labor share of gdp

["Peter.Dorman" <23215MGR@xxxxxxx>]

A brief note in response to the post about the labor share of GDP in the US.

True, the share of compensation in GDP has remained fairly constant.  The wage
and salary share, however, has dropped rather dramatically from a high of
about 54% in 1969 to around 49.5% in the early 1990's.  (Most of the drop took
place in the 70's and early 80's.)  What to make of this?  It would appear
that the primary culprit is the well-known inflation in medical prices.  Note,
however, that fringe benefits, including medical benefits, did not improve in
breadth or depth of coverage during the past decade--if anything they
declined. (The gory details can be found in Michel & Bernstein's excellent
STATE OF WORKING AMERICA.)  The proper interpretation, then, would be that the
entire brunt of the change in relative prices was taken up by labor, with a
corresponding drop in its share of real purchasing power.  (A thought
experiment: if the cost of health care were socialized on the Canadian model,
financed entirely out of personal income, would employers restore the
difference in wages; i.e. would the wage and salary share bounce back to the
level of the compensation share?) By any standard, income redistribution away
from wages and salaries has been significant in the U.S.  Cross-country
differences, of course, are even more compelling.

Peter Dorman