Spotting the delusion in the wild

The IPPR is the latest groupuscule to insist that the capital share is rising:

And worse again. They actually give us no evidence that the profit or capital share is increasing. They simply tell us that the labour share is decreasing and the assumption made is that the capital share is the mirror image. It isn’t. Obviously, if we look only at the wage share, it isn’t, we must add back in the other costs of employment (yes, including increased NI contributions, taxes upon employment) to gain the true labour share. But even that’s not enough.

There are four sectors to the national income, capital, labour, mixed income, subsidies to production and taxes upon consumption. Mixed income has risen as there are more self employed about. This reduces the labour share while not changing the profit share one iota. Taxes and subsidies – well, think on VAT, a tax on consumption, this has risen substantially over the decades. So too has the amount of subsidy to production – think of all those feed in tariffs, this is where they appear in the national income.

4 comments on “Spotting the delusion in the wild

  1. Oddly, I was at a friend’s birthday drinks last night, and I was having exactly this conversation.

    And because I have read my Worstall/ASI, I was able to make exactly this rebuttal.

    Worstall in the Wild #2…!

    DK

  2. “There are four sectors to the national income”

    I count five in that list you give. Bring…. the comfy cushion!

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