At a Parliamentary select committee this morning, a Labour and a Green MP were convinced that the labour’s falling share of GDP was evidence of rising profits to capital because of a loss of union bargaining power.
Instead, in the USA, where the data is best analysed, this decline in the gross labour share is a statistical illusion bought on by a greater part of GDP going to depreciation of ICT equipment which depreciates faster than in the past. The decline in the gross labour share does not mean the capitalists are sharing more of the total left. As Benjamin Bridgman said
US labor share has been falling since the 1970s. I show that it has not fallen as much once items that do not add to capital, depreciation and production taxes, are netted out. Recent net labor share is within its historical range, whereas gross share is at its lowest level. This effect holds for other high-income economies. The overall picture is no longer one of unprecedented, globally declining labor share. Using gross share as a proxy for net share can give misleading results. US gross share and inequality are correlated, whereas net share, the correct measure, is not.