Eroded worker power, not neutral economic forces, drove labor's record-low income share; only a revitalized labor movement can reverse it
Source: Conor Lynch. "Profits Are Soaring. Workers’ Share of Income Is Sinking.." October 21, 2026. jacobin.com
The Gist
Workers are getting a smaller slice of the economy than ever, while profits hit new highs. The author says the many explanations economists give all trace back to businesses and policymakers weakening worker power over decades. Since the AI boom could either displace workers or collapse and hurt them, the author argues that rebuilding a strong labor movement is the way out.
Conclusion
The record-low labor share of national income, and the inequality within it, stem fundamentally from decades of eroded worker power, so reversing the trend (and avoiding worse outcomes in an AI boom or bust) requires a revitalized labor movement.
Premises
- The US labor share was stable for most of the twentieth century (never below 60%, averaging about 63%), but has fallen since 2001 to a record low of 52.8%, while corporate profits as a share of income are the highest since the early 1950s and wage growth lags inflation.
- The commonly cited causes of the decline (automation, globalization, deindustrialization, market concentration, union decline, tax-driven income reclassification) are not rival explanations but parts of one political-economic shift: shareholder capitalism and a deliberate business assault on labor that curbed worker power.
- The labor share figure understates the transfer away from ordinary workers because of inequality within labor income: the top 1% of earners doubled their share of earnings from 1979 to 2021, while the bottom 90% lost over eleven points, and about 80% of the productivity-pay gap stems from this internal inequality.
- EPI economists attribute both the falling labor share and rising within-labor inequality to employer power and decades of wage suppression, which they say is also the biggest driver of wealth inequality, since 40% to nearly 100% of stock gains since 1989 trace to capital's rising income share.
- Current record profits rest on financial speculation, market shocks, and a debt-fueled AI boom concentrated in a few firms rather than genuine productivity gains, and a bust would hurt workers most while giving capital an opportunity to discipline labor with AI tools.
- Labor has little to gain and much to lose from AI-driven disruption or from an AI-bubble collapse as long as it remains weak and fragmented.
Assumptions
- Worker power (union density, bargaining leverage) is the primary causal determinant of labor's income share, and the other factors operate through it.
- The decline in labor share is driven by policy and power relations rather than by market forces such as technology that would operate regardless of worker power.
- A revitalized labor movement is feasible and would actually raise labor's share under current economic and legal conditions.
- Correlation between union decline and falling labor share reflects causation.
- Workers bear the brunt of recessions and an AI bust would be handled to capital's benefit, as in past downturns.
- The BLS labor share measure and EPI's earnings data are reliable indicators of real distributional change despite reclassification issues.