Wage share

In the economy, the wage share is an important measure for determining the functional distribution of income. The key figure provides information about the share of employee wages in national income.

Definition / explanation

The wage share basically describes the share of all income from non-self-employed work, which is measured against the total national income. The other way around, this means that the income that comes from self-employed work is not taken into account. The meaningfulness and development of the wage share is described below.

The macroeconomic wage share

The simplest and most understandable wage share is the macroeconomic or unadjusted wage share. For the calculation, the employee's remuneration, namely the total wage income, is divided by the national income.

macroeconomic wage share

However, there is a disadvantage here, because the simple calculation method is only of little informative value with regard to the macroeconomic wage share. This is because former employees who set up their own business are no longer included in the overall economic quota.

The adjusted wage share

There is another way of calculating the wage share, which is the adjusted wage share. It was introduced largely because it can isolate or demarcate the impact of potential changes in income.

When calculating this, it is assumed that the number of recipients of the various income categories remains unchanged. Conversely, this means that it is only changed by changes in the structure of the workforce.

Informative value of the wage share

As already mentioned, the wage share is an important basis for calculating the functional income distribution. Their expressiveness is therefore of great importance.

The wage share not only plays an important role in assessing income distribution, it is also important in state distribution policy. However, the macroeconomic wage share is less informative than the adjusted one.

The development of the wage share

The wage share in West Germany has been rising steadily since the 1950s. It was not until the 1980s that she suffered losses due to the reduction in working hours and rising unemployment. A further decrease in the wage share was also observed between 1993 and 1998.

In 1993 it was 74.4 percent of total national income. In 1998 it was already 71.5 percent. Again highs and lows followed, so that the rate fell significantly again in 2007 and was 64.7 percent.

The main reason for this is that income from assets has been rising steadily for several years. Therefore, a lower value does not automatically mean that the economy is in a worse situation, since the wage share only reflects the part from non-self-employed work. The rest is earned through the work of independent entrepreneurs.

Summary

  • The wage share is the share of the national income from non-self-employed work
  • A distinction is made between the macroeconomic and the adjusted wage share
  • the wage share is constantly changing in Germany
  • The wage share is currently very low due to an increase in income from assets
  • das Pendant zur Lohnquote ist die Win rate
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