The labor share of nonfarm business output hit 52.8% to 52.9% in the second quarter of 2026, the lowest reading since the Bureau of Labor Statistics began tracking the measure in 1947. Goldman Sachs says the economy now rewards capital owners, and most American households don’t hold enough assets to benefit.
By the numbers, labor’s slice has shrunk roughly 7.5 percentage points since the 1990s. But Goldman economist Abhay Duggirala argues in a September 15 research note that about 40% of that drop reflects measurement quirks, not an actual transfer from paychecks to profits. The figure that matters: the remaining 60%, or 4.5 percentage points, is real.
The measurement gap
Three distortions account for the 40%, Fortune reported. First, the 1986 Tax Reform Act pushed business owners into pass-through structures — S-corporations and partnerships — so income once reported as wages now shows up as business profits. Second, depreciation has climbed as short-lived capital like software takes a larger share of the capital stock, mechanically dragging down the labor-share denominator. Third, the BLS counts stock-based pay only when it vests, not when granted, understating compensation for high earners whose pay has shifted toward equity.
The real shift
The 4.5-point residual traces to rising corporate markups at “superstar” firms, automation reducing labor demand, and decades of eroding worker bargaining power. The wealthiest 10% of households hold the vast majority of corporate equities and mutual fund shares, Federal Reserve data show, so the markup gains flow to a narrow slice of already-wealthy shareholders.
Investors will note the concentration.
Middle class math
The Congressional Budget Office found the top 1%’s pre-tax income share doubled between 1979 and 2022, while the middle three quintiles’ after-tax share fell 6 percentage points. An American Enterprise Institute report this April reached a different conclusion: the upper-middle-class share of families tripled from 10% to 31% over a similar span, and median family income rose 52%. But the combined income share of the upper-middle class and the wealthy surged from 28% to 68%. Scott Winship’s verdict: “broad prosperity, unequally shared.”
AI accelerant
AI usage climbs from 9% among earners below $30,000 to 34% among those above $100,000. Goldman’s note puts it bluntly: if AI continues to automate additional tasks, the labor share “will likely continue to decline.” Whoever owns the companies deploying that automation captures the productivity gains as profit. Workers displaced by it generally don’t own equity in the firms replacing them.
The bottom line: a 4.5-percentage-point shift from labor to capital since the 1990s is a real, ongoing redistribution. Goldman’s analysts expect AI to push the labor share lower still.
Sources
- The economy is rewarding capital ownership over labor — most Americans don't benefit | Fortune
- Goldman says the economy is rewarding capital ownership over labor — and most Americans don’t own enough of it to benefit
