Labour Market

Company Profits Rising More than Labour Costs

The OECD Employment Outlook 2023 shows that in many of its member countries growth in company profits has significantly outpaced growth in labour costs. This divergence has led to a reduction in the labour income share and has made an “unusually large contribution to domestic price pressures.”

On average in the OECD, unit labour costs grew by 16% while company profits grew by 21% from Q4 2019 to Q1 2023. According to the OECD, this trend suggests that “the cost-of-living crisis has not been shared equally by everyone.”

Looking ahead, the report indicates that in several sectors and countries, “there is room for profits to absorb some further increases in wages to mitigate the loss of purchasing power at least for the low paid without generating significant additional price pressures.”

These findings emphasize the need for a balanced approach to profit and wage growth in order to better manage the ongoing cost-of-living crisis and its impact on workers, particularly those earning lower wages.

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