Summary of The Evolution of the Labor Share across Developed Countries

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The Evolution of the Labor Share across Developed Countries summary
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Debates about the impacts of income inequality and globalization often turn to the diminished role of labor in an economy. Though labor share – “the percentage of economic output that accrues to workers as labor compensation” – has declined in numerous developed countries, the reasons for its drop vary among the different economies, according to this scholarly report from researchers Roberto Pinheiro and Meifeng Yang. They explore various explanations for the shift, but they home in on the impacts of changes in economies and the substitution of technology for human capital. Economists, labor analysts and policy experts will find this succinct but technical analysis a worthwhile read.

In this summary, you will learn

  • Why the labor share of economic output is an important metric,
  • How it has declined in the advanced economies, and
  • Why the nature and extent of the declines differ between the United States and other developed nations.
 

About the Authors

Robert Pinheiro and Meifeng Yang are researchers at the Federal Reserve Bank of Cleveland. 

 

Summary

In the developed nations, the share of economic production that goes to workers in the form of compensation has been decreasing. Statistics show that the decline started in the mid-1970s in OECD countries other than the United States, where the drop started in the late 1980s. Economists analyze changes and trends in the labor share metric because it defines the degree to which workers experience real wage growth that rewards them for increases in their productivity. 


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