Labor Share Research Articles

The distributional effects of labour market deregulation: Wage share and fixed-term contracts

Since the 1980s, most advanced economies have massively ‘flexibilized’ their labour markets by reducing the protection against layoffs and introducing temporary and flexible contracts. Concurrently, a well-established economic stylized fact – the stability of the wage share of income – has been challenged as empirical evidence reveals a substantial decline in labour share across numerous countries. In this study, we aim to empirically investigate the causal link between these two phenomena by examining the impact of changes in the regulation of fixed-term contracts, as measured by variation over time in the temporary contracts EPL index, on the functional distribution of income. We employ Jordà’s local projection method for a panel of 18 advanced countries over the period 1985–2019 and show that reforms that deregulate fixed-term contracts consistently reduce the wage share.

Does NEEQ’s tiered system enhance corporate labour share？

ABSTRACT In the context of improving the multi-level capital market structure and promoting common prosperity, we examine the impact of NEEQ’s (National Equities Exchange and Quotations) tiered system on corporate labour share. We find that the corporate labour share significantly increases when the firm enters the innovative layer from the common layer, which indicates that tiered system can optimise the structure of labour income distribution and facilitate employees to better share the enterprises’ achievements. Our further evidences indicate that (1) this positive relation is more pronounced for firms whose stock liquidity improves more; (2) reducing the cost of capital is an important channel through which the tiered system promotes corporate labour share; and (3) the tiered system visibly affects labour share for firms facing higher financing constraints, meeting lower information transparency, or with a higher complementary effect between labour and capital factors.

IDENTIFYING BEHAVIORAL RESPONSE TO TAX CHANGE OF LABOR INCOME IN UKRAINE

Introduction. The National Revenue Strategy states that one of the directions for the further development of the national taxation system is the restoration of the progressive rates’ scale of personal income tax. Such a proposal looks appropriate and corresponds to the trends in the development of the labor market, the system of income generation in the national economy, and the demands of society. At the same time, the opportunistic reaction of taxpayers to the introduction of additional (increased) tax rates may lead to further evasion of labor income from taxation and, accordingly, an increase in tax risks of the state budget. Purpose of the article is to identificate of the behavioral response effect of the economic agents to tax change of labor income in Ukraine. Results. Changes in the taxation of labor income in 2015-2017 are characterized by the dynamics of such analytical indicators as the average effective tax rate and the tax wedge. The nominal growth of the wage fund in 2016 and 2017 is due to the following changes in taxation: an increase in the tax base and an increase in the average effective tax rate. In the short and medium term, reducing the tax burden did not have the expected positive effect, as predicted by the logic of Laffer's model. There is a significant increase in the share of wages at the average level, from 53.5% in 2012 to 63.8% in 2020. The share of labor income in the intervals from the lowest to the average earnings as of 2020 was more than 80%. The presence of an alternative system of income taxation with a significantly lower level of tax burden than the general system creates additional risks of effective implementation of personal income tax with a progressive scale of rates. Conclusions. The system of formation and distribution of labor income has undergone significant changes. The extremes of the income distribution (lowest and highest) were in relative gain compared to others. the introduction of a progressive scale of taxation rates exclusively for labor income in Ukraine does not have sufficient fiscal potential. In the case of a suboptimal political decision, with insufficient institutional capacity of control bodies and the presence of an alternative system of income taxation, there is a high probability of a significant increase in tax risks for state and local budgets.

СВЯЗЬ НЕРАВЕНСТВА ДОХОДОВ И НАУЧНО-ТЕХНИЧЕСКОГО ПРОГРЕССА С ТОЧКИ ЗРЕНИЯ ПОЛИТЭКОНОМИИ

The article analyzes the views of scientists of the late 20th and early 21st centuries on the question of whether there is a connection between income inequality and the development of the digital economy. Based on an analysis of the works of Lawrence F. Katz, David Autor, David Deming, Dani Rodrik, Robert Solow, Joseph Schumpeter and Klaus Schwab, the author answers the research question – what factors are determining for the generation of inequality in the digital economy. As such factors, the author identifies globalization, a reduction in the share of labor in the world GDP with a simultaneous reduction of the capital profitability, an increase in economic rent from the possession of technology, and a greater profitability for capital compared to labor from the introduction of technology. As a result of a comparative analysis of the concepts set out in the works of the above mentioned authors, it is concluded that they all recognize the fact that as a result of the introduction of new technologies, there is an increase in inequality. It was also found that the IT industry is developing according to the same laws as conventional production. As a new technology is widely introduced, it becomes «routinized,» and accordingly, as a large number of workers master the technology, wages fall. Moreover, the development of technology can, in principle, lead to layoffs of workers, which further deepens the problem of inequality. To verify the results of the analysis, the author analyzed statistical indicators for achieving SDG 10 «Reducing inequality within and between countries» based on the annual UN Sustainability Report. It was found that the target will not be achieved by 2030, but it significantly lays behind the other 16 SDGs. Thus, the author’s hypothesis about the growth of income inequality under the influence of digitalization processes is confirmed.

Multinationals, Robots, and the Labor Share

Multinationals, Robots, and the Labor Share

Посилення мотивації персоналу як фактор конкурентоспроможності підприємства

The aim of the article is to study the theoretical and applied aspects of the functioning of the system of motivation of staff on the example of a production enterprise and to outline the directions of its improvement in the context of increasing the competitiveness of enterprise. The article analyzes the current state of staff motivation on the example of a leading Ukrainian company specializing in the trade of furniture components and accessories. In the course of the analysis, it has been found that over the past three years, the motivational system of enterprise has remained sufficiently balanced and generally satisfies the basic needs of employees. The company uses a wide range of financial motivation instruments, which includes competitive wages, a bonus system, providing production personnel with summer and winter overalls, paying for mobile communications, compensation for fuel costs when using own cars for work purposes, etc. Common measures of non-financial motivation of production enterprises are the functioning of corporate universities and libraries, career development of employees, support for employees serving in the Armed Forces of Ukraine, sports events, and so on. Despite a fairly effective system of motivation, some of its weaknesses have been identified as follows: in particular, a low share of additional wages, an insufficiently competitive social package of the company, which contains only basic elements, imperfection of non-material motivation, insufficient individualization of motivation, etc. In modern wartime conditions, measures to improve non-financial motivation can become effective motivation instruments, such as: the introduction of the «Best Employee of the Month / Quarter / Year» programs, recognition of employees’ merits by awarding certificates of honor, letters of gratitude, valuable gifts, holding rallying events, creating a psychological service to support the mental health of staff.

Государственная политика СССР в сфере внедрения достижений науки и техники в середине 1950-х гг.

Based on the study of currently available archival documents from the RGANI funds, the problem of the evolution of state policy in the field of the introduction of science and technology in the USSR in the mid-1950s is investigated. The documents published at that time focused on speeding up the pace of the introduction of new technology, the best use of foreign samples, support for the movement of innovators and inventors, its scaling. A comparative analysis of the indicators of the USSR and the USA demonstrated the continuing technological lag of our country in a number of significant areas. Labor productivity remained relatively low. Arrogance, complacency, fear of taking risks and unwillingness to use the best of world and domestic experience were mentioned as factors determining the failure to achieve the targets. The documents that were not intended for publication contained specific negative examples, there was quite sharp and harsh criticism of the heads of ministries, enterprises and scientists. The conclusion is formulated that the data contained in previously unpublished documents give a more accurate idea of the results of the implementation of the state scientific and technical policy in the period under study and do not allow assessing the measures taken by the authorities in the field of technical re-equipment of production as optimal. Against the background of high rates of economic growth, significant achievements in the field of science and technology, there was a slowdown in modernization processes. Inventors were insufficiently stimulated, the results of research developments were slowly introduced. The approved documents indicate that the authorities tried to cope with the emerging problems with the help of command methods, reorganizations of the management system. But the share of manual labor remained high. This led to the fact that the advantages achieved in any industry by high mechanization of individual processes were largely lost, and the labor intensity of products continued to remain high. As the most important factor of inhibition, the current mobilization model of the economy was determined, focusing primarily on achieving quantitative targets. In addition, the rejection of the development of a unified all-Union plan for the introduction of new technology had a negative impact, there was no single body ensuring the coordination of research and implementation of their results. The country's leadership did not sufficiently assess the importance of the release of computer technology, automation and mechanization of production.

The Optimal Wage Share in Adam Smith

The Optimal Wage Share in Adam Smith

The effect of service outsourcing on labor income share: Measuring labor income share from the global value chains perspective.

Inspired by the positive impact of service outsourcing in Chery and other enterprises on human resources, this paper explores the impact of service outsourcing on labor income share. This paper introduces a framework to analyze how value added is distributed between capital and labor along the mix of inputs from different countries and sectors participating in global value chains and examines the effect of service outsourcing on the labor share income. Using the World Input-Output Database (WIOD) and OECD Inter-Country Input-Output (OECD- ICIO) table, this paper utilizes the WWZ decomposition method of global value chains (GVCs) to quantify labor share income. The results show that: (1) service outsourcing significantly contributes to the increase in labor share income; (2) Offshore outsourcing had a statistically stronger effect on labor share income after the financial crisis, both compared to the past and to onshore outsourcing; (3) Offshore outsourcing has a higher coefficient in countries with low technology. For ease of comparison, only onshore outsourcing shows a statistically significant difference among various service types; (4) The analysis using Chinese data reveals that the coefficient of offshore outsourcing is negative and statistically significant, indicating that industries with higher levels of service outsourcing have a lower labor share income.

Disentangling Various Explanations for the Declining Labor Share: Evidence from Millions of Firm Records

Disentangling Various Explanations for the Declining Labor Share: Evidence from Millions of Firm Records

Labour share and income inequalities in the European Union, taking into account the level of development of economies

Research background: The relationship between labour share and income inequality is a complex and multifaceted problem. Despite ongoing discussions among economists, there is still no consensus on the direction of the relationship between labour share and income inequality. Purpose of the article: The article aims to assess the impact of labour share on income inequality, which is measured in three ways: the Gini index of gross income, the Gini index of market incomes, and the Gini index of household disposable income. Methods: Dynamic panel data models were applied to estimate the relationship between Gini coefficients and socio-economic indicators. The study investigated 25 European Union countries over the 2011–2021 period. Findings & value added: Despite the long convergence process of the EU economies, there is still great diversity in the labour share, social inequalities, and the interplay between these factors. The added value of this research is the indication of labour share impact on three Gini measures covering a diverse income spectrum (from labour and capital). Based on the research findings, hypothesis 1, claiming that the more developed the national economy, the lower the share of employment income, favouring capital gains, is confirmed. Hypothesis 2 (as the share of income from work increases, the Gini coefficient of gross incomes decreases) must be rejected. There is no significant relationship between labour share and the studied Gini measures in 'old' EU countries. In 'new' EU members, there is a reverse relationship than assumed in hypothesis 2. The growth of the Gini coefficient was influenced by the rise in labour share, which can be attributed to the diversity in economic structures.

Growth, cycles, and residential investment

The empirical literature on models of cyclical growth and distribution has not investigated the differential roles of residential vs. nonresidential investment. These flows are similar in that they are largely undertaken by profit-seeking corporations, but differ greatly in that residential (nonresidential) investment is a leading (lagging) indicator of the business cycle. We estimate two Structural Vector Autoregressive (SVAR) models of the cyclical components of US post-WWII time series with restrictions motivated by neo-Goodwinian theory. The 4D model includes utilization rate, accumulation rate, employment rate and labor share. The 5D model disaggregates investment into residential and nonresidential flows. Results (i) support profit-led demand and profit- squeeze distribution, and (ii) confirm that residential investment leads the cycle, whereas nonresidential investment lags it.

Total Factor Productivity Growth and Changing Cost Structure of Sugarcane in Gujarat, India

Aims: 
 
 To estimate the growth of input, output indices and total factor productivity of sugarcane in Gujarat
 To estimate the changing cost structure of sugarcane
 
 Place and Duration of Study: Department of Agricultural Economics, Junagadh Agricultural University (between June 2018 and July 2020).
 Methodology: This paper has estimated the growth in total factor productivity of sugarcane crop using Tornqvist Theil index and growth trends in cost structure of sugarcane crop in Gujarat.
 Results: The results showed that the growth rate of TFP indices of sugarcane planted crop and ratoon crop were negative about -0.86 and -0.31 per cent per annum, respectively. Negative TFP growth resulted due to a relatively faster rate of total input growth than total output growth. in the total cost of cultivation of sugarcane, the cost share of human labour, irrigation and miscellaneous in Gujarat has shown an increasing trend. while, rental value of land showing declining trend. 
 Conclusion: Study suggested that technological gains have not been experienced in this crop needs concentrated efforts to bridge extension gap and further research to evolve concrete strains, resistant to pest and diseases which reduce the real cost of production.

Rentiers and distributive conflict in Brazil (2000–2019)

Abstract The paper examines the determinants of rentier income in contemporary financialised capitalist economies by analysing the case of Brazil. It argues that different drivers of rentier income may have comparable potential to channel a substantial share of aggregate income to asset owners. The paper estimates an expanded functional income distribution for Brazil for the period between 2000 and 2019, which distinguishes between rentier income, wages, profits of enterprise and government income. In the last two decades, the share of rentier income in Brazilian GDP has fluctuated around an approximately stable trend even though its composition has changed profoundly. The estimation presented allows for an analysis of the role played by financial expropriation (i.e. interest payments out of wage income) in this expanded functional income distribution, which points to alternative results concerning the recent trajectory of the wage share of income and of the distributive conflict.

Interconnected dynamics of duration, productivity and “bullshit” of labor (branch aspect on the example of the USA)

Within the framework of the generally accepted concept of the increasing role of materialized labor in productivity, a constant but slowing growth in the rate of labor productivity and a reduction in working hours, some paradoxes of labor productivity formed and developed in the past few decades. One of the paradoxical phenomena characteristic of industries with a traditionally high share of human labor is the increase in working hours due to additionally created jobs, assessed by D. Graeber as completely or partially meaningless (“bullshit”) labor. Such labor does not create value, but only participates in its redistribution in favor of the least valuable for society types of activity that, as a rule, serve the creation of a real product or socially significant service. This dynamic actualizes the problem of the relationship between productivity, duration and meaninglessness of labor, not only as socio-economic, but also cultural value. Based on data from the US Bureau of Labor Statistics and the results of factor analysis using a mathematical correlation-regression apparatus, the indicated relationships in the performance dynamics of two sectors of the US economy over a long period of time were modeled. It was empirically confirmed that in the context of a long-term increase in labor productivity, leading to a general reduction in working hours, a contradiction with the ethical principle of “purchasing” labor by the employer is gradually forming and developing, leading to stagnation and a subsequent increase in working hours due to the creation and diversification of different forms of meaningless labor. It is shown that the increase in the cost of living labor, expressed, in particular, in the need to allocate additional working time for socially meaningless work, objectively slows down productivity in construction and healthcare in the United States.

TESTING KALDOR’S FACT: EMPIRICAL EVIDENCE FROM EUROPEAN COUNTRIES

This paper discusses the functional distribution of income, as a consequence of decoupling phenomenon between workers’ compensation and labor productivity. This issue has been observed since the mid- 1970s in most developed economies, resulting in a trend of decreasing labor income in national income or GDP. Despite conventional economic theory predicting a proportional increase in workers’ income with increases in labor productivity, empirical results suggest that this relationship is not being realized. The study analyzes the distribution of labor income and capital income in relation to GDP in European countries, in order to gain insight into the conditions and trends of labor income and to evaluate the functional distribution of income at the level of an individual country. The paper provides a detailed analysis of labor share on the example of all countries in Europe and compares countries to determine the direction and degree of trend of the labor share. The results highlight the need for further research on this topic and provide insight into the factors contributing to the decoupling of productivity from workers’ compensation.

On the positive relation between the wage share and labor productivity growth with endogenous size and direction of technical change

This paper combines induced innovation and endogenous growth to investigate two issues: the relation between the wage share and labor productivity growth and the potential influence of the saving rate on the steady state wage share. We assume that myopic competitive firms choose the size and direction of technical change to maximize the growth rate of profits. First, we find technological conditions sufficient to ensure that labor productivity growth is a positive function of the wage share. Second, we show that the steady state wage share depends on the saving rate if, and only if, R&D investment affects the marginal rate of transformation between labor and capital productivity growth. Both results have important policy implications as they clarify under what conditions any factor affecting the wage share or the saving rate will have an impact on labor productivity growth or steady-state income distribution.

RESOURCE POTENTIAL OF THE BORDER REGIONS OF THE REPUBLIC OF TUVA

The modern economy considers the border territories as potential “points of growth” with prospects and conditions for intensive development, in order to overcome their periphery. In this article, the author attempts to consider the resource potential of the border regions of the Republic of Tyva, directly bordering the territory of Mongolia: Mongun-Taiga, Ovyur, Tere-Khol, Teshem, Erzya districts. Based on the analysis, the demographic, economic and natural resource potentials of the border territories of the republic were identified (the larger the area of the territory, the more natural resources). To assess the demographic potential, the share of the population of border areas in the population of the region is considered, as an economic potential — the share of average nominal wages in border areas as a percentage of the republican level, and a natural resource potential, was determined as the share of the area of border regions area.

Was Marx right? Development and exploitation in 43 countries, 2000–2014

We assess Marx's hypotheses about capitalist development on a global scale by constructing a new dataset of Marxist variables (profit rates, exploitation rates, composition of capital, and shares of productive activity) for 43 major economies, derived from world input-output data and national accounts in the 2000–2014 period. Consistent with Marx's hypotheses, the average profit rate declines at the world level, between countries, and within countries. The global rate of exploitation increases until 2008 but stagnates after the financial crisis, while capital intensity continued to increase. At the cross-country level, rich countries became increasingly dominated by unproductive activity. China absorbed much of the world's productive activity and kept the labor share of value added roughly constant at the world level.

Import Dependence of Exports, Aggregate Demand and Income Distribution in the Turkish Economy: A Post-Keynesian Econometric Analysis

This study aims to investigate the impact of import dependence on exports on the relation between aggregate demand and functional distribution of income in the Turkish economy. To achieve this, the model proposed by Stockhammer, Hein, and Grafl (2011) was employed and applied to the Turkish economy throughout 1988-2019. The findings indicate that the demand regime was wage-led in Türkiye throughout the sample period, and the integration of import content of exports into the analysis renders the demand regime even slightly more wage-led. Subperiod analyses show that even though the negative effect of a higher labor share in total income on net exports has doubled in absolute value from the 1995-98 subperiod to the 2008-18 subperiod, the positive effect of a higher labor share on private consumption expenditures did not only counterbalance but exceeded it, while its negative effect on private investment remained relatively small and constant over the subperiods. Our findings also show that the integration of import content of exports into the analysis also rendered all the subperiods moderately more wage-led.