Labor’s share of national income continued to decline in 2022

With the Turkish Statistical Institute (TÜİK) announcing economic growth figures for the fourth quarter of 2022 today, it has been observed that labor’s share of national income and growth continues to decline.

According to the data, Turkey’s gross domestic product (GDP) increased 3.5 percent in the last quarter of 2022 compared to the same quarter a year earlier and 0.9 percent compared to the previous quarter. Overall growth in 2022 was 5.6 percent.

THE SHOCK OF THE DIVISION IS BIG

While the Turkish economy was growing, the working segments could not get a share of this growth in the same way. In addition, it has been observed that the share of wage earners in national income has continued to decline since 2016.

According to the compilation made by Sozcu.com.tr based on GDP data calculated with current prices seasonally adjusted by the production method, labor’s share of national income decreased 3.2 points in 2022. Although the share of labor payments was 26.9 percent in 2021, this rate decreased to 23.7 in 2022.

Although the labor share rose again in 2019 after the 2018 currency crisis, the distribution shock that began with the coronavirus pandemic in 2020 accelerated with the currency crisis in 2021. This trend continued in 2022.

DECREASING TRENDS SINCE 2016

The decline in the labor share of national income has accelerated since 2016. The labor share, which was 32 percent in 2016, decreased 8.3 points in 6 years. Labor participation decreased from 32 percent in 2016 to 23.7 percent in 2022.

Net operating surplus, which represents equity, increased from 43.9 percent in 2021 to 46.9 percent in 2022. Equity, which was 41.6 percent in 2016, increased 5.3 points in 6 years.

Looking at non-seasonally adjusted data, “the share of labor payments in gross value added at current prices” was 30.1 percent last year, while this rate was 26.5 percent in 2022. The ‘share of net operating surplus/mixed income’, which represents the share of capital, increased from 52.5 percent to 54.5 percent.

Looking at non-seasonally adjusted data, the labor share, which was 32 percent in the fourth quarter of 2019, decreased approximately 7 points over 4 years. In the same period, the equity participation increased from 51.5 percent to 54.5 percent.

INCREASE IN PROFITABILITY IS BEHIND WAGE RISE

On the other hand, while labor payments increased 82.7 percent in 2022 compared to the previous year, net operating surplus/mixed income increased 115.2 percent.

Thus, in 2022, the gap between workers and capital has deepened even more.

HOW IS THE PART OF LABOR AND CAPITAL CALCULATED?

When calculating the Gross Domestic Product (GDP), the distribution of income obtained as a result of production is calculated into 3 important components. These are total labor payments, consumption of fixed capital, and net operating surplus.

The share of wage earners and capital owners in national income is seen in labor payments and net business surplus. While labor payments are calculated according to the income earned by workers, the net operating surplus defines the portion that remains for the company, the shareholder.