I think looking at the % of cost that is labor is highly misleading. If you have a Cobb-Douglas production function of labor and capital f(L,K)=LαK1−α, then the share of the cost that goes to labor in equilibrium will end up being just α since you’ll have
share of labor=wLf(L,K)=LfL(L,K)f(L,K)=α
So your data implies that we have something like α≈0.25. This will be true regardless of how much labor or capital we have, and if capital is really easy to manufacture on scale while labor is not, you’ll end up with a situation where you’re bottlenecked by labor even though the share of total cost that’s going to labor is low.
To see a concrete example of this, imagine that capital depreciates at a fixed rate δ>0 as in the Solow-Swan growth model so that dK/dt=−δK+investment. In this case, for fixed L you’ll eventually have a situation in which your total output isn’t enough to replenish the stock of capital that depreciates every year, so you’ll end up being stuck below a certain level of total output because of the labor bottleneck. All this time, the share of total costs that go to labor will remain flat at ≈0.25.
I think looking at the % of cost that is labor is highly misleading. If you have a Cobb-Douglas production function of labor and capital f(L,K)=LαK1−α, then the share of the cost that goes to labor in equilibrium will end up being just α since you’ll have
share of labor=wLf(L,K)=LfL(L,K)f(L,K)=α
So your data implies that we have something like α≈0.25. This will be true regardless of how much labor or capital we have, and if capital is really easy to manufacture on scale while labor is not, you’ll end up with a situation where you’re bottlenecked by labor even though the share of total cost that’s going to labor is low.
To see a concrete example of this, imagine that capital depreciates at a fixed rate δ>0 as in the Solow-Swan growth model so that dK/dt=−δK+investment. In this case, for fixed L you’ll eventually have a situation in which your total output isn’t enough to replenish the stock of capital that depreciates every year, so you’ll end up being stuck below a certain level of total output because of the labor bottleneck. All this time, the share of total costs that go to labor will remain flat at ≈0.25.
Ah, good point. There’s an additional layer of optimization between labor and capital I wasn’t considering.