The labor share of income in the US is at its lowest post-war level

2 days ago

The labor share of income in the U.S. has reached its lowest post-war level, indicating slower wage growth compared to productivity or prices.
Post-COVID, the labor share declined by 1.6 percentage points, following a trend of drops since the early 2000s, including after the global financial crisis.
Analysis shows the post-COVID decline aligns with pre-2000 recession patterns, where the labor share rises during recessions, falls in recovery, and later rebounds, unlike the steeper declines without rebounds seen after 2000.
Sectoral reallocation spiked initially during COVID but quickly subsided; however, it did not drive the aggregate labor share decline, which was primarily due to within-industry changes.
A shift-share decomposition confirms that within-industry declines, not between-industry reallocation, caused the fall in the aggregate payroll share during COVID and previous recessions.
The findings suggest the post-COVID decline is not a new phenomenon but follows historical cyclical patterns and within-industry forces, with no evidence of evolving differently from past episodes.

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