Here is a table of the income side of our GDP accounting, with data for 2017Q3, the most recent available. You can find much, much greater detail on the NIPA portion of the Bureau of Economic Analysis web site. What you can see is that compensation is the largest single component. Of course we might think that should be combined with small business income of $1,382 billion. Other changes? Observations?
|Gross domestic income||19,515||100%|
|wages & salaries||8388||81%|
|supplements (social security contributions)||1962||19%|
|excise & import taxes less subsidies||1270||7%|
|net operating surplus ("profits")||4842||25%|
|transfer payments (social security taxes)||153||3%|
|small business income*||1382||29%|
|corporate profits less government business||1755||36%|
|depreciation (“consumption of fixed capital”)||3052||16%|
Of course we would like to know how things changed over time. I could for example look up the change in compensation of workers as a percent of GDP. For some questions, that is the proper metric. But we really want to know how we're doing, how compensation has changed over time. The graph I add uses "real" data, that is, corrected for price changes. We'll get to the nominal / real distinction on Friday.
Note that in the following graph I use a log scale. That's preferable when there's a growth trends and the magnitude changes a lot. If X is the level, then a 10% increase is X*(1+.10). If we take a log then that becomes log X + log 1.1. So the same vertical increment represents the same percentage increase, whether the level of pay is low or high. If we use a regular scale, then a modest vertical increment to pay in 1960s represents a large percentage increase, while the same vertical increment in 2017 represents a small one. In other words, we can't "eyeball" what is going on. Another takeaway: with a log scale, the slope of the line is the (percentage) rate of increase. Again, your eyes fail you with a regular scale, as the slope doesn't translate directly into the rate of change.
Short-cuts: each item, as with any accounting system, incorporates lots of detail about what is and isn’t measured. Here is one example. Small businesses that aren’t set up as formal corporations don’t pay their owners a salary. Instead, earnings are simply part of personal income, and included as one part of overall income on Federal Income Tax Form 1040 (Schedule F for farmers, Schedule C for other businesses). A hint as to the technical accounting aspects: the formal line item is “Proprietors’ income with inventory valuation and capital consumption adjustments.”