Wednesday, June 24, 2026 at 11:00 AM
Original source
NY Fed — Liberty Street Economics
MacroLab briefing generated by AI for informational purposes. Original reporting by NY Fed — Liberty Street Economics. Not financial advice.
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The share of America's total economic output that goes to workers as wages and salaries has fallen to its lowest level since World War II ended in 1945. Researchers at the Federal Reserve Bank of New York measured this by tracking the "labor share of income," which is simply the percentage of all the wealth a country produces that ends up in workers' paychecks. The data shows this share has been declining, particularly since the 2000s, and has now hit a historic low for the entire post-war period.
When workers' share of national income shrinks, it means one of two things is happening: either companies are becoming more productive and keeping more of the gains for themselves and their owners, or prices are rising faster than wages are. Either way, ordinary workers are falling behind. If you're earning the same paycheck but prices go up, you can buy less. If your company becomes more profitable but your raise doesn't keep pace, you're effectively getting poorer even if your nominal wage stays flat. This squeeze on workers can slow consumer spending (since people have less money to spend), affect job security, and widen the gap between the wealthy and everyone else.
Pay attention to wage growth numbers relative to productivity gains and inflation. If wages start growing faster than productivity and prices, the labor share would begin climbing back up, signaling workers are getting a larger slice of the pie again. Watch for political pressure on wages, worker strikes or organizing efforts, and any major shifts in how companies distribute profits versus how much they pay employees. Also track whether unemployment stays low (which typically forces companies to pay more to attract workers) or rises, which gives companies more power to keep wages down.