WELLINGTON - Firms' share of the economic pie has increased and their employees' share has shrunk since the economic reform of the 1980s, says the New Zealand Institute of Economic Research.
To plot their relative shares of the national income it has used data from the system of nationalaccounts which roughly approximate to wages and salaries on the one hand and companies' profits before depreciation on the other.
It found that employees' compensation, expressed as a percentage of GDP, fell steadily from 50 per cent in the mid-1980s to 44 per cent in 1995 but has been inching up since then.
The return on capital initially fell more sharply, bottoming out in 1988 at around 36 per cent of GDP, but recovered, especially from 1992, until it almost matched labour's share in 1995. It has fallen somewhat since then.
"Interestingly labour's income share has grown since 1994/95, while companies' share has been declining," NZIER said. "Even during the recent economic slowdown employment levels and wage settlements have remained relatively high."
That might reflect "labour hoarding", where firms, not expecting the downturn to be severe, held on to their staff and waited for better times.
