Labor’s share of income declined in the nonfinancial economy from 1970 to 2008

Evidence

We examine three income inequality measures. First, we focus on labor’s share of income. The conventional measure of labor’s share is to divide total compensation by value added ðKristal 2010Þ. However, since our primary concern is the social relation between workers and owners, the conventional measure is inappropriate. Value added includes taxes on production and imports, the earnings of the government, but excludes government subsidies that directly increase firm earnings. We use the sum of compensation and gross operating surplus, instead of value added, as the denominator in our measure of labor’s share. — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 74

Categorization

• XREF: Connects to the reader’s financialization-and-inequality literature on labor’s falling income share (e.g., Kristal 2010) — a direct engagement with that measure’s methodological choices. — connects to: Greater import penetration lowers labor’s share of income — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 133; Financialization may erode the postwar capital-labor social pact — Greta R. Krippner, The Financialization of the American…, 142; Financial income reallocates resources away from workers and strengthens owner bargaining power (+3 more)
• DEFINE: Clarifies why a sociological measure of labor’s share uses compensation plus operating surplus rather than value added — a definitional distinction between denominators.

Related

• Financialization caused most of the decline in labor’s income share since 1970 (similarity 0.88)
• Financialization caused roughly three-quarters of the labor share decline by 1997. (similarity 0.88)
• Financialization independently explains over half of labor’s falling income share since 1970. (similarity 0.87)
• US profit and labor shares moved in exact symmetric opposition over forty years (similarity 0.85)
• Greater import penetration lowers labor’s share of income (similarity 0.81)
• Deunionization still leaves much wage inequality unexplained, pointing to financialization (similarity 0.80)
• Inequality dimensions reflect one institutional shift toward financialization (similarity 0.79)
• Financialization may erode the postwar capital-labor social pact (similarity 0.79)
• Workforce demographics and market concentration shape income distribution independently (similarity 0.78)

Broader Connections

• Financial income reallocates resources away from workers and strengthens owner bargaining power #expands (0.75)
• Greater import penetration lowers labor’s share of income #qualifies (0.72) — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 133
• Financialization may erode the postwar capital-labor social pact #complicates (0.72) — Greta R. Krippner, The Financialization of the American…, 142