10.4.1 Labour Share of GDP Comprising of Wages and Social Protection Transfers
Target 10.4: Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality
Goal 10: Reduce inequality within and among countries
Custodian Organization: International Labour Organization (ILO)
Tier Classification: Tier II
To facilitate the implementation of the global indicator framework, all indicators are classified by the IAEG-SDGs (Inter-Agency and Expert Group on Sustainable Development Goals Indicators) into three tiers on the basis of their level of methodological development and the availability of data at the global level, as follows:
Tier I: Indicator is conceptually clear, has an internationally established methodology and standards are available, and data are regularly produced by countries for at least 50 per cent of countries and of the population in every region where the indicator is relevant.
Tier II: Indicator is conceptually clear, has an internationally established methodology and standards are available, but data are not regularly produced by countries.
Tier III: No internationally established methodology or standards are yet available for the indicator, but methodology/standards are being (or will be) developed or tested.
Definition: Labour share of Gross Domestic Product (GDP) is the total compensation of employees given as a percent of GDP, which is a measure of total output. It provides information about the relative share of output which is paid as compensation to employees as compared with the share paid to capital in the production process for a given reference period.
Concepts: Compensation of employees is the total in-cash or in-kind remuneration payable to the employee by the enterprise for the work performed by the employee during the accounting period. Compensation of employees includes: (i) wages and salaries (in cash or in kind) and (ii) social insurance contributions payable by employers. This concept views compensation of employees as a cost to employer, thus compensation equals zero for unpaid work undertaken voluntarily. Moreover, it does not include taxes payable by employers on the wage and salary bill, such as payroll tax.
The indicator should be produced using data that cover all employees and all economic activities.
Gross domestic product (GDP) represents the market value of all final goods and services produced during a specific time period (for the purposes of this indicator, an year) in a country’s territory.
Employees are all those workers who hold the type of job defined as paid employment jobs, that is, jobs where the incumbents hold explicit or implicit employment contracts giving them a basic remuneration not directly dependent on the revenue of the unit for which they work. Total employment is made up by employees and the self-employed.
Rationale: Labour share of Gross Domestic Product (GDP) seeks to inform about the relative share of GDP which accrues to employees as compared with the share which accrues to capital in a given reference period.
In order to interpret this indicator effectively, it is important to consider it together with economic growth trends. The share of labour compensation in national output can highlight the extent to which economic growth translates into higher incomes for employees over time. In periods of economic recession, the wage share provides an indication of the extent to which falling output reduces labour incomes relative to profits. If labour incomes fall at a greater rate than profits, the wage share will be expected to fall. By contrast, if there is a sharper decline in profits than in labour incomes, the wage share will rise. For any given level of GDP and profits, the wage share can fall as a result of falling wage employment, falling wages or a combination of both.
Increased production and GDP often lead to improved living standards of individuals in the economy, but this will depend on the distribution of real income and public policy among other factors. If there is a large number of non-resident border or seasonal workers or inflows and outflows of property income such that the value of production differs from the income of residents, there may be a situation of over or understating the living standards of residents.
Limitations: In general, labour share in GDP will underestimate the proportion of GDP accrued to total employment, as it covers only the compensation of employees and does not include the labour income of the self-employed. Thus the indicator may be less relevant in countries where a large proportion of employment is in self-employment. However, an adjusted labour share may be estimated to take into account the labour income of self-employed workers.
GDP may exclude or underreport activities that are difficult to measure, such as transactions in the informal sector or in illegal markets, etc. thus understating the GDP. Moreover, GDP does not account for the social and environmental costs of production, and is therefore is not a good measure of the level of over-all wellbeing.
Data Source: Data for this indicator was primarily collected from the United Nations Statistics Division’s Open SDG Data Hub. National level data from the UN Statistics Division is compiled by the respective custodian for the SDG indicator, unless otherwise noted. To learn more about the data used in this portal, visit the about page.
Data is accurate as of October 31, 2018.
10.4.1 Labour Share of GDP Comprising of Wages and Social Protection Transfers in the Sustainable Development Goals
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10. Reduce inequality within and among countries
The international community has made significant strides towards lifting people out of poverty. The most vulnerable nations – the least developed countries, the landlocked developing countries and the small island developing states – continue to make inroads into poverty reduction. However, inequality still persists and large disparities remain in access to health and education services and other assets.
Additionally, while income inequality between countries may have been reduced, inequality within countries has risen. There is growing consensus that economic growth is not sufﬁcient to reduce poverty if it is not inclusive and if it does not involve the three dimensions of sustainable development – economic, social and environmental.
To reduce inequality, policies should be universal in principle paying attention to the needs of disadvantaged and marginalized populations.
Related 10.4.1 Labour Share of GDP Comprising of Wages and Social Protection Transfers Targets
Adopt policies, especially fiscal, wage and social protection policies, and progressively achieve greater equality