"Measuring Labor's Share"
BY: ALAN B. KRUEGER
Princeton University
Department of Economics
National Bureau of Economic Research (NBER)
Paper ID: NBER Working Paper No. 7006
Date: March 1999
Contact: ALAN B. KRUEGER
Email: Mailto:akrueger at pucc.princeton.edu
Postal: Princeton University
Department of Economics
Princeton, NJ 08544-1021 USA
Phone: 609-258-4046
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ABSTRACT:
This paper considers conceptual and practical issues that arise
in measuring labor's share of national income. Most importantly:
How are workers defined? How is compensation defined? The
current definition of labor compensation used by the Bureau of
Economic Analysis (BEA) includes the salary of business owners
and payments to retired workers in labor compensation. An
alternative series to the BEA's standard series is presented. In
addition, a simple method for decomposing labor compensation
into a component due to "raw labor" and a component due to human
capital is presented. Raw labor's share of national income is
estimated using Census and CPS data. The share of national
income attributable to raw labor increased from 9.6 percent to
13 percent between 1939 and 1959, remained at 12-13 percent
between 1959 and 1979, and fell to 5 percent by 1996.
JEL Classification: J3