suspended

Well-known member
yes but I was talking the tweets, but I think I get them now. whats your take away?
Don't have a takeaway really! Not well-versed in economic statistics to situate this properly. I am—as you well know—interested in the role of narratives in society, though—with all its hyperstition overlaps. E.g.,
“... Deprogramming simultaneously retro-produced the program, just as witch-trials preceded devil-worship and regressive hypnotherapy preceded false memory syndrome. Yet, once these ‘fictions’ are produced, they function in and as reality. It isn’t that belief in Project Monarch produces the Monarch Program, but rather that such belief produces equivalent effects to those the reality of Project Monarch would produce, including some that are extremely peculiar and counter-intuitive.”
Setting aside whether or not productivity gains are being fairly distributed to workers, the mere narrative that they are not is enough to bring about many "equivalent effects" (social unrest, resentment, depression/hopelessness) as the reality.
 

IdleRich

IdleRich
Can you explain this to me?
I think it's saying that there is an argument that states that - in real terms - wages have decreased since the seventies. I'm not entirely sure which variables are used to demonstrate this - something like wages as a proportion of profits I assume but can someone provide a definitive answer to that?
And in that tweet Schneider says "I take his definition and update it" and actually the ratio doesn't decrease as everyone thinks it does.
Who is the "his" whose definition he updates here? And how does he update it? Cos presumably the difference in results is not cos someone has done their sums wrong, so it must be in the way he's updated it right?
 

suspended

Well-known member
Here's my understanding, though it's thin (I posted hoping others could lend expertise). Labor share is how much of the national GDP gets paid out to workers via wages and salaries and benefits. The usual take (see McKinsey's 2019 "A new look at the declining labor share...") is that since the 70s/80s, there's been a huge decline in labor share, or a decoupling of labor share and GDP—the latter growing much faster than the former. These stats tie in to a clear picture of wages and income inequality generally. Many, in the Stiglitz vein, have argued that there are "inevitable dynamics" in a capitalist economy that drive inequality and prevent workers from reaping the benefits of economic growth.

A new measure of labor share introduced by Matt Rognlie uses "net labor share of domestic corporate factor income" as the "best measure" of labor share. "This measure divides labor compensation by the sum of labor compensation and net operating surplus for the domestic corporate sector." It excludes certain types of income from the calculation that the Rognlie sees as inappropriate—tho I don't understand labor share or different income types well enough to know whether they're fair to exclude. How this exactly connects to pay and productivity I'm not sure, other than that he uses Rognlie's "measure of net productivity."
 

Mr. Tea

Shub-Niggurath, Please
Staff member
Here's my understanding, though it's thin (I posted hoping others could lend expertise). Labor share is how much of the national GDP gets paid out to workers via wages and salaries and benefits. The usual take (see McKinsey's 2019 "A new look at the declining labor share...") is that since the 70s/80s, there's been a huge decline in labor share, or a decoupling of labor share and GDP—the latter growing much faster than the former. These stats tie in to a clear picture of wages and income inequality generally. Many, in the Stiglitz vein, have argued that there are "inevitable dynamics" in a capitalist economy that drive inequality and prevent workers from reaping the benefits of economic growth.

A new measure of labor share introduced by Matt Rognlie uses "net labor share of domestic corporate factor income" as the "best measure" of labor share. "This measure divides labor compensation by the sum of labor compensation and net operating surplus for the domestic corporate sector." It excludes certain types of income from the calculation that the Rognlie sees as inappropriate—tho I don't understand labor share or different income types well enough to know whether they're fair to exclude. How this exactly connects to pay and productivity I'm not sure, other than that he uses Rognlie's "measure of net productivity."
Two points here. One is that it explicitly "excludes proprietors' income" - I guess that means share dividends, in the case of a PLC? Money paid out to investors, at any rate. If that goes up in real terms over time (and maybe it hasn't, I dunno), then the percentage of a company's turnover going to investors rather than workers - if the latters' share remains constant - is going to increase.

Second: who, in this scheme, is defined as a "worker"? The CEO on a seven-figure salary and the woman who cleans the bogs are both employees of the company, aren't they? So I think a comparison of the wages of CEOs, or at least senior executives generally, to those of the ordinary worker, is much more illuminating. And figures you often hear is that the average income ratio of CEO to most junior employee for large American companies was 20 in the 1960s and is now about 300.
 

Mr. Tea

Shub-Niggurath, Please
Staff member
(actually the woman-who-cleans-the-bogs is probably employed by a contracting agency these days, but you get my drift)
 

IdleRich

IdleRich
Here's my understanding, though it's thin (I posted hoping others could lend expertise). Labor share is how much of the national GDP gets paid out to workers via wages and salaries and benefits. The usual take (see McKinsey's 2019 "A new look at the declining labor share...") is that since the 70s/80s, there's been a huge decline in labor share, or a decoupling of labor share and GDP—the latter growing much faster than the former. These stats tie in to a clear picture of wages and income inequality generally. Many, in the Stiglitz vein, have argued that there are "inevitable dynamics" in a capitalist economy that drive inequality and prevent workers from reaping the benefits of economic growth.

A new measure of labor share introduced by Matt Rognlie uses "net labor share of domestic corporate factor income" as the "best measure" of labor share. "This measure divides labor compensation by the sum of labor compensation and net operating surplus for the domestic corporate sector." It excludes certain types of income from the calculation that the Rognlie sees as inappropriate—tho I don't understand labor share or different income types well enough to know whether they're fair to exclude. How this exactly connects to pay and productivity I'm not sure, other than that he uses Rognlie's "measure of net productivity."
I guess we'd need to see all the details of what exactly he is including and excluding and why.
I'm not totally sure from the above what is replaced with what, does it say the original calculation is LS/GDP and the new calculation is NLSDCFI/GDP where the former is given by LS/(LS + NOS) - is that correct?
 
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