corporate sector, have in sum been associated with a falling labour income share. Since management salaries are part of compensation of employees in the national accounts and thus of the labour income share, the wage share excluding (top) management salaries has fallen even more pronounced than the wage share taken from the national accounts. Third, financialisation and neo-liberalism have weakened trade union bargaining power through several channels: increasing shareholder value and short-term profitability orientation of management, sectoral shifts away from the public sector and the non- financial business sector with stronger trade unions in many countries to the financial sector with weaker unions, abandonment of government demand management and full employment policies, deregulation of the labour market, and liberalisation and globalisation of international trade and finance. These channels should not only have triggered falling labour income shares, but should also have been conducive to the observed increases in inequality of personal/household incomes. The major reason for this is the (even more) unequal distribution of wealth, generating capital income, which then feeds back on the household distribution of income when it comes to between labour and capital incomes. The effect of financialisation on functional income distribution – evidence for Germany Checking the relevance of these channels for the German case, with respect to the first channel we find that neither the profit share of the financial corporate sector was higher than the profit share in the non-financial corporate sector in the period of the increasing dominance of finance starting in the early/mid 1990s (Figure 3), nor was there a shift of the sectoral shares in gross value added towards the financial sector (Figure 4). However, the share of the government sector in value added has seen a tendency to decline, from 12 per
corporate sector, have in sum been associated with a falling labour income share. Since management salaries are part of compensation of employees in the national accounts and thus of the labour income share, the wage share excluding (top) management salaries has fallen even more pronounced than the wage share taken from the national accounts. Third, financialisation and neo-liberalism have weakened trade union bargaining power through several channels: increasing shareholder value and short-term profitability orientation of management, sectoral shifts away from the public sector and the non- financial business sector with stronger trade unions in many countries to the financial sector with weaker unions, abandonment of government demand management and full employment policies, deregulation of the labour market, and liberalisation and globalisation of international trade and finance. These channels should not only have triggered falling labour income shares, but should also have been conducive to the observed increases in inequality of personal/household incomes. The major reason for this is the (even more) unequal distribution of wealth, generating capital income, which then feeds back on the household distribution of income when it comes to between labour and capital incomes. The effect of financialisation on functional income distribution – evidence for Germany Checking the relevance of these channels for the German case, with respect to the first channel we find that neither the profit share of the financial corporate sector was higher than the profit share in the non-financial corporate sector in the period of the increasing dominance of finance starting in the early/mid 1990s (Figure 3), nor was there a shift of the sectoral shares in gross value added towards the financial sector (Figure 4). However, the share of the government sector in value added has seen a tendency to decline, from 12 per
financialisation_and_income_distribution_germany.docx