Labor's Share and the Degree of Utilization of Capacity

Abstract

The purpose of this paper is to show the relationship between labor's share and the degree of utilization of capacity for the years 1929-1951. Several definitions of labor's share could be adopted, each of which would be preferable for an analysis of particular problems. Labor's share of either national income, private national income, or private non-agricultural income could be used. The latter two measures have the merit of excluding successively the not too appropriate governmental and agricultural sectors from the analysis. Labor's share of national income originating in government is, by arbitrary definition, 100 per cent. Labor's share of agricultural income cannot be measured by wages and salaries alone, because of the large number of small proprietors who work on their own farms and, hence, receive inseparable portions of both labor and non-labor incomes, in the form of proprietors' earnings. Still, definitions excluding these sectors must be regarded as too restrictive. The increasing importance of government in both depression and war certainly influenced labor's share, as did the secular decline in agriculture. Therefore, labor's share is defined as wages and salaries expressed as a per cent of national income.