Selected Article: A Shrinking Slice – Labour’s Share of National Income Has Fallen

“Imagine the proceeds of economic output as a pie, crudely divided between the wages earned by workers and the returns accrued to the owners of capital.” With this picture in mind, The Economist proves with numbers that “the workers’ take from the pie has shrunk across the globe” over the past 30 years. Especially “when growth is sluggish, as it is now, most workers are getting a smaller morsel of a smaller slice of a slow-growing pie“.

So what can be done? The Economist states that the goal should be to strengthen workers without hamstringing firms. In fact, “a good antidote to labour’s falling share of national income would be to boost ordinary workers’ share of capital.”

The Economist is right when underlining “ugly consequences” of this development. Since the rich own most of the capital – i.e. in 2008 the richest 20% of the population in Germany owned 80% of all capital assets – the increase of the share going to capital worsens inequality even more.

This effect is reinforced by the technological progress due to which the labour input in production decreases in comparison to the capital input and, as a result, the owners of productive assets receive a growing share of the income whereas the owners of human labour receive a proportionally ever-smaller share.

So the question is how productive property can be financed for the many. This is what the Employee Stock Ownership Plan, the ESOP, invented more than 50 years ago by American lawyer and investment banker Louis O. Kelso does. It uses the borrowing power of a company to acquire shares of that very company for its employees.

Click here to read more about leveraged ESOPs.

Read the full article from The Economist (Nov 2nd 2013) here:

A shrinking slice – Labour’s share of national income has fallen

Find a second article on the topic (from the same edition) here:

Labour pains – All around the world, labour is losing out to capital


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About Intercentar

Intercentar is devoted to dealing and promoting the idea of Employee Financial Participation for a more just society.

2 responses to “Selected Article: A Shrinking Slice – Labour’s Share of National Income Has Fallen”

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