The widening rift between the haves and the have-nots continues to be borne out in federal data, as a Thursday Bureau of Labor Statistics report revealed U.S. workers are doing more and reaping less.
Workers are earning record low wages and other compensation compared to their labor output, according to the BLS productivity and costs report published Thursday. Called the “labor share,” this indicator essentially measures how much of the nation’s economic earnings is used to pay wages and other worker benefits.
At 54.1%, workers are netting the lowest earnings compared to the income they’re producing since the data started being collected in 1947. Meanwhile, labor productivity increased 0.8%, output increased 1.5%, and people worked 0.7% more month over month.
“I think it’s really disturbing news for workers,” Joseph McCartin, professor of labor history at Georgetown University, told TPM, “because it shows that even while the economy is growing, workers are getting a smaller and smaller share of the economic pie.”
Because the labor share represents the slice of worker productivity actually going to workers, it can also be used to indicate a growing divide between corporate earnings and people’s income. Wall Street reached new record highs Wednesday, a surge apparently tied in part to investors believing administration claims that the war in Iran is nearing its end, and in part to tech companies’ reported earnings.
“Ultimately, you can’t continue to have an economy that so skews towards the wealthy,” McCartin said. “And what these figures today show is that, yeah, probably Wall Street…is kind of jumping for joy because it means that stockholders are looking at increased profits that they don’t have to pay the workers.”
In January, the BLS reported the same record with a lower labor share figure. The agency told TPM the figure was revised, and Thursday’s publication represents the lowest labor share in nearly 70 years.
So, where are those buoyant corporate earnings going? To capital expenditures including shareholder dividends, according to commentary from the Wall Street Journal’s Greg Ip.
“Capital, which includes businesses, shareholders and superstar employees, is triumphant, while the average worker ekes out marginal gains,” Ip wrote.
McCartin pointed to an ever-eroding labor movement as one cause for the decline in profit sharing between companies and their workers.
“I think the present administration, while it has a rhetoric of being pro-worker, has not done anything about workers’ lack of power,” McCartin said. Workers need more power. They need more voice.”
The labor share has been falling for decades, so President Donald Trump’s economic and foreign policies can’t be blamed for the overall trend. But his anti-labor movement policies, anti-immigration campaign, costly tariffs, and even the Iran war are weighing on inputs that drive the working population and earning potential down. At the same time, the Republican president’s push for business deregulation and corporate tax cuts is a boon to companies.
The president inherited a recovering economy following the COVID-19 pandemic and resulting inflation spike which, while sticky, was on its way down. Trump then: eliminated hundreds of thousands of federal jobs, initiated a violent mass deportation campaign that fell far short of its stated deportation goals but still increased the number of people removed from the country or forced into hiding, executed an antediluvian tariff scheme that halted or reversed progress on inflation, and launched an ill-fated war in Iran that’s brought oil and gas prices to their highest levels in years.
In its April real earnings publication, the BLS reported hourly earnings were actually down month over month as higher prices ate up modest worker wage gains. During tax season, Republicans touted the president’s so-called working class tax cuts on overtime and tips, but a study from a slate of economists at the Stanford Institute for Economic Policy Research found that spiking gas prices probably devoured any projected gains from higher tax returns.
For workers in the bottom two-thirds of the economy, the deteriorating situation is even more acute, said former BLS Commissioner William Beach.
“Certainly inflation continues to eat into take home pay and your purchasing power,” Beach told TPM.
And the poorer you are, the higher your inflation rate is.
“When we see an inflation rate of 3.5%,” Beach continued, “it probably is more like 4% in the bottom two-thirds.
Corporations are also investing in artificial intelligence, technological innovation that economists say will increase productivity and replace human workers. When those innovations will hit en masse is less clear, Beach and McCartin said. A March report from Goldman Sachs found widespread AI adoption will take around 10 years and gut 6-7% of jobs worked by people. Eventually, researchers at the investment banking firm found, AI could automate 25% of U.S. job tasks.
Beach cautioned, however, that Thursday’s reported labor share figure might be more closely related to Trump’s immigration policies than corporate greed. Trump’s mass removal of immigrants from the U.S. slowed the growth of the labor force by 50%, Beach told TPM.
“That share is the percentage of output that accrues to workers in the form of compensation,” Beach said. “And so if the total number of workers are growing less rapidly, then compensation is growing less rapidly. It doesn’t mean the individual worker is falling behind.”
But that logic doesn’t work for McCartin.
“If you take those immigrant workers out of the workforce, they’re not creating any of the profit,” McCartin said. “And the question is, what’s happened to the distribution of the wealth created in their absence going to the workers who are still being measured?
“And what we’re finding is they’re getting less.”
#pitchforksandtorches