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2 posts on "labor share"
June 24, 2026

The Post‑COVID Decline in the Labor Share

Richard Audoly, Miles Guerin, Srinidhi Narayanan, and Rachel Schuh

Top view of a bustling factory floor, workers in bright safety vests moving between rows of gleaming machinery , concept of Manufacturing processes and Productivity optimization, created with Generative AI technology

The labor share of income in the U.S. is currently at its lowest-ever level in the post-war period. The labor share measures the fraction of economic output paid to workers as wages and salaries. As such, it is a useful benchmark for wage growth: when the labor share falls, it means that productivity, prices, or both are growing faster than wages. After much-studied drops in the 2000s, the labor share fell sharply again after the COVID pandemic. In this post, we compare the dynamics of the labor share post-COVID to earlier periods to understand whether the recent decline represents the continuation of a trend or a new and distinct phenomenon. We find that both the cyclicality of the labor share and the contribution of reallocation to the labor share post-COVID are similar to earlier periods.

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Posted at 7:00 am in Labor Market | Permalink | Comments (2)
April 15, 2026

The R*–Labor Share Nexus

Sophia Cho and John C. Williams

Road construction with view of two human workers beyond road mac

Over the past quarter century, the U.S. economy has experienced significant declines in both the labor share of income and the natural rate of interest, referred to as R*. Existing research has largely analyzed these two developments in isolation. In this post, we provide a simple model that captures the joint evolution of the labor share and R*, which we call the R*–labor share nexus. Our key finding is that structural changes affecting R* also influence the evolution of the labor share, and thereby wages and prices. This highlights a potentially important channel, absent from many macroeconomic models, through which the factors that determine R* also affect the labor share and, in turn, broader macroeconomic developments, with implications for monetary policy.

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Posted at 7:00 am in Macroeconomics | Permalink | Comments (1)

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