Wage share

The wage ratio describes the proportion of income from non- self-employment (compensation of employees ) in the national income and is an important reference for the functional distribution of income. The wage rate is the rate, income from corporate profits, opposite.

A distinction is the gross wage rate at which the income is considered before deduction of taxes and social contributions, net of the wage rate at which the income is based after deduction of taxes and social security contributions.

Formulas

In the following formulas, the wage rate ( LQ) is expressed as a ratio. In all other designs and graphics, the wage rate, however, is given as a percentage, is thus multiplied by a factor of 100.

Macroeconomic wage ratio

The average wage rate is obtained by dividing compensation of employees ( wage income ) by the total national income:

However, the average wage rate has only a limited value. It is influenced by the change in the employment structure, in particular by a shift in the ratio of dependent to self-employed workers, as the earned income of the latter are not included in the wage share. To prevent this problem, the adjusted wage share has been developed.

Adjusted wage share

In the adjusted wage share ( BLQ) the average wage rate is adjusted for changes in the employment structure. For this, the number of employed persons and of employees is standardized to a base year:

The year under review (index t) is the year for which the wage rate is to be calculated, the base year ( Index0 ) is a selected year, the employment structure is to be kept constant. The formulas can be seen that in the base year, the macroeconomic and the adjusted wage share are equal.

A disadvantage of this adjustment in the wage share is that the level depending on which base year one assumes. It is therefore only suitable for the description of changes in the distribution between wage and profit income, not for describing the relationship for a current year.

Development of the wage share in Germany and International

In international comparison, wage rates are published for example in the Ameco database of the EU Commission.

Compared to the 19th century, the gross wage rate is thereby increased significantly in industrialized countries. 1870 was the wage share in Germany only 43.1 percent. They first rose to 1930 to 60.2 % and decreased again to 54.9 % by 1939. In the postwar period it increased since the 1950s and reached the highest value 1974-1981, according to Bontrup in 1981 with 75.3 percent ( the exact year and percentage differs in different sources, but relatively uniform is the temporal trend in the development the increases and reductions ). This development was also caused by the change from dominated by agriculture and small independent existences post-war economy to an industrial society. Later in the 1980s, the wage share has fallen and was according to the same statistics for 2006 still 65.6 %. This created a growing mismatch of labor share and productivity in Germany. In the wake of reunification was briefly an abrupt increase in the wage share observed which is explained by the fact that in West Germany fell and unemployment were less capital income in East Germany, labor productivity was lower. Nevertheless, walked up to the year 2000, the share according to statistics of the Federal Statistical Office back to 72.2 %. In the years 2000-2007, the wage rate declined slightly since then and is relatively constant at about 66%.

In most other Member States of the EU -15, the wage rate peaked and 1974-1981. Since then, the rate in most EU countries has dropped significantly again, an exception will, among others, Belgium, where the wage rate in the 2000s was higher than in the 1960s. A longer trend of a declining wage share, there is next to Germany, for example, in Greece, the Netherlands, Austria and Spain. Also, in most new EU Member States, the wage rate falls. The slightest variation in the wage share over the past 50 years, Denmark had the highest changes occurred in Greece, Ireland and Portugal.

For the U.S., the IMF indicates the development of the wage rate as a share of wages in value added in total since 1930. Accordingly, this was not to changes in the proportion of workers to total employment adjusted wage share in the 30 years between 50 % and 53 % until the mid-70s, it reached about 60%. 2005, the wage share was 57 %. The long-term increase in the wage ratio between the 30s and the 70s reflects the fact that during the process of concentration of capital in the longer term, the proportion of workers has increased in the total employment in industrialized countries.

Overall economic importance

The wage share has a large, but controversial role in the political and in particular wage policy discussion. It is thus one of the economic variables which take into account the bargaining parties in the collective wage negotiations.

Significance and problems of the wage share

The wage ratio provides some evidence for the distribution of income. However, a low wage rate does not necessarily mean that a high level of income inequality exists, as well as wage-earners other income, can achieve about capital income. However, rarely achieve people with low wages capital income, which correspond to high wages or exceed. So in the United States have the wealthiest 1 % 50 % of the shares, however, the poorer 50 % own only 0.5% of all shares.

Also, a high wage rate makes no statement about the distribution of wages within the group of wage and salary earners and on the respective number of persons who belongs to the group of wage earners. For example, one reason for the relatively high wage rate in the UK that bonuses earned in the financial industry to wages are calculated. The distribution of wage growth continues for a long time in the United States very much apart.

The wage rate measures only the labor income of employees. The labor income of the self-employed who have no dependent employees are, on the other hand attributed erroneously in the profit share. The profit income are thus highly and reported labor income is too low. This problem can be solved by instead of the wage share, the more meaningful labor income ratio is used, which is geared to all levels of income. However, this has the problem that the income from self-employment must be divided randomly in labor income ( wages entrepreneurs ) and the earnings from self-employment or entrepreneurial activity.

The wage ratio as a measure of the functional distribution of income is also controversial because it assumes that households refer to either pay or profit income, but not both. Only under this assumption results in a meaningful distribution measure. In industrialized countries, but increasingly households achieve the same labor and profit income, thus the significance of the wage share is limited. In addition, the wage share any statements about the distribution of income within the labor income ( wage differentials ) meets as more suitable for describing the distribution of income in industrial countries is therefore considered the personal income distribution.

The average wage rate is subject to a variety of influences. The most important include the union presence and wage policies, price trends and cyclical fluctuations.

Who calculates the wage rate?

The wage rate is published by the Deutsche Bundesbank in its Statistical Supplement No. 4 to the Monthly Report monthly. The Federal Statistical Office publishes data on compensation of employees and to the national income, from which the unadjusted wage ratio can be determined. For adjustments, the figures for the workers and the workers are also required, which are also published by the Federal Statistical Office.