Examining Labor Share Trends: Implications for Economic Growth and Income Inequality

Introduction

The distribution of income between labor and capital has profound implications for economic growth and income inequality. This report will examine recent trends in labor share—defined as the portion of national income paid to workers—over the past few decades and explore its implications for economic growth and the widening gap of income inequality. By analyzing historical data, economic theories, and observed outcomes, this report aims to shed light on the potential consequences of decreasing labor share on both macroeconomic performance and social equity.

Main Body

Labor share has been a subject of increasing scrutiny, particularly since the late 20th century, as many advanced economies have experienced a notable decline in the proportion of income allocated to labor. According to various studies, including those by the International Monetary Fund (IMF)