U.S. Workers Are Getting Record-Low Compensation Based on Their Productivity

The growing divide between the haves and have-nots continues to be borne out by federal data, as a report released Thursday by the Bureau of Labor Statistics found that American workers are making more and reaping less.

Workers are earning record wages and other compensation relative to their work output, according to the BLS Productivity and Costs report released Thursday. Called “labor share,” this indicator essentially measures the share of the country’s economic income that is used to pay workers’ wages and other benefits.

At 54.1%, workers are earning the lowest income relative to the income they produce since data collection began in 1947. During that time, labor productivity increased 0.8%, output increased 1.5% and people worked 0.7% more month over month.

“I think this is really worrying news for workers,” Joseph McCartin, a professor of labor history at Georgetown University, told TPM, “because it shows that even though the economy is growing, workers are getting a smaller and smaller share of the economic pie.”

Since the labor share represents the share of productivity that actually accrues to workers, it can also be used to indicate a growing gap between corporate profits and personal incomes. Wall Street hit new record highs on Wednesday, a rise apparently linked in part to investors’ belief that the administration is saying the war in Iran is coming to an end, and in part to profits reported by technology companies.

“At the end of the day, you can’t continue to have an economy that is so tilted in favor of the rich,” McCartin said. “And what these numbers show today is that, yes, probably Wall Street…is sort of jumping for joy because it means shareholders are looking at increased profits without having to pay workers.”

In January, the BLS recorded the same record, with a lower share of work. The agency told TPM that figure had been revised and Thursday’s release represents the lowest labor share in nearly 70 years.

So where are these profits from dynamic companies going? To capital expenditures, including shareholder dividends, according to commentary by Greg Ip of the Wall Street Journal.

“Capital, which includes corporations, shareholders, and superstar employees, triumphs, while the average worker obtains marginal gains,” Ip writes.

McCartin pointed to the steady erosion of the labor movement as one of the causes of the decline in profit sharing between corporations and their workers.

“I think the current administration, despite having a pro-worker narrative, has done nothing to address the lack of worker power,” McCartin said. Workers need more power. They need more voices.

Labor’s share has been declining for decades, so President Donald Trump’s economic and foreign policies cannot be blamed for this general trend. But its anti-labor policies, its anti-immigration campaign, its costly tariffs and even the war in Iran are straining the inputs that are shrinking the labor force and diminishing its earning potential. At the same time, the Republican president’s push for business deregulation and corporate tax cuts is a boon for businesses.

The president inherited an economy recovering from the COVID-19 pandemic and the resulting surge in inflation, which, while persistent, was on the way down. Trump then: eliminated hundreds of thousands of federal jobs, launched a violent mass deportation campaign that fell well short of his stated deportation goals but still increased the number of people expelled from the country or forced into hiding, implemented an antediluvian tariff system that halted or reversed progress on inflation, and launched an ill-fated war in Iran that brought oil and gas prices to their highest levels in years.

In its April actual results release, the BLS reported that hourly wages were actually down month over month as rising prices ate up workers’ modest wage gains. During tax season, Republicans touted the president’s so-called tax cuts for the working class on overtime and tips, but a study by a group of economists at the Stanford Institute for Economic Policy Research found that soaring gasoline prices likely swallowed up any projected gains from higher tax returns.

For workers in the poorest two-thirds of the economy, the deteriorating situation is even more serious, said former BLS Commissioner William Beach.

“Certainly inflation continues to eat away at your take-home pay and purchasing power,” Beach told TPM.

And the poorer you are, the higher your inflation rate.

“When we see an inflation rate of 3.5 percent,” Beach continues, “it’s probably more like 4 percent in the lower two-thirds.

Companies are also investing in artificial intelligence, a technological innovation that economists say will increase productivity and replace human workers. When these innovations will arrive en masse is less clear, Beach and McCartin said. A Goldman Sachs report from March found that widespread adoption of AI will take about 10 years and eliminate 6-7% of employed jobs. Ultimately, researchers at the investment bank found that AI could automate 25% of job tasks in the United States.

Beach cautioned, however, that the labor share figure announced Thursday may have more to do with Trump’s immigration policies than corporate greed. Trump’s mass removal of immigrants from the United States has slowed labor force growth by 50 percent, Beach told TPM.

“This share is the percentage of production that goes to workers in the form of compensation,” Beach said. “And so if the total number of workers is growing less quickly, then compensation is growing less quickly. That doesn’t mean every worker is falling behind.”

But this logic doesn’t work for McCartin.

“If you take these immigrant workers out of the workforce, they don’t generate any profit,” McCartin said. “And the question is: what happened to the distribution of the wealth created in their absence among the workers who are still measured?

“And what we’re seeing is they’re getting less.”