The Bank of Korea Develops Supplementary Indicator for Labor Income Share... To Be Announced in June

[Asia Economy Reporter Seo So-jeong] The Bank of Korea will develop an auxiliary indicator for the labor income share and announce it in June.

On the 18th, the Bank of Korea held a "Seminar on Improving the Labor Income Share Indicator" at the "2022 1st Bank of Korea Statistics Forum," attended by related experts, and announced this plan.

The newly developed auxiliary indicator for the labor income share will be estimated retroactively for mixed income (1975?2009) and will be announced in June after preliminary calculations by the end of this month.

At this seminar, presentations were made on various measurement methods of the labor income share and the estimation methods of the labor income share in major OECD countries, followed by an introduction to the direction for improving the labor income share indicator.

The labor income share is defined as the proportion of labor income in national income (labor income + capital income), but it can be measured using various formulas depending on how the scope of labor and capital income is recognized.

Cho Tae-hyung, head of the Economic Research Institute at the Bank of Korea, explained, "The labor income share can be analyzed by distinguishing between production and income aspects, and the level and movement of the labor income share can vary depending on whether depreciation of fixed capital is included and how mixed income is divided."

There have been some criticisms that the existing labor income share has a limited scope in the numerator (labor income) and denominator (national income). Accordingly, there have been calls to supplement the current indicator by examining the calculation methods of the labor income share in major countries.

Lee Gwan-gyo, team leader of the Economic Statistics Department at the Bank of Korea, said, "Experts generally agreed that considering the diverse demands for the labor income share indicator, the current indicator should be maintained as the main indicator, but there is a need to develop auxiliary indicators that can complement it." He added, "By synthesizing overseas cases, we are newly developing an auxiliary indicator for the labor income share by adding part of mixed income to labor income and diversifying the scope of capital income."

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