Which of the following would cause labor's share of national income to decrease?
A)labor productivity increases less rapidly than the real wage rate.
B)labor productivity increases more rapidly than the real wage rate.
C)labor productivity has increased at the same rate as the real wage rate.
D)labor's share of national income is not affected by the relative growth rates of labor productivity and the real wage rate.

Question

Quizplus · Accepted Answer

Labor's share of national income is defined as the ratio of total wages to national income. If labor productivity increases less rapidly than the real wage rate, then the cost of labor per unit of output will increase. This will lead to a decrease in the demand for labor, and hence a decrease in labor's share of national income.

Which of the Following Would Cause Labor's Share of National