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December 03, 2012


John H

That chart does seem to suggest that wages vs profits is pretty close to a zero-sum game, though.

Luis Enrique

it's also striking how often the kinds of people who opine on telly and radio think that high paid bankers are part of the profit share.

it does make me despair a little.


Where's the other 25% of GDP? How is that distributed if not via wages or profits?


Where's the other 25% of GDP? How is that distributed if not via wages or profits?


To John H: taxes is why the wages vs profits actually isn't a zero sum game. If you look at the chart above, you'll see that in this data set, 1955Q1 has wages 58 % and profits 22 %, altogether 20 %. For 2012Q1, wages are 54 % and profits are 21 %, and that makes up 75 %.

In other words, the proportion of wages has fallen by 5 % points. What happened? The chart doesn't say it, but it's because of taxes. Proportion of profits has also dropped just a bit.

There are vary many ways to calculate this stuff, of course. Here's another view to it from my blog post a couple of months back:


@ dcomerf - the other 25% is split roughly evenly between taxes on production and "other incomes", most of which are the incomes of the self-employed.
@ John H - it might look zero-sum in the short-term, but not necessarily in the long. Eg, if a higher profit share encourages investment, it'll create jobs in future. This, however, has only sometimes been true.


Sorry, a typo: 58+22=80 (not 20). 54+21=75.

So the remainder, taxes on production and imports, has grown 20 -> 25.


Surely the key point of the Larry Elliott article is that low productivity may be the result of cheap labour and under-investment.

The changing share of profits vs wages (or indeed the proportion due to tax) is a distraction, and not just because of the trend since the 80s of disguising income as profit. The split between the two could stay constant while both elements decline in real terms.

You'd feel more confident about a recovery if the proportion of profit was rapidly growing now.

Steven Clarke

Are there any data on what % of GDP is rental incomes?



Tim objects to high 'wages' in the finance sector being described as 'profits' to exaggerate, in his, view the growth of profits relative to wages.

But, in many ways, the problem we currently have in the financial sector is that the 'workers' - or at least the top echelons of employees - are robbing the rest of us blind*. In the phraseology used in mainstream discussions there is a 'principal-agent' problem and the danger is always that the 'agent' - the senior execs, but also the 'star', 'alpha generating' traders and other technical specialists - simply plunder the business, a good proportion of which may often be formally owned by large pension funds representing the retirement savings of millions of people. So, to avoid this, their incentives have to be aligned with those of the formal, de jure owners via bonus incentive schemes and the like.[Whether this actually works is another matter].

Now, you, as a Marxist, might say this is simply the upper tier of management and financial specialists appropriating a slice of profits, and they are in effect capitalists (e.g. de facto owners and controllers of the enterprise). This is certain the conclusion folk like Robin Blackburn have advanced.

Hard to measure or verify this I know, and personally I think it doesn't quite save the Marxist argument on its own, but I do think this comes quite close to a widespread gut feeling in many of the population.

*"Robbing us blind" is here used as shorthand for 'exercising unlegitimised rights of ownership & control'.

Greg vP


I'm not totally sure what Elliott's key point was. For me the takeaway paragraph was

"Their [Reed's and Himmelweit's] analysis shows that over the past three decades the whole of the increase in the profit share can been attributed to the increased profitability of the financial sector."

If there's more money to be made at the casino than from honest entrepreneuring, why wouldn't capitalists stop buying work tools, and why wouldn't they leave the kids (employees) in the metaphorical car while playing the one-armed bandits?

gastro george

Extending Charlie's point - if the wage share of GDP has fallen, and the banksters income is part of wages, and that income has been increasing rapidly, then what do we think has happened to the non-bankster wage share of GDP?


Worth noting that neither Tim nor ptaipale provide evidence that the share going to "taxes + other" is mostly going to taxes, but instead just claim it is all taxes.

Steve - Perrys Orpington

....how much of an affect did the recession truthfully have on the GDP?

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