Pay and economic growth: A shrinking slice

UK Only Article: 
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Go on, bet the farm

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Pay and economic growth

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Labour’s share of national income has fallen. The right remedy is to help workers, not punish firms

IMAGINE the proceeds of economic output as a pie, crudely divided between the wages earned by workers and the returns accrued to the owners of capital, whether as profits, rents or interest income. Until the early 1980s the relative sizes of those slices were so stable that their constancy became an economic rule of thumb. Much of modern macroeconomics simply assumes the shares remain the same. That stability provides the link between productivity and prosperity. If workers always get the same slice of the economic pie, then an improvement in their average productivity—which boosts growth—should translate into higher average earnings.
More recently, however, economics textbooks have been almost the only places where labour’s share of national income remains constant. Over the past 30 years, the workers’ take from the pie has shrunk across the globe (see …

Link to article: www.economist.com/news/leaders/21588860-labours-share-national-income-has-fallen-right-remedy-help-workers-not-punish?fsrc=rss

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