Economic and political determinants of the South African labour share, 1971–2019

This study examines the drivers of the steady decline in South Africa’s private sector labour share between 1971 and 2019. The focus on South Africa is instructive as its distributional contestation is bounded in a matrix of racial conflict. Crucial reforms on trade, finance and welfare were undertaken since 1994, but the study finds little evidence that the extension of the franchise promoted egalitarianism, since white economic elites invested in de facto political power. This study employs an Unrestricted Error Correction Model to estimate the drivers of the private sector labour share, and the findings suggest that globalisation, financialisation and public spending have decreased the labour share, while the effects of education have been positive but insufficient to halt the decline.

A Panel Analysis of the Impact of Green Transformation and Globalization on the Labor Share in the National Income

This study aims to examine the impact of green transition and globalization processes on changes in the labour share. The study covers 76 national economies diversified in development, global production share and energy transition stage from 2000 to 2018. Based on the Total Economy Database data, panel models of the relationship between green transition, globalization and the labour share in the national income were estimated. The conducted Breusch–Pagan and Hausman tests proved the validity of using fixed-effects models. We confirmed the research hypothesis that the openness of the economy contributes to a decline in the labour share. The openness of the economy resulting from globalization reduces the labour share in the national income. We do not confirm hypotheses that suggest energy transition contributes to a reduction in the labour share and that the labour share will decline in the post-crisis period due to the lower bargaining power of workers. Changes in the labour share should be of interest to government representatives who influence the shape and implementation of economic policy, especially in employment policy, education, and investment policy, mainly aimed at the green transformation.

Labour productivity, wages and the functional distribution of income in Portugal: A sectoral approach

The main purpose of this paper is to study the functional distribution of income in Portugal in the long run, considering the period between 1953 and 2017. The labour share in income or value added depends on two fundamental variables, labour productivity and the average labour compensation. The trends of these variables are quantified for the aggregate economy and for its main productive sectors. An interesting result emerges, namely the different dynamics across sectors, both for the (unadjusted) wage share (considering only the wages of employees) and for the adjusted labour share (considering also as labour compensation one fraction of mixed income). Moreover, a shift-share analysis is used, in order to distinguish the importance of each sector's wage share evolution (“within” effect) and the changes in each sector's weight (structural changes, or “between” effect). Finally, a first attempt to incorporate the effect of wage inequality on the functional distribution of income is made, subtracting the labour compensation of the highest paid workers (top 10%, 5% and 1%) in order to calculate the wage share of the (so-called) "typical" workers.

The effects of government spending shocks on income distribution in South Africa

PurposeThe main aim of this study is to examine the effect of government spending and its components' shocks on the distribution of income between labour and capital in South Africa for the period between 1994Q2 and 2019Q3.Design/methodology/approachThe effects of government spending shocks on income distribution are analysed using Jordà's (2005) local projection method. The shocks, however, are identified by applying short-run contemporaneous restrictions in a vector autoregressive model based on Cholesky identification scheme.FindingsThe results indicate that government spending shock has a positive and significant effect on labour share after the first quarter. This means that expansionary government spending has a paramount role in reducing income inequality in the economy. Both government investment and government consumption shocks have also contributed to a reduction in income inequality, though the magnitude effect is smaller for government consumption.Originality/valueResearch findings on the effects of government spending shock on income inequality are still inconclusive. Therefore, this research examines the effect of total government spending shock along with its components on labour income share for the South African economy.

Firm strategies and distributional dynamics: labour share in Italian medium-large firms

Using an original database on medium and large Italian firms built by merging the Rilevazione Imprese e Lavoro run by INAPP in 2010 and 2015 with the AIDA archive by Bureau Van Dijk, we show that the trend of the labour share differs along the labour share distribution. We carry out Unconditional Quantile Regression decompositions to explore the main drivers behind this heterogeneity. Thus, we contribute to the literature on the dynamics of the labour share since we investigate phenomena which cannot be observed through a macro perspective or by looking at a single parameter of the labour share distribution. After including in our specifications several firm-level characteristics and considering composition effects, we find that outsourcing is the main factor which plays a role in reducing the labour share along the distribution. Further different mechanisms act in the various parts of the distribution: unionization contributes to increase the labour share at the top of the labour share distribution, while the introduction of some forms of product (process) innovations is associated with a negative (positive) change in the labour share for those firms at the bottom of the labour share distribution.

Challenging the working time reduction and wages trade-off: a simulation for the Spanish economy

This paper analyzes the effect of working time reduction (WTR) on the Spanish economy. Using microdata from the Economically Active Population Survey (EAPS) and the Wage Structure Survey (WSS), we estimate the changes in employment, worked hours, wages and salaries, and the labour share driven by a 5-hour reduction of the ordinary work week in full-time contracts (from 40 hours to 35 hours), without a wage reduction. According to our results, this WTR would mean the liberation of private sector hours that are equivalent to 1.2 million full-time jobs. To calculate job creation, we consider the occupations and technical conditions of production (based on the European Working Conditions Survey). Consequently, had the WTR taken place in 2017, it would have created 560 thousand jobs, thus causing the unemployment rate to fall by 2.6 p.p. Moreover, women are found to be the group most affected by this measure. As for the effect on wages, these would have increased by 3.7%, implying a labour share increase of 2.1 p.p. Finally, we study the macroeconomic effects, through an extended version of the single-equations Bhaduri–Marglin model using quarterly data from 1995Q1 until 2017Q4. Our results show that a WTR of 5 hours leads to an increase of 1.4% in GDP.