Workers are taking home a shrinking slice of the US economy's income pie, and the gap is now near a century wide record. According to Kobeissi, the share of wages and salaries in Gross Domestic Income, a measure of every dollar earned across the economy including wages, corporate profits and investment income, has fallen to about 43%, close to the lowest level since records began in 1929. That share peaked near 52% in the 1940s and never dropped below 48% through the 1960s, so the current reading marks a striking break from the mid century pattern. The flip side of a shrinking labor share is a growing share going to corporate profits and investment income, which is one reason equity markets have been able to keep expanding profit margins even as consumer facing headlines about wage growth or living costs continue. It is also a structural tailwind for the argument that corporations, not households, have captured most of the gains from decades of productivity growth, automation and, more recently, AI adoption. A labor share this low, sustained over time, tends to widen wealth inequality and can eventually feed into political pressure for policy responses such as higher minimum wages, tax changes on corporate profits or renewed union activity.
Why it matters · A labor share this low is a quiet explanation for why corporate earnings and stock buybacks keep setting records even when headlines about wages and affordability sound gloomy, and it is a slow burning fuse for political and regulatory risk aimed at corporate profits.
Worth asking · Is a record low labor share simply the price of an AI driven productivity boom that will eventually lift wages too, or is it a warning sign that inequality has to be addressed before it becomes a bigger political risk for markets?