The declining labour share in Australia: Definition, measurement, and international comparisons

The explosion of research and policy interest in the problem of inequality in recent years has focused primarily on the distribution of income across individuals or households. This research has documented the dramatic growth of personal income inequality, and explored its causes, consequences, and solutions. However, a parallel and related dimension of inequality has received rather less attention: namely, the shifting distribution of income between the major factors of production (primarily labour and capital, but also land, mixed incomes, and other smaller categories). In fact, the changing factor distribution of income is one of the major causes of shifts in personal income distribution. And the factor distribution of income raises many additional and important issues for macroeconomics and political economy. Indeed, David Ricardo (1911) stated famously, 'To determine the laws which regulate this distribution, is the principal problem in Political Economy.' For these reasons, exploring the changing distribution of income between factors is an essential complement to other studies of inequality.