Labor Compensation as a Share of National Income

I owe our Angrybear readers an answer related to this post, which in part critiqued Michael Darda. One line which puzzled our readers was:

Labor compensation is growing above a 7 percent annual rate while aggregate hours worked are rising at a rate consistent with 4 percent real GDP growth.

Forgive me for thinking that Mr. Darda was referring to the growth compensation per hour as he was also touting how the number of hours grew. Our readers are smart enough to realize that the nominal growth rate in total compensation has been nowhere near 7% per year – and it does seem that Mr. Darda was not referring to compensation per hour after all. I would say that it would help if the NRO econopundits were clear with their definitions and their sources of data, but then I’d be forgetting the essential ingredient for getting Rich Lowry to allow one to publish at NRO – which is that one is supposed to present distortions to their readers.

Looking at BEA’s Table 1.12: National Income by Type of Income, it does turn out that nominal labor compensation is rising by around 7% per year, but why would anyone compare this nominal growth to the growth rate of real GDP? Does Mr. Darda not realize that inflation is above zero?

Our chart shows the ratio of labor compensation to national income since 1998. Our readers know that the labor share of income has fallen. I guess Mr. Lowry and his econopundits don’t want NRO readers to know this.