Comment

Another important question is the following: If we add income to skilled labor we must subtract it from other factors for consistency; which share would be reduced? The answer depends on accounting practices for stock-based compensation followed by firms when compiling their books. Unfortunately, over time practices have changed and even now there is no uniformly accepted rule. For example, Deloitte has a 500-page road map on how to properly account for share-based payment awards. They likely show up as profits in many books, but according to the current generally accepted accounting principles, stock-based compensation is a noncash operating expense on the income statement. As such, it could show up either in the wage bill of the firm (still, it would not be picked up by national accounts, as explained by Eisfeldt et al.) or in other operating costs related to investment in intangibles, for example, research and development, marketing, and advertising expenses. In the latter case, Eisfeldt et al. provide support for the mechanism proposed by Koh, Santaeulàlia-Llopis, and Zheng (2020). According to these authors, the decline in the labor share is directly linked to the rise of investment in intangibles because on the income side of national accounts statistical agencies attribute all the income corresponding to these intangible expenditures to capital. Eisfeldt et al. document that part of this income is, in reality, deferred compensation to skilled labor and so, as argued by Koh et al. (2020), should be added back to the labor share.