Labor's Share in the National Income

• Published date: 01 March 1951
• Date: 01 March 1951
• DOI: 10.1177/000271625127400108
• Author: L. Reed Tripp
• Subject Matter: Articles

Labor’s Share in the National Income
By L. REED TRIPP
UCH
contemporary interest cen-
lems, perhaps the central question in this
M ters around the behavior and de-
sphere is the impact of collective bar-
terminants of labor’s share in the na-
gaining.
tional income. This interest includes,
These questions of the determinants
but also goes beyond, the division of
of labor’s share and the influence of col-
product among the participants in the
lective bargaining are frequently an-
production process and its direct bearing
swered by reference solely to national
upon standards of living of the parti-
income statistics. The accounting rec-
cipants.
Economists who stress the
ord of the past is a basic starting point
need for high levels of consumption in
for such an inquiry. Well-marked and
our economic mechanism see in labor’s
persistent trends through time constitute
share the key to high and sustained
strong evidence of the likely continua-
national income itself. Those who em-
tion of such trends, given a consistent
phasize the volatile nature of private
and adequate frame of reference. For
investment in the functioning of our
a number of reasons, however, it is be-
economy see a problem in the potential
lieved necessary to go beyond the statis-
effects of labor cost upon business fluc-
tical record for the &dquo;why&dquo; and &dquo;where
tuations. In any case the investigation
to&dquo; questions, and to rely more heavily
of labor’s income share is a project well
upon economic analysis with as careful
worth the widespread attention being
regard as possible for actual behavior.
devoted to it in contemporary economic
TRENDS
literature.
Related but not identical to such an
National income statistics have sug-
investigation is the impact of collective
gested two features of labor’s income
bargaining upon distributive income
share as its most prominent characteris-
shares.
Concern of many students of
tics : (1) the tendency for employee
contemporary affairs, considered more
compensation to become a higher per-
broadly than their strictly economic as-
centage of national income during de-
pects, has focused upon the role of col-
pression periods than during prosperity,
lective bargaining.’ With the growth
and (2) the relative stability otherwise
of labor unions to a membership of some
of employee compensation as a percent-
15,000,000 persons in the postwar pe-
age of national income over a period of
riod, their influence upon wage deter-
time.
mination and income distribution is of
The category of employee compensa-
interest to the unions themselves and to
tion in national income aggregates (in-
many others in society. In a symposium
cluding supplements as well as wages
issue on various aspects of labor prob-
and salaries) groups together the com-
1 For a careful analysis of the many different
pensation of all persons in an employee
elements within total union membership and
relationship to employers, from the pres-
a balanced appraisal of their current status in
ident of a large corporation to the com-
the United States, see E. E. Witte, "Role of the
mon laborer.
While it excludes farm
Unions in Contemporary Society," Industrial
income and the income of
and Labor Relations Review, IV, No. 1
unincorpo-
rated business
(October 1950),
and
pp. 3-14.
professional persons,
47

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48
it includes types of managerial income
centage-wise. Employee compensation
which are more closely allied to the en-
in manfacturing as a percentage of in-
trepreneurial function than to labor. An
come originating in this sector shows
appropriate definition of &dquo;labor&dquo; in this
a similar and more pronounced fluctua-
context may go beyond those employees
tion.
who are actually organized in labor un-
In considering the collective bargain-
ions to include other employees who
ing sphere, however, it should be noted
might be considered &dquo;susceptible&dquo; to
that salaries (where data are separately
unionization. Viewed in either light,
available) show a greater stability and
however, the inclusion of many sales and
account for more of the percentage rise
supervisory personnel, not solely ac-
in depression than do wages.’ There
counted for in &dquo;executive compensa-
are many variations from industry to
tion,&dquo; introduces additional imponder-
industry, and part of this behavior may
ables. Clerical and some sales employees
be accounted for by transfers to service
engage in collective bargaining, though
and other industries characterized by
less generally than manual workers.
more prevalent use of salaried compen-
There is undoubtedly a twilight zone in
sation. The greater prominence of gov-
the industrial labor force, in which it is
ernment payments as wages or supple-
difficult if not impossible to say whether
ments is a further contributing element
many sales and salaried employees are
to the percentage rise of wages and sal-
typically aligned with the management
aries in depression. The significance of
function or are &dquo;susceptible&dquo; to collec-
bargaining in this element is transferred
tive bargaining.
from the market place to the legislative
A differentiation such as has devel-
halls.
oped by statute and administration un-
Depression data must necessarily be
der the Fair Labor Standards Act be-
tween exempt and nonexempt employees
2 Dr. Kuznet’s data for 1919 to 1938 show
would be
fluctuations of
a closer approximation than
wages at least as wide as the
business cycle but less than conforming fluc-
now exists in the national income ac-
tuations of salary payments where the two
counts. Failing that, however, a caveat
items can be separated. See Simon Kuznets,
is in order to prevent too literal reliance
National Income and its Composition 1919-
upon the behavior of &dquo;employee com-
1938 (National Bureau of Economic Research,
No.
pensation&dquo; in assessing labor’s income
40, New York, 1941), Vol. I, pp. 250 ff.
See also pp. 216-218 for the significance to em-
share or the impact of collective bargain-
ployee compensation behavior in the 1930’s of
ing.
government payments of social security, work,
and other relief payments, included in Dr. Kuz-
Depression influence
nets’ supplements to wages and salaries. Cf.
also Dr.
From 58.1
Kalecki’s hypothesis that the share of
per cent of national in-
manual labor’s wages in gross private income,
come in 1929, employee compensation
that is, excluding the government sector, re-
climbed to a high of 74.1 per cent in the
mains relatively constant over the business
depression year of 1933, illustrating the
cycle: Michael Kalecki, "The Distribution of
tendency for the
the National Income," in W. Fellner and B.
wage and salary share
Haley, Readings in the Theory of Income
to rise during depression and to fall
Distribution
(Philadelphia: The Blakiston
during properity. As profits are wiped
Company, 1946), pp. 197-217. For a critical
out in depression, wages and salaries
analysis of the latter view, developing inter-
become a higher percentage of the lower
industry comparisons, and for the significance
of
level of national income, although other
excluding the government sector, see J. T.
Dunlop, Wage Determination Under Trade
shares of a relatively fixed nature, such
Unions (New York: The Macmillan Company,
as interest payments, may also rise per-
1944), pp. 174-180.

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49
taken from historical periods during
Over even this short a period, many
which collective bargaining was not as
other factors have occurred besides
widespread in the United States as it is
the growth of collective bargaining,
today. There is furthermore no hard
including some changes in employment
and fast distinction between wages and
represented by the...