Munich Personal RePEc Archive

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

Cowgill, Matt (2013): A Shrinking Slice of the Pie: The Labour Income Share in Australia.

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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.

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