This chart isn’t about a bad quarter or a quirky data revision. It’s showing a long, structural shift. For decades after World War II, workers reliably took a little over 60% of the economic pie. That wasn’t accidental. It reflected strong unions, tighter regulation, limited globalization, and a system that funneled productivity gains back into wages.

That floor started cracking in the 1980s. It never truly came back. And over the last twenty years especially after 2000 the decline stopped being cyclical and became structural. The latest reading just makes that impossible to ignore. Labor’s share isn’t low relative to the past few years. It’s low relative to modern U.S. history.

This isn’t about workers suddenly becoming less productive. Productivity has actually been decent. The problem is that productivity gains aren’t flowing to paychecks. They’re flowing to margins.

Why This Keeps Happening

The story underneath is bargaining power. Globalization, automation, weaker labor institutions, and rising market concentration all tilt leverage away from workers. Large, dominant firms can scale without hiring much labor. Care and service jobs add headcount, but they don’t reset wage power across the economy. So employment can grow while labor’s slice shrinks.

Policy matters here too, but not always in the way people think. Asset supportive policies helped stabilize the economy after crises, but they also boosted capital values much faster than wages. That cushions downturns without fixing distribution. Over time, that gap compounds.

You can see it in the data around this chart with weak hiring momentum, more people working multiple jobs, slower real wage growth, and profits holding up fine. That combination almost guarantees downward pressure on labor share.

What It Means For The Economy

A falling labor share doesn’t just show up as inequality. It changes how the economy behaves. When income shifts toward capital, spending becomes more fragile. Growth leans harder on credit, fiscal support, or asset wealth effects. Things can look stable on the surface while feeling tight underneath.

Markets often like this setup at first. Lower labor costs support margins. Inflation stays contained. Stocks do fine. But over time, revenue growth gets harder if workers can’t keep spending. And eventually the imbalance shows up somewhere else…politically, socially, or financially.

My View

This chart isn’t a warning about tomorrow. It’s a diagnosis of the system we’re already in. Productivity is still there. Growth is still possible. But the link between economic gains and worker pay has weakened to a degree we haven’t seen before.

That doesn’t break the economy overnight. It slowly changes its character. And history says that when labor’s share gets this low, it stops being just an economic statistic and starts becoming a macro force of its own.