Sunday, 9 June 2013

The falling income share of labour

At his blog Conversable Economist Timothy Taylor quotes from a International Labour Organization report that shows that labour’s share of income has declined between 1990 and 2009 in 26 out of the 30 countries that were considered for the report. Taylor then makes an important but often missed point that when looking for an answer as to why labour's share has fallen, looking within country isn't likely to be fruitful. If the trend affects many countries the cause is likely to be something had has affected all countries and not something particular to one country.
When a trend cuts across so many countries, it seems likely that the cause is something cutting across all countries, too. Looking for a "cause" based on some policy of Republicans or Democrats in the U.S. almost certainly misses the point. The same is true of looking for a "cause" based in policies more common in Europe, or in China.
So just blaming the previous government or the current government isn't going to cut it as an explanation for the fall. And who reads ILO reports anyway?

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