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Measuring Labor's Share

  • Alan Krueger

This paper considers conceptual and practical issues that arise in measuring labor's share of national income. Most importantly: How are workers defined? How is compensation defined? The current definition of labor compensation used the Bureau of Economic Analysis (BEA) includes the salary of business owners and payments to retired workers in labor compensation. An alternative series to the BEA's standard series is presented. In addition, a simple method for decomposing labor compensation into a component due to raw labor' and a component due to human capital is presented. Raw labor's share of national income is estimated using Census and CPS data. The share of national income attributable to raw labor increased from 9.6 percent to 13 percent between 1939 and 1959, remained at 12-13 percent between 1959 and 1979, and fell to 5 percent by 1996.

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File URL: http://arks.princeton.edu/ark:/88435/dsp01f1881k89j
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Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 792.

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Date of creation: Jan 1999
Date of revision:
Handle: RePEc:pri:indrel:dsp01f1881k89j
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  1. Oliver J. Blanchard, 1997. "The Medium Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 89-158.
  2. James R. Spletzer & Katharine G. Abraham & Jay C. Stewart, 1999. "Why Do Different Wage Series Tell Different Stories?," American Economic Review, American Economic Association, vol. 89(2), pages 34-39, May.
  3. Card, David & Krueger, Alan B, 1992. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 1-40, February.
  4. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  5. N. I. Stone, 1945. "The Beginnings of the National Bureau of Economic Research," NBER Chapters, in: The National Bureau's First Quarter-Century, pages 5-10 National Bureau of Economic Research, Inc.
  6. Barry Bosworth & George L. Perry, 1994. "Productivity and Real Wages: Is There a Puzzle?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 317-343.
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