Why is the labor share declining?

Sangmin Aum, Yongseok Shin

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)


The fraction of national income accruing to labor (the labor share) had been roughly constant in developed economies for much of the 20th century but has fallen since the 1980s. We review several of the leading explanations in the literature for the declining labor share. We then point to hitherto unexplored dimensions of the data and provide suggestive evidence for a new explanation. In particular, we show that the labor share began a steeper descent in 2000. This more recent break in the laborshare trend coincides with the rapid rise of software investment, which has left a larger impact on service industries (than manufacturing) and on high-skill, cognitive occupations (than middle-skill, routine occupations). (JEL E25, O33).

Original languageEnglish
Pages (from-to)413-428
Number of pages16
JournalFederal Reserve Bank of St. Louis Review
Issue number4
Publication statusPublished - 2020


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