What Explains the Decline of the U.S. Labor Share of Income? An Analysis of State and Industry Level Data

IMF Working Papers, July 24, 2017

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What Explains the Decline of the U.S. Labor Share of Income? An Analysis of State and Industry Level Data

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Bibliographic details

• Authors: Yasser Abdih, Stephan Danninger
• Published: July 24, 2017
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484311004.001

Key findings

• The U.S. labor share of income has been on a secular downward trajectory since the beginning of the new millennium.
• The decline in the labor share is broad-based across states and industries, but the extent of the fall varies greatly.
• Drivers identified:
  • Changes in labor institutions (including steep declines in unionization in affected industries).
  • Technological change, especially automation linked to routine tasks.
  • Different forms of trade integration (including high competition from imports and high intensity of foreign input usage).
• Industries that experienced the largest average falls in the labor share had:
  • A high initial intensity of “routinizable” occupations.
  • Steep declines in unionization.
  • A high level of competition from imports.
  • A high intensity of foreign input usage.

Quantitative conclusions

• Quantitatively, the bulk of the decline is attributed to changes in technology linked to the automation of routine tasks, followed by trade globalization.
• The paper uses data disaggregated across both state and industry, a new data set on the task characteristics of occupations, the U.S. input-output tables, and the Current Population Survey.

Data and scope

• The analysis exploits:
  • A new data set on the task characteristics of occupations.
  • U.S. input-output tables.
  • The Current Population Survey.
• The study disaggregates results across both state and industry to document variation in the labor share decline.

Policy-relevant implications

• Policies addressing the decline in the labor share should consider:
  • The role of automation of routine tasks and the need for labor-market responses (training, reallocation support).
  • The interaction of trade integration with domestic labor institutions (including unionization trends).
  • Industry- and state-specific conditions, given large heterogeneity in the extent of the labor share decline.

IMF Working Paper by Yasser Abdih and Stephan Danninger, July 24, 2017.

Content in this bundle

• What Explains the Decline of the U.S. Labor Share of Income?, WP/17/167, July 2017
  • What Explains the Decline of the U.S. Labor Share of Income?, WP/17/167, July 2017 (Markdown version)
  • What Explains the Decline of the U.S. Labor Share of Income?, WP/17/167, July 2017 (PDF)