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A Shrinking Slice of the Pie: The Labour Income Share in Australia

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  • Cowgill, Matt

Abstract

The ‘wages breakout’ has been a recurring theme in the Australian public policy debate in recent years. Political conservatives, media commentators and some business groups have warned that Australian wages growth is unsustainable, or threatens to become unsustainable. This paper critically examines such claims and finds that they are not supported by the evidence. This paper shows that Australia has experienced the opposite of a ‘wages breakout’ since 2000. Over this period Australian real wages have not kept pace with productivity growth. This means that labour’s share of total income has fallen and capital’s share has risen. This paper also shows that many other OECD countries have experienced a falling labour share in recent years, but the fall in Australia’s labour share has been relatively large. The fall in the Australian labour share has been broadly-based – the labour share has fallen within a broad range of industries. Only a small portion of the fall can be ascribed to structural change in the economy towards low-labour share industries such as mining.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46209.

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Date of creation: Mar 2013
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Handle: RePEc:pra:mprapa:46209

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Keywords: labour share; labour income share; decoupling; wages; real wages; productivity; factor shares; bargaining power; capital; capital share; inequality; Australia; wages breakout; The Accord;

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  1. Dean Baker, 2007. "The Productivity to Paycheck Gap: What the Data Show," CEPR Reports and Issue Briefs 2007-11, Center for Economic and Policy Research (CEPR).
  2. William F. Mitchell & Martin J. Watts, 1997. "The Path to full Employment," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 30(4), pages 436-443.
  3. Quiggin, J., 1995. "Estimating the Benefits of Hilmer and Related Reforms," CEPR Discussion Papers 338, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  4. Alan B. Krueger, 1999. "Measuring Labor's Share," American Economic Review, American Economic Association, vol. 89(2), pages 45-51, May.
  5. P. Cook, 1991. "The accord: an economic and social success story," LSE Research Online Documents on Economics 21072, London School of Economics and Political Science, LSE Library.
  6. Anthony B. Atkinson & Andrew Leigh, 2007. "The Distribution of Top Incomes in Australia," The Economic Record, The Economic Society of Australia, vol. 83(262), pages 247-261, 09.
  7. Dew-Becker, Ian & Gordon, Robert J, 2005. "Where did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income," CEPR Discussion Papers 5419, C.E.P.R. Discussion Papers.
  8. P Cook, 1991. "The Accord: An Economic and Social Success Story," CEP Occasional Papers 01, Centre for Economic Performance, LSE.
  9. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2009. "Top Incomes in the Long Run of History," NBER Working Papers 15408, National Bureau of Economic Research, Inc.
  10. Junankar, P.N. & Madsen, J.B., 1996. "Unemployment in the OECD: models and mysteries," Discussion Paper Series In Economics And Econometrics 9648, Economics Division, School of Social Sciences, University of Southampton.
  11. Corden, W M, 1979. "Wages and Unemployment in Australia," The Economic Record, The Economic Society of Australia, vol. 55(148), pages 1-19, March.
  12. Isaac, J, 2012. "Keynes versus the Classics in the 1970s," Australian Bulletin of Labour, National Institute of Labour Studies, vol. 38(2), pages 96-110.
  13. W. M. Corden, 1979. "Wages, Iflation and Unemployment," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 12(1), pages 69-70.
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