<p>As others have noted, your "ceteris paribus" is not very well defined.
If you only want to redistribute "here and now" all the profits to the workers, then you can use the "Kaldor fact" that the wage share is usually around 60-70% of GDP and thus profit share around 30-40%. This means that profit represents something like 40-60% of wages, if this is the figure you are looking for ?</p>

<p>You can of course find a more accurate figure concerning the country or sector you are interested in the national accounts.</p>

<p>I understand that you exclude price increase if you are interested in the <em>real</em> wage at the <em>aggregate level</em> (and probably in a closed economy).</p>

<p>Like Tobias, I think that the really interesting question is : what would be the short run, medium run and long run effects of such a "policy" ? In the short run it could maybe boost GDP through higher consumption demand. But sooner or later it seems unavoidable that you would meet insufficient investment (no one would invest to get zero profit back) and thus insufficient capital, except if you raise taxes and socialize investment.</p>

<p>Maybe you should have a look at the economic history of Yugoslavia, where workers were supposed to control the firms.</p>

CC BY-SA 3.0
2017-01-10T23:41:38.110Z
2017-01-10T23:41:38.110Z
user11629
<p>Labour unions are pushing for wage increase but what is maximal theoretically possible wage increase here and now - without restructuring production, processes and without introduction of new technologies? As far as I can imagine then the decrease of dividend (profit) is the only possible source of wage increase. So - how much wages (in percentage terms) can theoretically be increased if profit is reduced to 0% from invested capital?</p>

<p>On can start the calculations with estimating the average wage share in the expenses of average company and go on...</p>

<p>Of course - another source of increase of lowest wages is the redistribution of the wages, lowering highest wages in enterprise and there can be great opportunities.</p>

CC BY-SA 3.0
2017-01-10T18:20:08.790Z
Profits as you use the word is just the return to capital, and forcing  it to zero would seriously distort investment and savings decisions. Both wages and profits are prices of production factors, messing with them in a quantitatively important way will likely seriously affect production.
Tobias
CC BY-SA 3.0
2017-01-10T18:38:18.707Z
My intention was simple - I wanted to establish argument that there can not be serious wage increase without structural reforms. To prove this argument I needed to establish the maximal bound that can be achieved by diminishing profits at all. I expect that such wage increase will be negligible - no more than 10% and that is why structural reforms and technology are necessary for wage increase. But I wanted to now the exact upper bound of possible wage increase by diminishing profits. Of course, I know that unprofitable company can not survive investment decisions.
TomR
CC BY-SA 3.0
2017-01-10T18:46:53.247Z
Price changes are another possible funding method of wage increases, particularly for the self-employed
Henry
CC BY-SA 3.0
2017-01-10T19:03:33.370Z
I wanted to exclude price changes (ceteris paribus). I just wanted to prove that serious wage increase (and reduction of working poverty as experienced by low income labourers) is not possible without structural reforms, education and technology.
TomR
CC BY-SA 3.0
2017-01-10T19:59:47.520Z
You use the word "prove" too freely. Your ceteris paribus is ill-defined, obviously a wage increase would have far reaching effects. As Henry notes price increases are pretty much unavoidable.
Giskard
CC BY-SA 3.0
2017-01-11T05:09:16.537Z
The problem is that you've already reached your conclusion, and now you want to bend the science to support it. That's the opposite of the positive economics that this site exists for.
410 gone
<microeconomics><labor-economics><wages><labor-cost>
What is the maximal theoretically possible wage increase here and now (ceteris paribus)?
TomR
# What is the maximal theoretically possible wage increase here and now (ceteris paribus)?

(Asked by: username_0 on 2017-01-10)

Labour unions are pushing for wage increase but what is maximal theoretically possible wage increase here and now - without restructuring production, processes and without introduction of new technologies? As far as I can imagine then the decrease of dividend (profit) is the only possible source of wage increase. So - how much wages (in percentage terms) can theoretically be increased if profit is reduced to 0% from invested capital?

On can start the calculations with estimating the average wage share in the expenses of average company and go on...

Of course - another source of increase of lowest wages is the redistribution of the wages, lowering highest wages in enterprise and there can be great opportunities.

**Tags:** microeconomics, labor-economics, wages, labor-cost

> **Comments:**
> **username_1**: Profits as you use the word is just the return to capital, and forcing  it to zero would seriously distort investment and savings decisions. Both wages and profits are prices of production factors, messing with them in a quantitatively important way will likely seriously affect production.  
> **username_0**: My intention was simple - I wanted to establish argument that there can not be serious wage increase without structural reforms. To prove this argument I needed to establish the maximal bound that can be achieved by diminishing profits at all. I expect that such wage increase will be negligible - no more than 10% and that is why structural reforms and technology are necessary for wage increase. But I wanted to now the exact upper bound of possible wage increase by diminishing profits. Of course, I know that unprofitable company can not survive investment decisions.  
> **username_2**: Price changes are another possible funding method of wage increases, particularly for the self-employed  
> **username_0**: I wanted to exclude price changes (ceteris paribus). I just wanted to prove that serious wage increase (and reduction of working poverty as experienced by low income labourers) is not possible without structural reforms, education and technology.  
> **username_3**: You use the word "prove" too freely. Your ceteris paribus is ill-defined, obviously a wage increase would have far reaching effects. As username_2 notes price increases are pretty much unavoidable.  
> **username_4**: The problem is that you've already reached your conclusion, and now you want to bend the science to support it. That's the opposite of the positive economics that this site exists for.  

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## 1 answers

### Answer by username_5 on 2017-01-10. Score: 2

As others have noted, your "ceteris paribus" is not very well defined.
If you only want to redistribute "here and now" all the profits to the workers, then you can use the "Kaldor fact" that the wage share is usually around 60-70% of GDP and thus profit share around 30-40%. This means that profit represents something like 40-60% of wages, if this is the figure you are looking for ?

You can of course find a more accurate figure concerning the country or sector you are interested in the national accounts.

I understand that you exclude price increase if you are interested in the *real* wage at the *aggregate level* (and probably in a closed economy).

Like username_1, I think that the really interesting question is : what would be the short run, medium run and long run effects of such a "policy" ? In the short run it could maybe boost GDP through higher consumption demand. But sooner or later it seems unavoidable that you would meet insufficient investment (no one would invest to get zero profit back) and thus insufficient capital, except if you raise taxes and socialize investment.

Maybe you should have a look at the economic history of Yugoslavia, where workers were supposed to control the firms.


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