Understanding the Decline in the Labor Income Share

A large body of recent research has documented a global decline in the labor income share. Growing concern over this trend in general, coupled with the fact that a disproportionate share of this decline is found among low-skilled workers, has encouraged debate about fair distribution of personal incomes. The widening gap in the labor income share by skills suggests that globalization and technological progress may be driving forces. Policies aimed at skill enhancement and job creation for low-skilled workers could minimize welfare loss stemming from the declining share of labor income.