This paper looks at the extent to which wages are affected by profits in major British firms – a process known as ‘rent-sharing.’ It finds this happens on a much smaller scale today than it did in the 1980s and 1990s.
The researchers used data from a panel of the top 300 publicly-quoted British companies over a 30-year period between 1983 and 2016, looking at information on profit per employee, wages and market share.
They found that while firms do share their profits with employees, this happens on a much smaller scale today than it did in the 1980s and 1990s. Those with the greatest market share used to pass on more of their profits, and this decreased more rapidly after 2000 than in firms with smaller market shares. The authors conclude that a rise in firms’ market share might be related to a drop in workers’ bargaining power.