US workers take home smallest share of income since 1947

American workers are receiving the smallest share of the country's economic output on record, even as corporate profits climb and the broader economy expands. Data from the Bureau of Labor Statistics shows labor share, the portion of national output that workers receive through wages and salaries, fell to 52.8 percent in the second quarter of 2026. That is its lowest level since the agency began recording the figure in 1947.

The decline came after labor share stood at 53.6 percent in the previous quarter. Over the current decade, its average has been about 55.6 percent. The drop comes at a time when corporate earnings are surging. Profits for Fortune 500 companies hit a record $2.1 trillion in 2025, and U.S. gross domestic product grew 3.4 percent in the third quarter of that year, beating economists' forecasts.

Economists say the gap between strong output and weaker labor returns reflects two forces. Raymond Robertson, a labor economist at Texas A&M's Bush School of Government, said the falling share of income points toward capital and suggests either falling earnings or fewer people working. "The falling share of income is having to do with the shift towards capital," he told Fortune. Employment indicators are also softening. Unemployment rose to 4.2 percent in September, and employers added 584,000 jobs in 2025, compared with 2 million in 2024. The economy added 29,000 jobs in September, roughly one-third of economists' projections.

That combination has raised concerns about jobless growth, in which output rises without corresponding job creation, and about a K-shaped economy, in which the wealthy gain while lower-income workers fall further behind. "Data right now is very mixed," Robertson said. "But I think it also all consistently points to this idea that things are getting worse for workers and much better for billionaires."

Robertson attributes the shrinking labor share in part to automation, which he says is displacing workers while productivity, a measure of output per worker, keeps rising. Second-quarter data showed nonfarm productivity grew 1.4 percent, slower than the 2.2 percent recorded in the same quarter a year earlier. "All these things, bit by bit, are replacing people, and they're concentrating income and their share of capital," he said.

Goldman Sachs analysts Joseph Briggs and Sarah Dong estimated, based on Department of Labor data, that AI automation could displace 25 percent of all work hours. They projected that a 15 percent increase in AI-driven productivity could displace 6 to 7 percent of jobs at its peak, which would mean about 1 million more unemployed workers. They noted that job displacement from AI has not yet shown up meaningfully in economic data, and argued that new jobs created by the technology would temper the impact. Wharton projected automation could raise GDP by 1.5 percent by 2035.

Mark Regets, a senior fellow at the National Foundation for American Policy, points to a different cause for the slowdown in labor growth: immigration enforcement. He told Fortune that President Donald Trump's immigration crackdown has not increased the number of U.S.-born workers, as administration officials including White House Deputy Chief of Staff Stephen Miller had predicted. According to NFAP data, the foreign-born workforce has shrunk by 1.1 million to 1.4 million people since January 2025. "The data is raising huge red flags that we are losing immigrants of all types that we otherwise would be advancing America's economy," Regets said.

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Connor Quincy

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Connor Quincy covers public affairs, politics, business, culture and daily news for Core Memo. The role focuses on verification, context, and clear explanations for readers.

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