The wage share (or labor share) is the ratio between compensation of employees (according to the system of National accounts) and one of the following variables:
- gross domestic product at market prices
- gross domestic product at factor cost.
- net domestic product at factor cost (domestic income at factor cost)
An adjustment is often made so that the wage share reflects only changes in relative incomes and not changes in the composition of employment in employees and number of self-employed. In this case the adjusted wage share is:
compensation of employees per employee
divided by one of the following:
- gross domestic product at market prices per number of persons in employment (this adjusted wage share is also called real unit labour costs).
- gross domestic product at factor cost per number of persons in employment
- net domestic product at factor cost (domestic income at factor cost) per number of persons in employment
The wage share is a (rough) indicator for the distribution of income between capital and labour. In the short term it moves countercyclically to the business cycle.
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