That figure is the share of US national income that goes to workers as wages rather than to investors as profits and interest. It has fallen to its lowest level since records began after the second world war and is part of the reason why incomes at the top – which tend to be earned from capital – have risen so much. If wages were at their postwar average share of 63 per cent, workers would earn an extra $740bn this year, about $5,000 per worker, according to FT calculations.
OK, well, the FT gets that wrong because income and profits are not the binary division of national income. But us profits as a share have indeed been rising, so we\’ll, for the moment, let them get away with that.
However, Ritchie then goes on to comment that:
And you wonder why people are angry? They know the system is abusing them, because it is. And they know that this is straightforward exploitation. Because it is.
And it’s worse in the UK. Our labour share is 53% (from memory).
No wonder Occupy resonates.
Now, where’s the Labour Party?
And it is indeed true that the labour share of income in the UK is down. However, as before, it\’s not actually a binary division into labour and capital shares. It\’s labour, sales taxes, subsidies, self employment income and employers\’ national insurance plus the return to capital. Some of self-employment income is profits and some isn\’t, so adjustments should be made for that. Ooooh, lookie here:
There are only a few countries
where the profit share seems to have lacked an upward trend: Belgium, the Netherlands,
Portugal, Sweden and the United Kingdom (bottom panel of Figure 1).
That\’s after the adjustment.
So, if the labour share of income has fallen but the profit share hasn\’t risen, what has happened?
Well, obviously, employers\’ national insurance has risen and so has VAT.
Have employers\’ national insurance and VAT risen? Why, yes, they have.
That\’s where that missing part of labour income has gone: in taxes, to government.