In June, Statistics New Zealand published data from its annual Annual Enterprise Survey (AES) which shows company profits, wages and salaries paid, and many other details of companies in the commercial economy. It shows a falling share of income going to wage and salary earners, along with increasing company profits which are even stronger when capital gains (the revaluation of their assets) is included.
This survey gives us another look at the share of income that wage and salary earners are receiving, and paints a consistent picture with the share that employees get of income in the whole economy (the ‘labour income share’), but provides more details down to subindustry level.
Taking all the industries together, although wages per employee rose, total wages paid fell steeply as a proportion of the income the employees created in them. The wage share fell from 59.1 percent of income to 55.4 percent between 2013 and 2018 before capital gains and losses were counted. If the share had not fallen, average annual wages and salaries would have been $3,900 higher than they actually were. Return on equity rose strongly from 10.6 percent to 12.2 percent. If the wage share had not fallen, the return would still have risen, to 11.2 percent.
The picture is even starker after taking account of capital gains and losses over this period of rapidly rising asset prices. The wage share taking these greater profits into the calculation fell from 60.1 percent of income down to 51.9 percent between 2013 and 2018. If the share had not fallen, average annual wages and salaries would have been $9,100 higher than they actually were. Return on equity rose strongly from 10 percent to 14 percent. If the wage share had not fallen, the return would still have risen, to 11.6 percent.
In the majority of main industrial sectors, the wage share also fell. In Manufacturing, the wage share fell even more sharply than average, from 75 percent to 65 percent before capital gains and losses, equivalent to an annual wage loss of $9,800, and from 80 percent to 66 percent after capital gains and losses, equivalent to an annual wage of loss of $14,300, reflecting the fact that the sector had larger capital losses than gains, particularly in 2013. Return on Equity rose from 13.3 percent to 19.9 percent before capital gains and losses, and from 10 percent to 19.0 percent after. If the wage share had remained the same, return on equity would still have been 14.4 percent (or 10.9 percent, respectively), higher than it was in 2013.
Download the full bulletin: CTU Economic Bulletin 213 – August 2019