Why labour share of income fell - and how to raise it

Much of the news of the past few days has come to us from the global level - climate change battles at the G-20, doubts about the future of the World Trade Organisation, Russian President Vladimir Putin's assertion that liberalism has "become obsolete". But to really understand why the world is so fractured today, you have to go local and look closely at why labour's share of the economic pie has been squeezed so much in recent years, particularly in the United States and Western Europe.

Globalisation usually gets the blame for the declining labour share and the subsequent discontent among the working class and more recently, middle-class voters. But a recent report on the US labour market, conducted by the McKinsey Global Institute (MGI), found that globalisation was actually at the bottom of the list of the top five reasons that labour's share of national income has declined since the turn of the 21st century.

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A version of this article appeared in the print edition of The Straits Times on July 02, 2019, with the headline 'Why labour share of income fell - and how to raise it'. Print Edition | Subscribe