UK GDP by Income, Revisited
Since the TUC are hawking dodgy charts again, possibly only in an effort to annoy Tim Worstall, here is the numerical breakdown of UK GDP by income over the last six decades, taking the average over each decade to smooth out cyclical movements. Values given are the % of nominal GDP.
| Decade from |
Compensation of Employees |
Corporate Gross Operating Surplus |
Other income |
Taxes less subsidies |
|---|---|---|---|---|
| 1950 | 57.9 | 21.5 | 10.6 | 10.3 |
| 1960 | 59.4 | 20.9 | 9.5 | 10.5 |
| 1970 | 60.0 | 18.8 | 10.8 | 9.8 |
| 1980 | 55.5 | 21.7 | 10.5 | 12.1 |
| 1990 | 53.4 | 22.7 | 11.5 | 12.5 |
| 2000 | 54.2 | 21.4 | 12.2 | 12.2 |
Previous analysis, and Tim’s, still stands.
Since we have a shorter data set for the breakdown of the compensation of employees, here it is taking averages over five years – again % of nominal GDP:
| 5 Years from |
Wages | Employers’ Social Contributions |
|---|---|---|
| 1987 | 47.5 | 6.9 |
| 1992 | 46.2 | 6.8 |
| 1997 | 46.7 | 6.9 |
| 2002 | 45.9 | 8.1 |
| 2007 | 45.1 | 8.9 |
As one of Tim’s commenters noted, the most hilarious thing about the TUC’s analysis is that they show the 1980s to be the most successful decade of the last three by a long way, on their chosen metric of median wages vs GDP growth. Thatcher was great for the workers – just ask Brendan Barber.
Question I’d have on this is whether wage share as a % of GDP really the best thing to consider when you’re making this kind of political argument. Another chart they use has what I’m assuming is median wage vs GDP and shows a growing gap, which seems to support the overall argument that wages aren’t what they used to be. I’m certainly wary of accepting what Tim seems to imply which is that the TUC argument is just plain wrong.
You’re right about the second chart – the “hypothetical earnings” line seems to track real GDP per capita upwards.
They do also cite inequality. But if they want to talk about inequality, they should do that and not make completely bogus arguments about the wage share of GDP. And why are we looking at pre-tax incomes if we are really just looking about inequality?
There doesn’t seem to be a consideration of incidence here. Because in a way the most interesting thing here is the maintenance of the profit share (apart from the 1970s), despite a definite 1970/1980 break point for employee compensation. Why was the impact of expenditure taxes and employers’ contributions not equally shared?
The other consideration is that despite huge increases in salaries for those at the top of businesses over the years, this has obviously been at the expense of someone/something other than the profit share!