Box sets » GDP by income » Corporate profits
The impact of AI on the economy and public finances is highly uncertain. In this box, we explored how AI could affect productivity, the balance between labour and profits, and future tax revenues, highlighting the potential fiscal implications of a lower labour share of income.
Real wage growth and productivity are closely linked to living standards and firms’ profitability. In this box, we explored how differences between real wage and productivity growth affected profit margins and the profit share of GDP, and considered the implications for investment and tax receipts.
The corporate sector had run a significant surplus of profits over investment since 2003, and this surplus rose sharply following the crisis. This box explored some of the possible reasons for this, including the possibility that businesses may have used this to build up a buffer against future shocks. The box also discussed the uncertainties around the existing data, which may have overstated corporates' holdings of cash reserves.