A Contribution to the Critique of Labor Share Analyses

According to this analysis, the frequently reported narrative about the success of neoliberalism, in terms of redistributing the pie in favor of capital vis-à-vis labor is not supported by data for the first thirty-eight years of neoliberalism. In this dissertation I disaggregate the variation in labor’s share of GDP according to movements in depreciation and the labor shares of various organizational forms namely, corporations, government, nonprofit institutions, proprietorships and private households. Of all of these organizational forms, only the net domestic income of the corporate sector is divisible between profit and compensation. Nevertheless, depreciation, private households, and proprietorships (when the labor income of proprietors is estimated according to the national average of wage and salary workers) have had a significant impact on the trajectory of labor’s share of GDP. The inclusion of proprietors’ estimated labor income (estimated according to the average compensation of wage and salary workers), private households, and depreciation fully explain the decline in labor’ share of GDP during the neoliberal run up to the 2008 Great Recession. When proprietor labor income is not estimated, the decline in labor’s share of GDP is fully attributable to private households and depreciation. Labor’s share of corporations’ net output was trendless over the same period. Finally, this study moves from the aggregate to the sectoral level to investigate the factors that are responsible for the decline in the labor share in manufacturing. While manufacturing has undoubtedly experienced substantial declines in union density in recent decades, the evidence suggests that this decline did not contribute to the decline in labor’s share in the manufacturing sector. Compensation per manufacturing worker rose and by a greater magnitude than compensation per worker in the private sector as a whole. Labor’s falling share in manufacturing, then, was due to a substantial increase in output relative to employment. This dissertation suggests that the fall in the labor share in manufacturing had more to do with technical change that led to sectoral shifts in labor demand.