The effect of computerisation on the wage share in United Kingdom workplaces

This historical paper analyses the distributional consequences of computerisation on the wage share of income in United Kingdom (UK) workplaces in the first decade of this century. The reasons why computerisation might increase a firm’s income but reduce the share assigned to wages are still not well understood. The uniquely rich Workplace Employment Relations Survey (WERS) 2004–2011 includes firm-level measures of the main production inputs and outputs, and thus allows an analysis of the main mechanisms through which increased computer usage influenced the wage share of income in UK workplaces over this period. This analysis shows that the proportion of employees using computers impacted the wage share in ways that were at odds with two mainstream views: that computers complement capital, and that labour can be easily replaced by capital. The results show that the proportion of employees using computers reduced the wage share by disproportionally increasing the productivity of the least skilled employees, who were not proportionally compensated for their increase in productivity. The stability of the wage share, over the period of interest, is explained by the rise in a workplace’s share of professional employees and by a rise in work effort. This positive contribution to the wage share was counteracted by an increased share of employees using computers and by a reduction in the share of employees whose pay was negotiated by unions, thereby contributing to a decline in the wage share of firm income. JELcode J31

Increasing Remuneration for Agricultural Workers in the Irkutsk Region as a Result of Increasing of Agricultural Production Efficiency

The provision of regions with local products will be achieved on the basis of increasing labor productivity in agriculture. Financial incentives of workers are of great importance. The article substantiates the need to increase labor productivity in agricultural production. The achieved productivity level of agricultural crops and livestock, as well as labor intensity of production according to product types are considered by the example of agricultural organizations of the Irkutsk region. The level of workers’ wages in agricultural production in the region within 2015–2019 is analyzed. The data on the wage share in the production cost and in the selling price are given. The ways of agricultural production development, such as increasing soil fertility, improving growing crops technology, providing high-performance equipment, improving labor management and remuneration, are considered. On the basis of the proposed measures, it is possible to increase the wage level of agricultural workers.

Labour productivity, wages and the functional distribution of income in Portugal: A sectoral approach

The main purpose of this paper is to study the functional distribution of income in Portugal in the long run, considering the period between 1953 and 2017. The labour share in income or value added depends on two fundamental variables, labour productivity and the average labour compensation. The trends of these variables are quantified for the aggregate economy and for its main productive sectors. An interesting result emerges, namely the different dynamics across sectors, both for the (unadjusted) wage share (considering only the wages of employees) and for the adjusted labour share (considering also as labour compensation one fraction of mixed income). Moreover, a shift-share analysis is used, in order to distinguish the importance of each sector's wage share evolution (“within” effect) and the changes in each sector's weight (structural changes, or “between” effect). Finally, a first attempt to incorporate the effect of wage inequality on the functional distribution of income is made, subtracting the labour compensation of the highest paid workers (top 10%, 5% and 1%) in order to calculate the wage share of the (so-called) "typical" workers.

Household indebtedness, distribution, and bargaining power under distribution-induced technological change: a macroeconomic analysis

We present a stylized model to explore the interaction between household debt, functional income distribution, and technological change. We assume that weak labor bargaining power allows firms to set their mark-ups in order to meet a target profit rate. At a low wage share, workers’ households are assumed to have limited flexibility in meeting financial goals, so household indebtedness tends to rise as the wage share falls. Rising indebtedness further lowers labor's bargaining power, a phenomenon that was observed in the wave of financialization that began in the late twentieth century. Thus, rising debt levels allow firms even greater freedom to raise their target profit rate. We find that the dynamics can be either stable or unstable, with the potential for a self-reinforcing pattern of rising household indebtedness and falling wage share, consistent with trends in the US from the 1980s onward. The unstable cycle can be triggered by increased willingness by workers to incur debt and rising influence of household indebtedness on labor's bargaining strength and income distribution. The model can shed some light on widely observed trends over recent decades regarding household indebtedness, inequality, and technological changes in the US, and potentially in other OECD countries.

Omitted-variable bias in demand-regime estimations: the role of household credit and wage inequality in Brazil

In the Kaleckian theoretical framework, an economy's demand regime is characterized as either wage-led or profit-led depending on the relative effect of an increase in the wage share on consumption, investment, and net exports. Based on this framework, a vast empirical literature has focused on estimating demand regimes in numerous countries. Although they contribute to a better understanding of the relationship between distribution and demand in different economies and time periods, they also face various critiques on theoretical and methodological grounds. This paper aims to address one dimension of these critiques by investigating a potential omitted-variable bias in the estimated relationship between distribution and demand in the Brazilian economy between 1997 and 2014. Our results suggest that when controlling for some of the relevant factors in Brazil's inclusive growth experience of the early twenty-first century, namely wage inequality, commodity prices, and household credit, the empirical characterization of the Brazilian demand regime as profit-led loses its statistical significance. Also, the demand-regime definition was found to be most sensitive to intra-wage distribution, confirming previous findings in the Kaleckian empirical literature for the Brazilian case.

A note on ‘Wage-led versus profit-led demand regimes: the long and the short of it’

The aggregative and structural approaches are the main approaches used to investigate the US demand regime. They have reported mixed findings whereby the former tends to find profit-led results and the latter tends to find wage-led results. Blecker (2016) suggests that those conflicting findings can be explained, at least in part, by the different time dimensions captured by the two approaches. That is because the US economy tends to be profit-led in the short run and wage-led in the long run. This note discusses and extends Blecker's analysis. An alternative interpretation of the findings of studies using the structural approach is offered, suggesting that their conclusions rest on their handling of the short run. Specifically, the structural approach fails to find cointegration relations among integrated variables in most equations. That absence means it fails to pick up the stronger effect of the wage share on consumption in the long run, which is a key mechanism explaining different regimes across time horizons. The note concludes by briefly discussing other possible explanations for the conflicting results reported in the empirical literature.

MANAGEMENT OF THE INCOME AND BUSINESS ACTIVITY OF THE POPULATION IN THE CONTEXT OF DE-SHADOWING THE ECONOMY OF UKRAINE

The shadowing of the economy is a significant obstacle on the way to stable economic development and the reason for deteriorating investment climate and imbalance of economic incentives in the national economy of Ukraine. The aim of the article is to determine the factors of shadowing and de-shadowing of Ukraine’s economy in the areas of household income and business and investment activity of the population, as well as justification of measures to de-shadow economic processes in Ukraine. On the basis the calculation of the Fechner correlation coefficient, the relationship between the level of the shadow economy of Ukraine and indicators of household income and indicators of small and medium-sized business development was revealed. Іn the sphere of household income factors determining level of the black economy are as follows: increacing in disposable income per capita (the correlation coefficient -0,75), the change in the wage share in househol incomes (the correlation coefficient -0,75), the level of social payments (the correlation coefficient +0,5) and employment (the correlation coefficient +0,75). In the field of entrepreneurship the most sagnificant factors determining level of the underground economy are change in the volume of sales of small and medium-sized businesses (the correlation coefficient -0,75) as well as change of financial result of small enterprises (functional inverse relationship). It is necessary to increase the incomes of the population, stimulate their investment and entrepreneurial activity, in particular, liberalize tax policy for small and medium-sized businesses in order to reduce the level of the underground economy of Ukraine. Special attention should be paid to the development of small businesses, in particular, to changing approaches to regulatory policy in the field of small businesses, to simplify organizational procedures related to doing business as much as possible and ensure the availability of credit. Keywords: underground economy, tax policy, small businesses, medium-sized businesses, entrepreneurial activity. JEL Classification O17, H25, D31 Formulas: 1; fig.: 9; tabl.: 8; bibl.: 21.

Onshoring Through Automation; Perpetuating Inequality?

Many analyses of the ethical, legal and societal impacts of robotics are focussed on Europe and the United States. In this article I discuss the impacts of robotics on developing nations in a connected world, and make the case that international equity demands that we extend the scope of our discussions around these impacts. Offshoring has been instrumental in the economic development of a series of nations. As technology advances and wage share increases, less labour is required to achieve the same task, and more job functions move to new areas with lower labour costs. This cascade results in a ladder of economic betterment that is footed in a succession of countries, and has improved standards of living and human flourishing. The recent international crisis precipitated by COVID-19 has underlined the vulnerability of many industries to disruptions in global supply chains. As a response to this, “onshoring” of functions which had been moved to other nations decreases risk, but would increase labour costs if it were not for automation. Robotics, by facilitating onshoring, risks pulling up the ladder, and suppressing the drivers for economic development. The roots of the economic disparities that motivate these international shifts lie in many cases in colonialism and its effects on colonised societies. As we discuss the colonial legacy, and being mindful of the justifications and rationale for distributive justice, we should consider how robotics impacts international development.