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The Post‑COVID Decline in the Labor Share

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Abstract

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.

Suggested Citation

  • Richard Audoly & Miles Guerin & Srinidhi Narayanan & Rachel Schuh, 2026. "The Post‑COVID Decline in the Labor Share," Liberty Street Economics 20260624, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:103426
    DOI: 10.59576/lse.20260624
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    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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