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A Shrinking Slice of the Pie: The Labour Income Share in Australia

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  • Cowgill, Matt

Abstract

The ‘wages breakout’ has been a recurring theme in the Australian public policy debate in recent years. Political conservatives, media commentators and some business groups have warned that Australian wages growth is unsustainable, or threatens to become unsustainable. This paper critically examines such claims and finds that they are not supported by the evidence. This paper shows that Australia has experienced the opposite of a ‘wages breakout’ since 2000. Over this period Australian real wages have not kept pace with productivity growth. This means that labour’s share of total income has fallen and capital’s share has risen. This paper also shows that many other OECD countries have experienced a falling labour share in recent years, but the fall in Australia’s labour share has been relatively large. The fall in the Australian labour share has been broadly-based – the labour share has fallen within a broad range of industries. Only a small portion of the fall can be ascribed to structural change in the economy towards low-labour share industries such as mining.

Suggested Citation

  • Cowgill, Matt, 2013. "A Shrinking Slice of the Pie: The Labour Income Share in Australia," MPRA Paper 46209, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:46209
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    File URL: https://mpra.ub.uni-muenchen.de/46209/1/MPRA_paper_46209.pdf
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    Cited by:

    1. Jurica Bosna, 2018. "Estimation Of The Great Decoupling On The Example Of Croatia, As Compared With Germany And Poland," Poslovna izvrsnost/Business Excellence, Faculty of Economics and Business, University of Zagreb, vol. 12(1), pages 33-52.
    2. Declan Trott & Leo Vance, 2018. "Adjusting the Australian Labour Share for Depreciation, Housing and Other Factors, 1960–2016," Economic Papers, The Economic Society of Australia, vol. 37(4), pages 412-428, December.
    3. Ben Spies-Butcher, 2020. "Book review: Elizabeth Humphrys, How Labour Built Neoliberalism: Australia’s Accord, the Labour Movement and the Neoliberal Project," The Economic and Labour Relations Review, , vol. 31(1), pages 116-119, March.

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    More about this item

    Keywords

    labour share; labour income share; decoupling; wages; real wages; productivity; factor shares; bargaining power; capital; capital share; inequality; Australia; wages breakout; The Accord;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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