Labor share of output has declined since 1947

The labor share—the percentage of economic output that accrues to workers as compensation in exchange for their labor—has been declining in the nonfarm business sector throughout most of the post-World War Two era. In the first quarter of 1947, the labor share was 65.8 percent; by the fourth quarter of 2000, it was 62.8 percent. The labor share declined more rapidly after that, dropping below 60.0 percent in 2005 and reaching a low of 56.0 percent in the fourth quarter of 2011. The labor share has been slowly increasing since the first quarter or 2012, climbing back to 58.4 percent by the third quarter of 2016.

Before 1950 or so, most economists agreed that labor’s share of national output was relatively constant. In the late 20th century, however—after many decades of relative stability—the labor share began to decline in the United States and many other economically advanced nations, falling to unprecedented lows in the early part of the 21st century.

These data are from the Labor Productivity and Costs program. To learn more, see “Estimating the U.S. labor share,” by Michael D. Giandrea and Shawn A. Sprague, Monthly Labor Review, February 2017. The labor share is the percentage of economic output that accrues to workers in the form of compensation. It is calculated by dividing the compensation earned during a certain period by the economic output produced over the same period. The labor share is an indicator of the extent to which workers share in the economy’s output.