The productivity boom driven by artificial intelligence (AI) is widening the gap between corporate profits and workers' income in the United States. Gregory Daco, chief economist at EY-Parthenon, reported that the labor share of U.S. income has fallen to a record low of 52.8%. This is the lowest level since the government began tracking this data in 1947. This decline comes even as corporate profit margins reached a record 14.9% of GDP.
Key Details
Daco noted that productivity growth tends to protect profit margins instead of worker income. He said, "Productivity growth protects margins, not income." In the second quarter of 2026, economic output rose by 1.7%. This increase was driven by a small 0.3% rise in work hours. Meanwhile, compensation grew by 2.6%. However, when adjusted for inflation, this leads to flat or slightly lower real income.
Background
The gap between productivity gains and labor income is not only due to the AI boom. Daco pointed out that these trends largely existed before AI advancements. He stressed that the concentration of gains among larger firms creates a "winner-takes-all" environment. Smaller firms face ongoing cost pressures and uncertainty, which worsens income inequality.
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The decline in labor's share of income could affect consumer spending and economic growth. This is especially true in sectors that rely on wage growth. Investors may respond by closely watching corporate earnings reports and labor market data. They will want to assess the sustainability of profit margins in light of these trends.
Watch for upcoming labor market data releases. These may provide more insights into wage growth and employment trends.
Based on reporting by: fortune.com