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

July 24, 2017

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Yasser Abdih, and Stephan Danninger. What Explains the Decline of the U.S. Labor Share of Income? An Analysis of State and Industry Level Data, (USA: International Monetary Fund, 2017) accessed September 18, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

The U.S. labor share of income has been on a secular downward trajectory since the beginning of the new millennium. Using data that are disaggregated across both state and industry, we show the decline in the labor share is broad-based but the extent of the fall varies greatly. Exploiting a new data set on the task characteristics of occupations, the U.S. input-output tables, and the Current Population Survey, we find that in addition to changes in labor institutions, technological change and different forms of trade integration lowered the labor share. In particular, the fall was largest, on average, in industries that saw: a high initial intensity of “routinizable” occupations; steep declines in unionization; a high level of competition from imports; and a high intensity of foreign input usage. Quantitatively, we find that the bulk of the effect comes from changes in technology that are linked to the automation of routine tasks, followed by trade globalization.

Subject: Commodities, Competition, Imports, International trade, Labor, Labor markets, Labor share

Keywords: Employment weight, Global, I. Next, Import competition, Imports, Industry concentration, Labor markets, Labor share, NAICS industry code, Offshoring, Routine tasks, Shift share analysis, State labor, Unions, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/167
Stock No:

WPIEA2017167
ISBN:

9781484311004
ISSN:

1018-5941

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