Income Distribution: Labor Share Remains Constant, Inequality Increases

[EnumaElish]

A commonly referred "factoid" claims that within the past ___ years (or decades), the share of labor in income distribution has shrunk while that of capital has increased.

However, all evidence that I've seen (mainly for the U.S.) indicate that:

1. including benefits, the income share of labor has remained more or less constant over the past few decades;

2. there has been a regressive redistribution within labor -- i.e., income inequality within wage earners has increased (e.g., the "minimum wage/managerial wage" ratio has decreased).

AFAIK, fact #2 is hardly disputed, but I think it is often misapplied or misquoted as the income share of labor getting smaller.

Any thoughts or comments?

 

[russ_watters]

Maybe I'm having a dense day, but none of that makes any sense to me. It all just looks like word salad. Could you cite some references (like the actual statistics) discussing this concept?

Ie, generally, "income distribution" a histogram-type description of how much money individuals in a country earn. I've never seen the words "labor" and "capital" used in this context.

 

[Gokul43201]

Russ, you are talking about income distribution among people or households, while EE is talking about income (or total output) distribution among land, labor and capital (I think).

 

[russ_watters]

Ok - output is GDP, not income. That would make more sense. I'll wait for clarification, though...

 

[Gokul43201]

This may be a really silly question, but nevertheless, what does the GDP go into, other than incomes?

 

[Economist]

Ok - output is GDP, not income. That would make more sense. I'll wait for clarification, though...

Income and output are one and the same. In fact, the terms are used interchangealby within economics in certain contexts.

This may be a really silly question, but nevertheless, what does the GDP go into, other than incomes?

Exactly. If there is output, then it is someone's income (usually it's multiple peoples income).

 

[EnumaElish]

Maybe I'm having a dense day, but none of that makes any sense to me. It all just looks like word salad. Could you cite some references (like the actual statistics) discussing this concept?

Ie, generally, "income distribution" a histogram-type description of how much money individuals in a country earn. I've never seen the words "labor" and "capital" used in this context.

Thanks for the interest, guys; I would have been far more concrete and careful had this been a social science thread.

Gokul's interpretation is correct, as in http://en.wikipedia.org/wiki/Distribution_(economics )

Most of the time I have seen the claim "wage labor's income share has been getting smaller," it is not supported by, or referenced to statistics, and I think the reason is there aren't any. Instead, the claim is tossed around with a general reference to worsening income distribution "all around us."

Let me try it this way:

It is relatively easy to find references to a worsening OVERALL income distribution, e.g. http://en.wikipedia.org/wiki/Income_distribution_of_the_United_States, which shows a regression using two separate metrics. See also figures 1-4 in Piketty (2001) as well as other selected figures in same. This distribution includes labor (wage) as well as capital income (e.g., dividends). This, however, can be explained in at least two ways:

1. Within wage labor, there has been a regressive redistribution (Figures 13-16 in Piketty. His Fig. 18 shows CEO vs. average salary wage).

2. Wage income has lost to capital income.

I have seen news articles/columns which presume that #2 has been the case; although research indicates otherwise; e.g. Figure 9 of Pikkety.