The labor share of income in the US is at its lowest post-war level
The labor share of income in the United States has fallen to its lowest level since World War II, according to analysis by the New York Fed. The post-COVID period has seen a further decline in the portion of national income going to workers, driven primarily by a shift in corporate income toward profits and capital compensation.
Background
- The "labor share of income" measures what portion of national income goes to workers (wages, salaries, benefits) versus what goes to capital (corporate profits, dividends, capital gains). A falling labor share means a growing share of economic output is flowing to owners of capital rather than to workers.
- This New York Fed post reports that the US labor share has dropped to its lowest level since WWII — roughly 56% in 2024, down from about 63% in the early 2000s. The decline accelerated after the pandemic.
- The post argues this is not just a statistical quirk. The fall is driven by real economic forces: a rapid shift toward industries with traditionally low labor shares (tech, finance), increased automation and AI adoption, and a weaker bargaining position for workers relative to capital.
- Understanding this trend matters because a declining labor share is closely linked to rising income inequality, stagnant middle-class wages, and the sense that the benefits of economic growth are not being broadly shared — a central concern in both policy debates and public discourse.