Workin’ 9 to 5, what a way to make a livin’. — Dolly Parton
Workin’ 9 to 5, what a way to make a livin’.
Labor’s share of output in the U.S. nonfarm business sector stood at 66.2% in 1960 and remained near 63–64% in 2000. Today it sits at 53.8%, the lowest reading in the series dating back to 1947. The decline spans multiple cycles, monetary regimes, and technological waves. The pandemic briefly interrupted the trajectory, but the series has returned to a level roughly 10 percentage points below where it stood at the turn of the century.
The pandemic lifted labor share sharply before it retraced; the series moved several percentage points higher during 2020–2021 before returning to the low-50% range. Output fell while many firms retained workers and fiscal transfers supported income as wage growth accelerated. Margins compressed, then recovered. The episode sits within the cycle rather than the longer structural trend.
The longer trend is visible in the relationship between productivity and compensation. Output per worker has continued to advance while real compensation has risen more slowly. Over extended periods, that difference compounds and shifts a larger share of output to capital.
Capital deepening increased the role of equipment, software, and intellectual property in generating output. Global integration broadened labor competition and reorganized supply chains. The equity market shifted toward sectors that scale with limited incremental labor. The decline in labor share began long before the recent focus on artificial intelligence.
Corporate margins reflect the same arithmetic. A lower labor share corresponds to a higher capital share. The sustained expansion in margins over the past decade sits inside this broader distributional shift. Earnings growth benefited not only from revenue gains, but from how output has been divided.
Looking across advanced economies using compensation of employees as a share of GDP as a proxy, labor shares have generally been more stable. From 2000 to 2025, Germany’s rose from 50.3% to 52.9%, and France’s increased from 49.5% to 51.8%. The measures differ from the U.S. nonfarm business series, but the contrast in direction is notable. The U.S. stands out for the scale and persistence of its decline.
The post-pandemic period tested that trajectory. Wage growth accelerated and labor shortages became a dominant market narrative. Unit labor costs rose. That pressure eased as margins recovered and productivity stabilized.
Artificial intelligence has raised concerns that certain categories of labor could face reduced demand in the years ahead. If those concerns prove well founded, capital intensity would increase further and shift a larger share of income toward capital. The structural decline in labor share predates these tools, but a technology that substitutes for labor at scale could reinforce the dynamic already in place. AI enters an economy where labor’s share is already compressed.
Distribution unfolds within a political and institutional framework. Policy debates across advanced economies have shifted. Industrial policy has returned to the foreground. Trade relationships are being reconsidered. Labor dynamics feature more prominently in public discussion. Political volatility has risen in several developed markets.
Productivity continues to advance while labor share remains near the lower end of its historical range. Capital has benefited from this sustained concentration of output for decades, a dynamic reinforced in recent years by a prolonged period of low interest rates that elevated asset values and lowered the cost of capital. Extended periods of concentration have historically reshaped the institutional and monetary framework in which capital operates. The durability of the current regime will depend on how long this structure proves sustainable.
Between the Lines is a weekly blog by DoubleLine Portfolio Managers Sam Garza, Joseph Mezyk and Quant Analysts Fei He, CFA and Sunyu Wang that breaks down topical macro and market issues. For questions or suggestions please e-mail us at betweenthelines@doubleline.com. The views and opinions expressed herein are those of the authors and do not necessarily reflect the views of DoubleLine Capital LP, its affiliates or employees.
