Overstating the Decline in Wage Share

An NYT Economix blognote overstated the effective decline in the labor share of national income over the last three decades by using gross national income rather than net national income. The note shares the labor compensation share declining by 4-5 percentage points over this period.

However, the depreciation share of gross domestic product rose by roughly 2 percentage points over this period. If we assume that this increase came proportionately from the capital and labor share of income, then the rise in the depreciation share would lead to a 1.2 percentage point reduction in the labor compensation share of gross national income.

Much of the loss of income by ordinary workers has been due to increased pay of CEOs, doctors, and other highly paid workers. This is still included as part of labor income.

Tyranny of Human Capital Depreciation
written by izzatzo, February 03, 2012 6:21 AM

Exactly. Any economist knows if the human capital of 'CEOs, doctors and other highly paid workers' was calculated correctly to include their voluntary sacrificial self-accelerated depreciation the zero-sum loss of income to ordinary workers is much less.

Stupid liberals.

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...
written by Union Member, February 03, 2012 7:40 AM

The cohort of "other highly paid workers," who have seen an unjustifiable increase in pay over the last three decades, no doubt includes television news readers and " news programers" (sometimes-and quite erroneously - refered to as journalists.)

Huh?
written by Luke Lea, February 03, 2012 8:53 AM

Go over that again please.

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Unclear to non-economists
written by Andrew Burday, February 03, 2012 9:25 AM

I don't understand what "the depreciation share of gross domestic product" is, such that it can derive equally from labor and capital. Without an explanation, I don't know what this post is saying. If you want to respond to this, you could start at the absolute bottom: what does "depreciation" mean in this context?

Overstating the Decline in Wage Share

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