Development of Wage Share

After a decade of a stable wage share in Austria, the picture has changed since the inflation shock of 2022-23 and a prolonged recession: the wage share has recently risen markedly, more so in Austria than in many other countries. This paper provides an overview of the international literature and discusses various measurement concepts as well as factors influencing the wage share. The focus is initially on the development of aggregate and sectoral wage shares in Austria. A shift-share analysis shows that both the decline in wage shares up to 2007 and the subsequent rise in the wage share are primarily attributable to changes in compensation of employees within sectors (shift effect), while structural change plays only a minor role. A macroeconometric analysis demonstrates that the recent increase was driven not only by the business cycle but also by a slower expansion of labour supply, rising commodity prices and other structural factors. In addition, trade unions were particularly successful in pushing through their wage demands.