The idea that the labor share of income has been historically stable is often taken as a given, but it’s more of a “stylized fact” than an unchanging law. Measuring non-wage compensation, like healthcare and retirement benefits, is notoriously tricky, which makes it hard to get a clear picture. And if capital—like machines and software—ever becomes a perfect substitute for human labor, that historical stability could completely fall apart.
On top of that, even though GDP and worker productivity have risen over the decades, many workers, especially those in low and middle-income jobs, haven’t seen their wages keep up. Since the 80s, a bigger share of the productivity gains has gone to capital owners, executives, and highly skilled workers, leaving others behind and deepening income inequality. Declining union membership, globalization, and shifts in labor markets have further eroded workers’ bargaining power, lowering their share of income—even in industries where technology is designed to work alongside people.
The idea that the labor share of income has been historically stable is often taken as a given, but it’s more of a “stylized fact” than an unchanging law. Measuring non-wage compensation, like healthcare and retirement benefits, is notoriously tricky, which makes it hard to get a clear picture. And if capital—like machines and software—ever becomes a perfect substitute for human labor, that historical stability could completely fall apart.
On top of that, even though GDP and worker productivity have risen over the decades, many workers, especially those in low and middle-income jobs, haven’t seen their wages keep up. Since the 80s, a bigger share of the productivity gains has gone to capital owners, executives, and highly skilled workers, leaving others behind and deepening income inequality. Declining union membership, globalization, and shifts in labor markets have further eroded workers’ bargaining power, lowering their share of income—even in industries where technology is designed to work alongside people.