by Ben Gitis
American Action Forum
July 22, 2014
Now hobbling into the sixth year of economic recovery, Americans remain frustrated as earnings barely rise and job creation is slow. This phenomenon, however, may in part be due to a much longer-term trend: the decline in labor’s share of all income in the U.S. economy. In order to completely understand the causes and implications, it is necessary to first clearly define labor share and evaluate how it is measured. Once doing so, it is clear that some of the most frequently cited causes for its decline, like technological innovation, low unionization rates, and high income inequality, in reality have nothing to do with labor share. Rather, evidence suggests that falling labor share is a global trend, rooted in countries becoming increasingly economically intertwined.

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