Spoiler: Analysing inequality in Sweden by looking at developments of capital and labour shares 1960-2019 show that inequality is not a big issue. Labour’s share in GDP is closely related to the real wage. Growth of hourly real wages has not lagged labour productivity growth.
In the previous post, I showed that the wage share had increased in Sweden since 1993. That conclusion may be based on the initial point in the sample. In fact, it wasn’t. The wage share has been, as Kaldor suggested a long time ago, relatively constant over a long period of time. In this post, I will take a longer view on capital and wage shares in Sweden.
Spoiler: Measuring income equality in the classical way where a nation’s income is distributed between capital and labour, shows that the wage share in Sweden has increased since 1993. In order to properly measure how the capital share has developed, one must take the depreciation of the capital stock into account.
This adjustment shows that the capital income share of factual income (wage compensation + gross capital income – depreciation) decreased from 34% in 1993 to 22% in 2018.
Spoiler: The Yellow Vests’ claims that inequality in France is increasing are not justified. Wages constitute the most important share of total incomes and real earnings per capita kept growing despite the Financial crisis. Nor did labour shares in total GDP decrease and real wages increased more than labour productivity. And no indicators indicate that inequality has increased.
In fact, France also has one of the most generous welfare programs in the OECD which hasn’t prevented the Kremlin to spread lies and pay people to demonstrate and riot.
Despite the facts that developments of real wages exceed labour productivity developments and that the labour share in GDP is increasing, many claim that income inequality is a big problem in Sweden. That is wrong.