by Summary:
Total income earned can be divided into what is earned by labor in wages, salaries, and benefits, and what is earned by capital in profits and interest payments. The line between these categories can be a blurry: for example, should the income received by someone running their own business be counted as "labor" income received for their hours worked, or as "capital" income received from their ownership of the business, or some mixture of both?However, the US Bureau of Labor Statistics has been doing this calculation for decades using a standardized methodology over time. The US labor share of income was in the range of 61-65% from the 1950s up through the 1990s. Indeed, for purposes of basic long-run economic models, the share was sometimes treated as a constant. But in the early 2000s,
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Mike Norman considers the following as important: capital share, labor share
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Total income earned can be divided into what is earned by labor in wages, salaries, and benefits, and what is earned by capital in profits and interest payments. The line between these categories can be a blurry: for example, should the income received by someone running their own business be counted as "labor" income received for their hours worked, or as "capital" income received from their ownership of the business, or some mixture of both?However, the US Bureau of Labor Statistics has been doing this calculation for decades using a standardized methodology over time. The US labor share of income was in the range of 61-65% from the 1950s up through the 1990s. Indeed, for purposes of basic long-run economic models, the share was sometimes treated as a constant. But in the early 2000s,
Topics:
Mike Norman considers the following as important: capital share, labor share
This could be interesting, too:
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Total income earned can be divided into what is earned by labor in wages, salaries, and benefits, and what is earned by capital in profits and interest payments. The line between these categories can be a blurry: for example, should the income received by someone running their own business be counted as "labor" income received for their hours worked, or as "capital" income received from their ownership of the business, or some mixture of both?
However, the US Bureau of Labor Statistics has been doing this calculation for decades using a standardized methodology over time. The US labor share of income was in the range of 61-65% from the 1950s up through the 1990s. Indeed, for purposes of basic long-run economic models, the share was sometimes treated as a constant. But in the early 2000s, the labor share started dropping and fell to the historically low range of 56-58%. Loukas Karabarbounis and Brent Neiman provide some perspective on what has happened, citing a lot of the recent research. in "Trends in Factor Shares: Facts and Implications," appearing in the NBER Reporter (2017, Number 4)....
The fall in the labor share of income has consequences that ripple through the rest of the global economy. For example, it contributes to the rise in inequality….Also.
When comparing current stock prices and price-earnings ratios to historical values, it's worth remembering when the capital share of income is higher, stock prices represent a different value proposition than they did several decades ago.Conversable Economist
Behind the Declining Labor Share of Income
Timothy Taylor | Managing editor of the Journal of Economic Perspectives, based at Macalester College in St. Paul, Minnesota