An interesting chart on the trend in labor share of income, via TalkingPointsMemo:
Since this has been going on for a decade, it seems to reflect structural rather than cyclical factors. I think it's driven by the Information Age and automation, which reduces demand for labor and therefore its share of income. One or more of the following might reverse the trend:
- More investment, more capital formation, making labor scarcer relative to capital.
- Large-scale retraining of workers, and re-orientation of the education system to the skills that are most needed today.
- Strong and sustained economic growth.