Measuring the economy: Look to human capital

The wage bill as a proportion of GDP is becoming outdated amid structural changes. A more nuanced approach is needed as the line between labour and capital blurs.

An important indicator that policymakers must keep track of is that of wage share in gross domestic product (GDP). Wage share is the ratio of workers' compensation to GDP. It is a useful guide to an economy's complexities and long-term trends.

The use of wage share as an indicator was recently examined by former NTUC secretary-general Lim Boon Heng ("Getting the picture right on wage share in Singapore"; Dec 12), in a Straits Times article adapted from a memo he wrote for NTUC staff. It said that the wage component of GDP offers a useful indication of the overall structure of an economy, but he cautioned that one has to understand the local attributes and longer-term trends.

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A version of this article appeared in the print edition of The Straits Times on January 11, 2019, with the headline 'Measuring the economy: Look to human capital'. Print Edition | Subscribe