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

Institutional Context: The Federal Reserve Bank of New York

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Analysis: The Post-COVID Decline in the Labor Share

Date: June 24, 2026
Authors: Richard Audoly, Miles Guerin, Srinidhi Narayanan, and Rachel Schuh

Currently, the United States is experiencing its lowest labor share of income since the end of World War II.

Definition: The labor share represents the specific portion of total economic output that is distributed to the workforce in the form of salaries and wages.

Mathematically, this can be viewed as: $\text{Labor Share} = \frac{\text{Total Compensation of Employees}}{\text{Gross Domestic Product (GDP)}}$

Why This Metric Matters

The labor share serves as a critical barometer for wage growth. When this figure drops, it indicates that either prices, productivity, or a combination of both are increasing at a rate that exceeds the growth of worker pay.

Historical Trajectory

The evolution of the labor share has moved through several distinct phases:

1. The Era of Stability: For decades, the share remained constant remarkably steady at roughly 63%.
2. The Initial Slide: A downward trend began in the early 2000s.
3. The GFC Shock: The Global Financial Crisis accelerated this decline significantly.
4. The Recent Dip: After a period of leveling off in the 2010s, the post-pandemic era triggered another steep fall.

Theoretical Drivers of the Decline

Academic discourse suggests several long-term catalysts for this trend:

• Technological Advancement: Automation replacing human labor.
• The "Superstar" Effect: The emergence of dominant firms that capture a larger share of income.
• Increased Markups: Firms exercising more pricing power.

Research Objectives and Findings

The authors sought to determine if the post-COVID drop was a unique anomaly or a continuation of existing patterns.

Research Checklist:

• Analyze the cyclicality of the post-COVID labor share.
• Evaluate the role of economic reallocation.
• Compare current dynamics to the GFC and early 2000s.

Conclusion: The study found that the cyclical nature and the impact of reallocation during the post-COVID period are consistent with previous declines.

Data Representation (Conceptual)

If we were to represent the labor share trend in a data structure, it might look like this:

{
  "labor_share_trends": {
    "1945_1999": {"status": "stable", "value": 0.63},
    "2000_2008": {"status": "declining", "trend": "downward"},
    "2009_2019": {"status": "stabilizing", "trend": "flat"},
    "2020_present": {"status": "historic_low", "trend": "sharp_decline"}
  }
}

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