One major element in this is the rise of earnings from pass-through income. Self-employed or nearly self-employed individuals who would have been counted as employees of their small businesses 30+ years ago increasingly take "profits" from their business rather than "wages," even though they are the same thing. The "profits" get tax advantages. This makes labor share decline despite dentists, consultants, etc. still doing the same amount of work and taking home the same pretax income. See: https://www.ericzwick.com/labshare/labshare.pdf
This is purely data with no narrative attached, which is sort of refreshing.
The un-answered question is what is now eating up the percentage that was going to wages?
What are the options? R&D, shareholders, lawyers, advertising/marketing/PR, share buy-backs, political lobbying (cough bribery cough), strategic reserves?
> what is now eating up the percentage that was going to wages?
Here you go [1].
Wages and salaries are down 0.4 percentage points from ‘24, 0.75 from ‘15 and 5 from 2000 [2].
Corporate profits after taxes are up 5 percentage points from 2000, of which 2 percentage points went to dividend increases and 3 percentage points to undistributed profits. (Also of note, private consumption of fixed capital +2pp, same as rental income.)
Most income gets reinvested; the goal of modern large corporate accounting is to show a huge income, growth of sales, and near-zero profits. I suppose that the large revenues are also at least partly due to financial engineering, through structuring of subsidiaries, etc. Hence wages, which are real costs, look smaller compared to large amounts of money sloshing around as huge revenues.
All (the value) of the things produced goes ultimately to either labor (wages), capital (interest), or land (rent) - Adam Smith. (tax being an intermediary for the same).
If wages are down then rent or interest returns are up.
Market interest rates are trending up in recent years but in line with / below long term averages.
So obviously rent is doing the heavy lifting. GFC, housing crisis, etc, are all products of the extreme rents and land speculation.
Where does rent go? It can be consumed (luxury goods, etc) but most of it 'grounds out' in labor and capital through subsequent investments.
So higher share going to rent actually looks like larger luxury consumption by the landowners, more services consumed by them, and (probably most significantly) larger capital investments domestically and internationally - huge AI and semiconductor investments, robotics and EV factory build outs, complicated R&D programs, etc). These go on to employ more laborers globally - with the key change being that the return to laborers within any one investment is historically low.
Money is only an intermediary. It is the flow of goods produced (machines built, technologies developed) and services and resources which really matters.
Naively, people have been working for 75 years over the span of the graph to create valuable IP, scalable manufacturing, unique organisational capabilities, partnerships etc.
If capital is being created faster than it degrades or is destroyed, wouldn't we expect its share of income to increase over time?
It's not obvious to me why labour's share should remain constant as the economy accumulates productive assets.
I don't think you understand the graph. This is what percentage of income comes from wages. So for every dollar that people earned as income on their tax sheet, 42% was listed as coming from wages. The other 58% comes from other sources like non-wage employer compensation, rental income, private business income, etc.
there are only two ways to make money - labor and capital - broadly speaking, and continued data points like this one is why the word Oligarchy is increasing in usage... most of us see it and feel it
Unless a calamity throws human survivors back to the stone age there can be no future Wright brothers, in the post Tevatron and LHC, James Webb telescope era there will be no new Woz, no new Jobs... 2-3 people in a garage or hanger soldering and welding
Any yet unseen discoveries will require teams of people composing something on the scale of...AI robots and Wolverine like regenerative medicine
And Google and such ...hired PhDs to do that work so they could own it and not have them release it without permission. They weren't hiring basement tinkers.
Look beyond the syntactic totems of power like brand names and logos and it's just soylent green. The contemporary legal and PR gibberish defining ownership and hyping yet another chat app are not real; it's just physics.
One major element in this is the rise of earnings from pass-through income. Self-employed or nearly self-employed individuals who would have been counted as employees of their small businesses 30+ years ago increasingly take "profits" from their business rather than "wages," even though they are the same thing. The "profits" get tax advantages. This makes labor share decline despite dentists, consultants, etc. still doing the same amount of work and taking home the same pretax income. See: https://www.ericzwick.com/labshare/labshare.pdf
<scarcasm>Wait till millions of robotaxis hit the streets, the graph will crater!</sarcasm>
This is purely data with no narrative attached, which is sort of refreshing.
The un-answered question is what is now eating up the percentage that was going to wages?
What are the options? R&D, shareholders, lawyers, advertising/marketing/PR, share buy-backs, political lobbying (cough bribery cough), strategic reserves?
> what is now eating up the percentage that was going to wages?
Here you go [1].
Wages and salaries are down 0.4 percentage points from ‘24, 0.75 from ‘15 and 5 from 2000 [2].
Corporate profits after taxes are up 5 percentage points from 2000, of which 2 percentage points went to dividend increases and 3 percentage points to undistributed profits. (Also of note, private consumption of fixed capital +2pp, same as rental income.)
[1] https://fred.stlouisfed.org/release/tables?rid=53&eid=42185 2025
[2] https://fred.stlouisfed.org/release/tables?rid=53&eid=42185&...
The quarterly data is more recent.
https://fred.stlouisfed.org/release/tables?rid=53&eid=17636
Most income gets reinvested; the goal of modern large corporate accounting is to show a huge income, growth of sales, and near-zero profits. I suppose that the large revenues are also at least partly due to financial engineering, through structuring of subsidiaries, etc. Hence wages, which are real costs, look smaller compared to large amounts of money sloshing around as huge revenues.
All (the value) of the things produced goes ultimately to either labor (wages), capital (interest), or land (rent) - Adam Smith. (tax being an intermediary for the same).
If wages are down then rent or interest returns are up.
Market interest rates are trending up in recent years but in line with / below long term averages.
So obviously rent is doing the heavy lifting. GFC, housing crisis, etc, are all products of the extreme rents and land speculation.
Where does rent go? It can be consumed (luxury goods, etc) but most of it 'grounds out' in labor and capital through subsequent investments.
So higher share going to rent actually looks like larger luxury consumption by the landowners, more services consumed by them, and (probably most significantly) larger capital investments domestically and internationally - huge AI and semiconductor investments, robotics and EV factory build outs, complicated R&D programs, etc). These go on to employ more laborers globally - with the key change being that the return to laborers within any one investment is historically low.
Money is only an intermediary. It is the flow of goods produced (machines built, technologies developed) and services and resources which really matters.
The economic accounting doesn’t map nearly into what you think of as “labor” and “capital.” For example, the non-labor share includes things like depreciation: https://taxfoundation.org/blog/capital-is-not-taking-half-of...
See also: https://itif.org/publications/2026/08/25/the-false-panic-ove...
Naively, people have been working for 75 years over the span of the graph to create valuable IP, scalable manufacturing, unique organisational capabilities, partnerships etc.
If capital is being created faster than it degrades or is destroyed, wouldn't we expect its share of income to increase over time?
It's not obvious to me why labour's share should remain constant as the economy accumulates productive assets.
I don't think you understand the graph. This is what percentage of income comes from wages. So for every dollar that people earned as income on their tax sheet, 42% was listed as coming from wages. The other 58% comes from other sources like non-wage employer compensation, rental income, private business income, etc.
You can see the breakdown of the categories here:
https://fred.stlouisfed.org/release/tables?rid=53&eid=42185
Wages for the upper tier, but not in the form of wages
there are only two ways to make money - labor and capital - broadly speaking, and continued data points like this one is why the word Oligarchy is increasing in usage... most of us see it and feel it
https://fred.stlouisfed.org/graph/?id=GDIA,GDICOMPA,
We know it isn't R&D. That got done by universities, and we're in the process of gutting them.
Not just universities. Large tech companies have been excellent at funding R&D.
This turns out not to be the case.
Right, from Wright brothers airplane to modern GPT LLMs founders, they were all university researchers that are now being gutted by Trump:
https://chatgpt.com/share/6adedaac-c650-83e8-bb64-c30c1170fa...
Unless a calamity throws human survivors back to the stone age there can be no future Wright brothers, in the post Tevatron and LHC, James Webb telescope era there will be no new Woz, no new Jobs... 2-3 people in a garage or hanger soldering and welding
Any yet unseen discoveries will require teams of people composing something on the scale of...AI robots and Wolverine like regenerative medicine
And Google and such ...hired PhDs to do that work so they could own it and not have them release it without permission. They weren't hiring basement tinkers.
Look beyond the syntactic totems of power like brand names and logos and it's just soylent green. The contemporary legal and PR gibberish defining ownership and hyping yet another chat app are not real; it's just physics.
Does this include income like RSUs?
> Does this include income like RSUs?
Yes [1].
[1] https://www.bea.gov/help/glossary/wages-and-salaries