The Post‑COVID Decline in the Labor Share

Richard Audoly, Miles Guerin, Srinidhi Narayanan and Rachel Schuh

No 20260624, Liberty Street Economics from Federal Reserve Bank of New York

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.

Keywords: labor share; wage growth (search for similar items in EconPapers)
JEL-codes: E2 J3 (search for similar items in EconPapers)
Date: 2026-06-24
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fednls:103426

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DOI: 10.59576/lse.20260624

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