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The Distribution of Recent Economic Gains: Some early observations

The Distribution of Recent Economic Gains: Some early observations

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The Distribution of Recent Economic Gains: Some early observations

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  1. The Distribution of Recent Economic Gains:Some early observations Ben Dolman

  2. Some early observations • Sources of income growth • The labour share of income • Labour market outcomes

  3. Sources of income growth

  4. GDP per capita Average annual growth in GDP per capita (per cent)

  5. Market sector output Contributions to average annual growth in market sector output (percentage points)

  6. Industry contributions Share of output Share of hours worked Per cent Per cent

  7. Market sector output Contributions to average annual growth in market sector output (percentage points)

  8. Summary • Reforms to the supply side of the economy led to productivity growth in the 1990s. • Since then, output growth has been input driven … • Strong investment • More workers (though lower average hours) • … and price driven, through soaring terms of trade. • These changes can be identified with changes in demand.

  9. The labour share of income

  10. Labour income shares Per cent of total factor income

  11. Labour and capital Indexes, 1999-2000 = 100

  12. Labour and capital

  13. Labour and capital

  14. Changes in labour income shares … Share of total factor income, per cent … within industries

  15. Changes in labour income shares … … within industries Share of total factor income, per cent … between industries

  16. Average return on capital Per cent per annum

  17. Average return on capital Nominal return less 10-year bond rate (Per cent per annum)

  18. Some implications Share price indexes Capital services Indexes, 1989-90 = 100

  19. Gross national income Contributions to average annual growth in GNI per capita (percentage points)

  20. Summary • Through the 1990s, the benefits of microeconomic reform were evenly shared with workers – throughhigher wages and lower output prices – and firms. • Since then the labour income share has fallen mainly because profit rates on capital have increased. • The labour income share has fallen in most market sector industries. The largest contributors are mining (about ½ of the overall fall), construction and finance. These industries have experienced particularly strong demand-driven growth. • Higher profit rates have also seen more earnings remitted offshore.

  21. Labour market outcomes

  22. Labour market outcomes • A. Jobless families • B. Jobs growth and the wage distribution • C. Male full-time employment • D. Unemployment and education

  23. A. Jobless families Percentage of families with dependent children and no working head

  24. B. Jobs growth by wage rate Annual average growth in hours worked (per cent)

  25. C. Male full-time employment Full-time employment rate (per cent of civilian population) Age group

  26. D. Education Unemployment rate Employment rate Per cent of civilian population Per cent of labour force

  27. Labour market outcomes • A. Jobless families • B. Jobs growth and the wage distribution • C. Male full-time employment • D. Unemployment and education

  28. Concluding observations • Australia’s economic growth this decade has been marked by strong demand growth, particularly in construction, mining and finance. • These have brought much higher profits which in turn appear to have driven strong investment and employment growth. • Labour market outcomes have improved in many ways.