Are workers getting a smaller slice of the cake?

Are workers getting a smaller slice of the cake?
Jeremy Corbyn saying: In 1976 wages took over 64% of the GDP - that figure is now only 54%. Verdict: Both those figures are correct. Bank of England research suggests the decline from the 1976 peak could be due to problems with accounting for income from self-employment and housing.

On Tuesday, Labour leader Jeremy Corbyn told the conference of the trade union umbrella body, the TUC: “For 40 years the share of the cake going to workers has been getting smaller and smaller.

“In 1976, wages took over 64% of the GDP – that figure is now only 54%.”

Wages as a proportion of GDP, also known as the labour share, is a broad measure of how much money is going to workers as opposed to, for example, companies and their shareholders.

Mr Corbyn’s figures on the labour share are correct – but 1976 was hardly a representative year, as this chart shows, although it had also reached such levels in the 1950s and 1960s.

Wages as a proportion of GDP

The labour share fell sharply after 1976 and reached a trough in the mid-1990s. It rose slightly in the early 2000s and has been pretty static since then.

“The labour share has been falling over recent decades in many countries – though in the UK, perhaps surprisingly, it has been fairly constant in recent years,” says Jennifer Smith, a labour market economist from Warwick University.

Indeed, research from the International Labour Organisation found that between 1970 and 2014, the labour share in the UK had fallen by less than it had in any of the other nine developed countries with which it was compared (Spain, Italy, Korea, USA, Japan, Australia, Canada, Germany and France).

But these international comparisons are not straightforward, in particular because of the challenges of self-employment income.

“There has been a long-term trend of a rising share of self-employed workers in the UK and there have, in the past, been practical difficulties in including their income in the figures,” Ruth Gregory, from Capital Economics, told Reality Check.

With self-employed workers it is harder to make the distinction between workers’ pay and company profits.

The Office for National Statistics has been looking into the challenges of self-employment income for the labour share and whether they account for the fall in the labour share.

Research from the Bank of England suggests if you properly account for housing income (that’s money made by landlords) and self-employment, the labour share has been pretty constant in developed economies since 1980, with the exception of the US.

Meanwhile, this paper from the Massachusetts Institute of Technology (MIT) suggests the falling labour share is actually due to the rise of what it calls “superstar firms” rather than less money going to workers.

What claims do you want BBC Reality Check to investigate? Get in touch

Read more from Reality Check

Follow us on Twitter

You Might Also Like