New York Fed: U.S. Labor Share of Income at Its Lowest Post-War Level

The share of U.S. income paid to workers as wages and salaries is now at its lowest level in the post-war period, according to economists at the Federal Reserve Bank of New York. In a Liberty Street Economics post published on June 24, 2026, Richard Audoly, Miles Guerin, Srinidhi Narayanan and Rachel Schuh report that the labor share fell 1.6 percentage points below its pre-pandemic level.

A measure of who gets the output

The labor share measures the fraction of economic output paid to workers rather than to capital, which makes it a useful benchmark for wage growth: when it falls, productivity, prices or both are growing faster than wages. For much of the post-war period it hovered around 63 percent. From the early 2000s it entered a sustained decline, with a particularly sharp drop during the global financial crisis. After stabilizing in the 2010s, it fell again after the pandemic.

Closer to the pre-2000 pattern

Tracing the labor share around past recessions, the authors find that its path after COVID resembles the pre-2000 cycles: it rose sharply, declined modestly and then flattened out. Following the dotcom recession and the financial crisis, by contrast, the decline during the expansion was steeper and the labor share did not meaningfully rebound. On the evidence of earlier cycles, the authors write, a longer expansion would be needed to see the labor share rise again.

Reallocation was not the driver

Because industries differ in labor intensity — health care and education rely more on workers' time and expertise, while manufacturing and agriculture rely more on machinery — a shift of output between sectors could lower the aggregate labor share. The authors build a reallocation index from sectoral output shares and find that although reallocation spiked at the onset of the pandemic, it then moderated and stabilized at a low level, unlike earlier recessions, where it persisted and increased.

A shift-share decomposition of the payroll share, which excludes non-wage compensation, points the same way. Across the three most recent recession episodes — 1999–2004, 2007–2012 and 2019–2024 — the fall in the aggregate payroll share was driven entirely by changes within industries, while output moving between sectors contributed nothing or very little. The authors conclude that the post-COVID decline follows the same cyclical patterns and the same within-industry forces as earlier recessions.