American Workers Are Getting The Smallest Share Of Economic Output In Nearly 80 Years. AI Could Make It Worse.

American workers are receiving a smaller share of U.S. business output than at any point in nearly eight decades even as productivity continues to improve, raising questions about who benefits most from the country's economic growth.

Labor's share of income fell to 52.8% in the second quarter of 2026, down from 53.6% in the previous quarter and 55.3% at the beginning of 2025, according to the Bureau of Labor Statistics.

The measure tracks how much of the output generated by nonfarm businesses goes to employees through wages, salaries, benefits, pensions and other compensation. For much of the period following World War II, that share remained between 60% and 66%. It then began a sustained decline in the early 2000s.

The latest drop has renewed concerns about whether artificial intelligence could accelerate the shift, allowing businesses to generate more output without a comparable increase in employee compensation.

Heather Long, chief economist at Navy Federal Credit Union, told CNN that workers could remain employed as AI becomes more widespread without necessarily sharing proportionately in the resulting financial gains.

Michael Feroli, chief U.S. economist at JPMorgan, also raised the possibility that labor's share could fall below 50% by the end of the decade if current trends continue and AI further changes how businesses operate.

The downward trend, however, began long before generative AI became widely available, and economists have identified several other factors behind it.

Nonfarm business productivity increased at an annualized rate of 1.4% in the second quarter, while hourly compensation rose 2.6%, according to the BLS productivity and costs report.

After adjusting for inflation, hourly compensation declined 3.3% during the quarter and was down 0.1% from a year earlier, even as productivity increased 2.2% over the same 12-month period.

Since the fourth quarter of 2019, labor productivity has grown at an annualized rate of 2.1%, matching its long-term average since 1947. More recent figures show that rising prices continue to erode purchasing power.

Average hourly earnings increased 3% in September from a year earlier, while consumer prices rose 3.7%. That left inflation-adjusted hourly earnings down 0.7%, with real average weekly earnings slipping 0.1%, according to the BLS September real earnings report.

Economists are also examining how changes in business practices have affected the portion of national income recorded as employee compensation.

A separate analysis published Sept. 3 by the Tax Foundation challenged the interpretation that business owners are receiving nearly half of all economic income.

Economists Richard DiSalvo and Erica York argued that the widely cited measure includes components of gross output that do not translate directly into income received by either workers or investors.

These include depreciation, production taxes and other accounting items that must be deducted before determining how net income is distributed.

Using that approach, the researchers estimated that capital's share of net income ranged from 22.6% to 31.7%, depending on how income earned by business proprietors was classified.

They calculated that clearly identifiable labor income accounted for 68.3% of net income, compared with approximately 69% in the late 1940s and 75% during the 1970s.

The Tax Foundation acknowledged that capital's share had increased since 2000 but argued that the longer historical decline was less dramatic than the standard BLS figures appeared to show.