Studies point to several reasons workers get less of national income

In short: Researchers say workers are receiving a smaller slice of national income, and the evidence points to several main causes rather than one clear answer.

What's going on

Across many countries, workers’ share of national income has been falling. National income is the total money an economy produces in a year, and “workers’ share” is the part paid out as wages and salaries. The other big slice goes to owners of capital, meaning things like machines, buildings, and investments.

Several studies highlighted in recent reporting point to technology and automation as a major driver in advanced economies. Automation is when machines and software do tasks people used to do, like self checkouts or factory robots. The International Monetary Fund has said technology can explain about half of the decline in workers’ share in richer countries.

Globalization and offshoring are also linked to the shift. When companies move labor heavy work to other countries, more of the pay tied to that work shows up abroad instead of at home.

Another factor is rising market concentration, meaning a smaller number of large companies dominate an industry. When a firm has fewer real competitors, it can have more power to keep wages from rising as fast as sales.

Some research also points to a change in what businesses invest in. More spending now goes to intangible assets like software and intellectual property (ideas and code a company owns), and higher depreciation (an accounting way to spread the cost of investments over time) can make the labor share look smaller.

What to watch

The mix of causes varies by country and time period, so future debate will likely focus on measuring which factor matters most in each place. One key clue is whether wages keep up when productivity rises, meaning people produce more per hour but do not see the same growth in pay.

Source: NYTimes