Workers' share of GDP.

AuthorMarcus, Morton J.

Everyone likely to read these words knows that GDP stands for "gross domestic product," the value of goods and services produced and sold in the marketplace in the United States in a given period of time. It's reported quarterly by the U.S. Bureau of Economic Analysis, with monthly updates. Politicians have plans to make it grow faster (as if it were a favorite garden flower).

Most students of economics learn that GDP has three familiar components: consumer spending (C), business investment (I), and government spending (G). Those who are paying good attention learn that exports minus imports (E-X) are also part of GDP. But there is another side to GDP, the distribution of those dollars in the economy.

In this article, we examine the three components of that other side: employee compensation, taxes less subsidies and gross operating surplus. We define these components, look at their changes over time and explore how they differ by state--with specific reference to Indiana.

Definitions

Simply put:

* Employee compensation is what workers and executives get paid.

* Taxes less subsidies are the net of what business pays to government for services rendered to the firm or society in general (social overhead, if you will), less whatever subsidies the firm gets as an incentive for, presumably, advancing economic welfare.

* Gross operating surplus represents what is left after employees, suppliers and net taxes are paid. This pre-income tax sum includes depreciation and is available to those who own the firm or hold its debt.

More formal definitions are provided in the accompanying box.

Compensation of employees = Wages and salaries, plus employer-paid benefits (pensions and insurance) and government social insurance (Social Security and Medicare). This includes bonuses to employees but not payments to consultants or contract workers who are not employees of the firm.

Taxes on production and imports less subsidies = "Federal excise taxes and customs duties, state and local sales taxes, property taxes, motor vehicle licenses, severance taxes, and special assessments, less subsidies by governments to private businesses or government enterprises." All these are taxes levied directly on business. Corporate income taxes are not included.

Gross operating surplus = "Value derived as a residual for most industries after subtracting total intermediate inputs, compensation of employees, and taxes on production and imports less subsidies from total industry...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT