As David Ricardo famously wrote in 1817, the principal function of political economy is to determine the laws which regulate how the "whole produce of the earth" is distributed between rent, profit and wages (see the preface to the Principles of Political Economy and Taxation). Having posed the question right almost 200 years ago, there is still little agreement in the economic discipline on what these laws are - and why the share of wages in national income, the so-called labour share, falls or rises. Even the basic statistics for the trends in labour shares are less than complete: Most data sources cover OECD countries only, and for these the unanimous finding is that labour shares have been declining since the early 1980s. However, the little information we have for developing countries indicates that a similar trend occurred here - including in Southern Africa, where labour shares have been declining since the early 1990s in Botswana, Namibia and South Africa.

The impact of this decline can be felt directly: At any given level of GDP, a lower labour share either means less employment in the formal sector (at constant wages), that wages are lower (at the same employment level), or that a combination of both effects has occurred. Falling labour shares are thus often an explanation why growth has not created enough jobs (so-called "job-less growth") or not translated into higher incomes for workers. Conversely, understanding the mechanisms that can contribute to a higher labour share can thus help to promote employment-intensive growth and to raise to real incomes of workers. Further, higher labour shares can help to reduce income inequality (see the work by Daudey and García-Peñalosa).

The determinants of the labour share are hotly disputed. One view is that each factor of production is compensated strictly according to its marginal productivity, and that shifts in the labour share can therefore be attributed to changes in factor productivity and changes in the labour/capital ratio used in production. Technological change, most importantly the adoption of information technology, has the potential to change factor productivity, and there is some evidence for OECD countries that this has indeed contributed to a higher capital share (see the IMF's 2007 WEO). However, other authors have argued that the most fundamental determinant is the relative bargaining power of capital and labour that determines the distribution of surplus (see Harrison, Guscina and many other authors). Here, the predominant view is that globalization has systematically favoured capital over labour. For example, the possibility to re-locate production into another country or do divert investment gives capital an upper had. In line with this argument, Lee and Jayadev show that financial openness (and financial crises) are associated with lower labour shares. However, there is still ample room for research - for example on the role of trade unions in strengthening workers' bargaining power.

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