Wealth versus income: A long-running feud

INCOME

Andrew Wilson, head of investment at Towry, explains why the ‘value' of wealth needs to be sustained and grown without any challenges, for a healthy economic future.

There is a constant battle for the spoils of economic growth, between capital (wealth) and labour (incomes). This can be observed in the chart, which measures corporate profits as a percentage of gross domestic product (GDP). The dramatic shift in the past decade tells the story of asset price inflation and real wage deflation, or wealth outperforming income. This is not unusual to see at times of low levels of economic growth. However, the relationship between the two is both symbiotic and mean reverting, which means ultimately, wealth and incomes cannot diverge away from each oth...