Labor share of economic income hits record low

The share of economic income going to workers, known as the labor share, has reached historic lows. Recent data indicates that wages and benefits now account for approximately 52.8 percent of the nation’s economic output, the lowest level recorded since 1947.

As the labor share declines, the capital share—comprising profits, rent, and dividends—has risen. In the United States, corporate profits as a share of GDP have reached record highs, with profits rising 50 percent since late 2019 compared to just a 3 percent increase in inflation-adjusted wages.

Debate persists regarding the drivers of this trend. Some policymakers attribute the decline to industry consolidation and market power, suggesting antitrust actions to break up large firms. Others point to the decline of labor unions as a primary cause, noting that unionization rates have dropped significantly from over one-third of private-sector workers in the 1950s. Additionally, the rapid advancement of technology, specifically artificial intelligence, is cited as a potential force reducing the labor share globally, affecting both advanced and developing economies.