Labor Compensation.
Personal income includes lots of income that isn't for doing work. How much of personal income goes to the people who are actually doing the work? I often wondered. Today I had a thought.
FRED offers Share of Labour Compensation in GDP at Current National Prices for United States.
Annual, 1950-2017. It is given as a ratio, so, like percent but not
times 100. I'm thinking the ratio is "Labor compensation relative to
GDP". If I multiply by GDP I get Labor Compensation. That was my
thought.
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| Graph #1: Labor Compensation in billions |
Red is personal income. Blue is labor compensation.
Green is Labor
Compensation as a percent of Personal Income. It looks a lot like "Labor
share" doesn't it? It should.
Labor compensation falls from 80.6% of Personal Income
in 1950 to 68.8% in 2017. What does that tell us? It tells us that non-labor income, including for example
income to finance, rose from 19.4% of Personal Income to 31.2% during that time.
What else do we learn? Labor compensation fell 11.8 percentage points in 67 years. That's a
decline of 0.176 percentage points per year. At that rate, in 391 years
labor compensation will reach zero and, best case, we'll all be serfs.
But don't worry, finance will be doing great!
3 comments:
Nice graph of labor compensation.
I see 3 Key Takeaways from your post:
1) They make you work for data on what people are paid for work.
2) The proportion that went to labor held fairly steady from 1950-1970 and from 1980-2000
3) Labor's share of the pie fell the most in the 1970's when supposedly the rising burden of labor costs was what was causing inflation (according to the story that many economists are telling)
Thank you!
Your Key Takeaways offer a lot more insight than does my "looks like labor share".
Man, I lived thru the 1970s and I hated it when they called the inflation "wage-push". It was just so wrong.
Happy holidays.
Tim Duy, in Monday Morning Notes, 1/4/21:
"Wages and salaries are the basis of consumer spending power..."
Yeah, that's it. That's why I was looking at "Labor Compensation in Billions" on the graph.
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