Labor’s Declining Share of Income and Rising Inequality

Jacobson, Margaret; Occhino, Filippo

doi:10.26509/frbc-ec-201213

Cited by 38 publications

(41 citation statements)

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“…The condition that capital income is more concentrated or unequally distributed than labor income has been confirmed by Piketty (2014) and others. For example, Jacobson and Occhino (2012) found that the concentration index of capital income is always larger than that of labor income in the United States during 1979 to 2007, with the former ranging from 0.62 to 0.84 and the latter ranging from 0.42 to 0.50. Using data from eight industrialized countries in the last three decades of the 20th century, Garc ıa-Peñalos and Orgiazzi (2013) concluded that the distribution of capital income, including interest, rent, dividends annuities, private individual pensions and royalties, is much more unequal than labor earnings.…”

Section: Labor Sharementioning

confidence: 99%

Aging and inequality: The link and transmission mechanisms

Wan

Wang

et al. 2018

Review Development Economics

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There exists a shortage of rigorous empirical analyses that focus on the aging‐to‐inequality transmission mechanisms although both developed and some developing countries have been confronted with the challenge of population aging. Using cross‐country panel data covering the period of 1975 to 2015, this paper contributes to the literature by directly modeling the relationship between aging and inequality and exploring the transmission mechanisms. Our estimation results show that (1) Aging worsens income distribution; (2) This adverse impact is attributable to its negative correlation with the share of labor income that in general is more equally distributed than capital income; (3) The labor share‐reducing effect of aging can be further attributed to the significant and negative impact of aging on both labor input or supply and wage or labor productivity; and (4) Our findings are robust to changes in model specifications, use of different indicators of aging, different inequality and labor share data sources.

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Section: Labor Sharementioning

confidence: 99%

Aging and inequality: The link and transmission mechanisms

Wan

Wang

et al. 2018

Review Development Economics

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“…The IMF (2017), the European Commission (2007) and the Bank for International Settlements (Ellis and Smith, 2007) published reports that documented the decline in the labor share of income and provided several explanations for this trend including the impacts of globalization and technological changes. Jacobson and Occhino (2012), using household data for the United States, indicate that the decline in the labor share made total income less evenly distributed and more concentrated at the top of the distribution, thus increasing income inequalit. According to their results, a 1 percent decrease in the labor share of income increases the Gini coefficient in the United States by 0.15-0.33 percent.…”

Section: Literature Reviewmentioning

confidence: 99%

Income Inequality and Labor Share in U.S.A and Canada

Islam

Safavi

2018

ABR

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In recent years, in many countries, income inequality has increased while the labour share of income has declined. Using the Standardized World Income Inequality Database, we examine if income inequality, measured by the GINI Index, is related to the labor share of income in the U.S. and Canada. The paper uses time series regressions for the 1981-2011 period. Although apparently correlated, regression results confirm that declines in the labor income share have not had significant effects on income inequality.

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“…At the same time, technological innovation and the information revolution yielded rapidly changing job-skill demands, and made many low-skilled jobs replaceable by machines. Taken together, these economic shifts created asymmetric industrial-labor power relations (Jacobson & Occhino, 2012).…”

Section: From Shared Prosperity To Slow and Unequal Wage Growthmentioning

confidence: 99%

“…As a result of all these factors, since 1980, the labor share of national income has trended downward. While there are many ways to measure the labor share, nearly all approaches find that it has declined about 10 percent since 1980, while the capital share of income has increased by over a third (Giovannoni, 2014a;Jacobson & Occhino, 2012;Piketty & Zucman, 2014). 4 This trend is found in virtually all OECD countries (International Labor Organization, 2012;Stockhammer, 2013).…”

Section: From Shared Prosperity To Slow and Unequal Wage Growthmentioning

confidence: 99%

Social Inequality, Retirement Security, and the Future of Social Security

Veghte

2015

Poverty &Amp; Public Policy

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Social Security was a cornerstone of the mid‐century social contract that led to broadly shared prosperity in the three decades following World War II. Since the 1970s, economic shifts and a neo‐liberal turn in economic, labor‐market, and tax policy have led to a declining labor share of national income as well as levels of income and wealth inequality that are extreme both in historical and comparative context. Decades of slow and unequal wage growth have led to a projected retirement income crisis for today's workforce. This cannot be addressed through expansion of tax‐expenditures on individual saving, which actually serve to exacerbate inequality. This article argues that while Social Security's contribution and benefit structure were adequate through the 1970s, they now need to be updated to reflect changes in the economy since then. To account for slow and unequal wage growth, Social Security benefits should be expanded and the system's tax cap eliminated. And to account for the stark and growing inequality of income from capital, investment income should be incorporated into the system's contribution and benefit base, and the estate tax restored to its 2000 level and dedicated to Social Security. These reforms would position Social Security to be the cornerstone of a new social contract for the twenty‐first century.

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Labor’s Declining Share of Income and Rising Inequality

Abstract: Labor income has been declining as a share of total income earned in the United States for the past three decades. We look at the past effect of the labor share decline on income inequality, and we study the likely future path of the labor share and its implications for inequality.

Cited by 38 publications

References 1 publication

Aging and inequality: The link and transmission mechanisms

Aging and inequality: The link and transmission mechanisms

Income Inequality and Labor Share in U.S.A and Canada

Social Inequality, Retirement Security, and the Future of Social Security

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