One major element in this is the rise of earnings from pass-through income. Self-employed or nearly self-employed individuals who would have been counted as employees of their small businesses 30+ years ago increasingly take "profits" from their business rather than "wages," even though they are the same thing. The "profits" get tax advantages. This makes labor share decline despite dentists, consultants, etc. still doing the same amount of work and taking home the same pretax income. See: https://www.ericzwick.com/labshare/labshare.pdf
By this paper's own conclusion, this phenomenon explains 31.9% of the decrease in recent decades. That's significant, but also means that most of the decrease comes from somewhere else.
At the center of their story is a quiet revolution in the American economy: the rise of a particular kind of private business. A few decades ago, these businesses collectively made far less money than Corporate America. But by 2011, they were generating more income than all traditional U.S. corporations combined — and accounting for most of the rise in the share of income flowing to the top "one percent."
Over the previous few decades, this sort of private business had — quite privately — taken over the American business world. In 1980, pass-through businesses generated about one-fifth of all U.S. business income. By 2011, they generated more than half. Move over, Corporate America. Hello, Pass-Through America!
> “Pass-through” businesses like partnerships and S-corporations now generate over half of US business income and account for much of the post-1980 rise in the top-1% income share.
Any LLCs and PLLCs (physicians, attorneys, lawyers, accountants, architects, etc.). An owner of a LLC cannot be an employee of it and therefore is pass-through.
This is purely data with no narrative attached, which is sort of refreshing.
The un-answered question is what is now eating up the percentage that was going to wages?
What are the options? R&D, shareholders, lawyers, advertising/marketing/PR, share buy-backs, political lobbying (cough bribery cough), strategic reserves?
> what is now eating up the percentage that was going to wages?
Here you go [1].
Wages and salaries are down 0.4 percentage points from ‘24, 0.75 from ‘15 and 5 from 2000 [2].
Corporate profits after taxes are up 5 percentage points from 2000, of which 2 percentage points went to dividend increases and 3 to undistributed profits. (Also of note, private consumption of fixed capital +2pp, same as rental income.)
All (the value) of the things produced goes ultimately to either labor (wages), capital (interest), or land (rent) - Adam Smith. (tax being an intermediary for the same).
If wages are down then rent or interest returns are up.
Market interest rates are trending up in recent years but in line with / below long term averages.
So obviously rent is doing the heavy lifting. GFC, housing crisis, etc, are all products of the extreme rents and land speculation.
Where does rent go? It can be consumed (luxury goods, etc) but most of it 'grounds out' in labor and capital through subsequent investments.
So higher share going to rent actually looks like larger luxury consumption by the landowners, more services consumed by them, and (probably most significantly) larger capital investments domestically and internationally - huge AI and semiconductor investments, robotics and EV factory build outs, complicated R&D programs, etc). These go on to employ more laborers globally - with the key change being that the return to laborers within any one investment is historically low.
Money is only an intermediary. It is the flow of goods produced (machines built, technologies developed) and services and resources which really matters.
Technically speaking, maintenance is a capital investment.
Use of some rare natural consumable (lubricating a machine with whale oil?) would still require a) labor b) capital and c) paying rent to whoever owned that slice of nature. So consumption, broadly, may take from nature, but the returns (if there are any) go only to people - as rent, interest, or wages. If there are no returns, then it is just consumption proper.
Naively, people have been working for 75 years over the span of the graph to create valuable IP, scalable manufacturing, unique organisational capabilities, partnerships etc.
If capital is being created faster than it degrades or is destroyed, wouldn't we expect its share of income to increase over time?
It's not obvious to me why labour's share should necessarily remain constant as the economy accumulates hard-to-replicate productive assets.
Because society breaks down when there is an elite class of people who are so wealthy the law no longer applies to them, while a significant portion of people are on the brink of being homeless, and many more are one health emergency away from it.
Most income gets reinvested; the goal of modern large corporate accounting is to show a huge income, growth of sales, and near-zero profits. I suppose that the large revenues are also at least partly due to financial engineering, through structuring of subsidiaries, etc. Hence wages, which are real costs, look smaller compared to the large amounts of money sloshing around as huge revenues.
I don't think you understand the graph. This is what percentage of income comes from wages. So for every dollar that people earned as income on their tax sheet, 42% was listed as coming from wages. The other 58% comes from other sources like non-wage employer compensation, rental income, private business income, etc.
there are only two ways to make money - labor and capital - broadly speaking, and continued data points like this one is why the word Oligarchy is increasing in usage... most of us see it and feel it
Unless a calamity throws human survivors back to the stone age there can be no future Wright brothers, in the post Tevatron and LHC, James Webb telescope era there will be no new Woz, no new Jobs... 2-3 people in a garage or hanger soldering and welding
Any yet unseen discoveries will require teams of people composing something on the scale of...AI robots and Wolverine like regenerative medicine
And Google and such ...hired PhDs to do that work so they could own it and not have them release it without permission. They weren't hiring basement tinkers.
Look beyond the syntactic totems of power like brand names and logos and it's just soylent green. The contemporary legal and PR gibberish defining ownership and hyping yet another chat app are not real; it's just physics.
Only 17% of people who laid out LLM transformer foundations between 2017 and 2022 had relevant PhDs. Not that I expect it would sway your faith or stop the downvotes, but just quoting anyway:
Lmao "look their own AI says their effort and accomplishments were noble and altruistic; what more do you need?"
...it was their final, most essential command...
Will most def use local models to generate code and frontier to guide that local process but it's obviously a text generator that can be weighted to emit whatever Altman or Dario and the rest of big tech (and their inherent self selecting biological imperative) believe is best for them
Right, for the important stuff, not this LLM bullshit, people did have either PhDs or came from eminent universities and organizations:
"The EU's common-charger initiative can be traced to Solomon Passy and Gergana Passy, two Bulgarian politicians who proposed it in 2008. Interestingly, Solomon Passy had a PhD in mathematical logic and computer science."
One major element in this is the rise of earnings from pass-through income. Self-employed or nearly self-employed individuals who would have been counted as employees of their small businesses 30+ years ago increasingly take "profits" from their business rather than "wages," even though they are the same thing. The "profits" get tax advantages. This makes labor share decline despite dentists, consultants, etc. still doing the same amount of work and taking home the same pretax income. See: https://www.ericzwick.com/labshare/labshare.pdf
By this paper's own conclusion, this phenomenon explains 31.9% of the decrease in recent decades. That's significant, but also means that most of the decrease comes from somewhere else.
> this phenomenon explains 31.9% of the decrease
Which lines up nicely with 3 out of 5 of the percentage points of increase attributable to corporate profits (out of GDI) being in distributed [1].
[1] https://news.ycombinator.com/item?id=50239264
Is it though? Self-employed individuals who've set up an umbrella business entity aren't particularly common.
Like all law firm partnerships are pass through entities. Law firm partners have a lot of money, but its fundamentally labor income.
> Self-employed individuals who've set up an umbrella business entity aren't particularly common.
I've serviced a lot of small businesses over 35yr of IT (typically deep into operations) and I've never come across it.
At the center of their story is a quiet revolution in the American economy: the rise of a particular kind of private business. A few decades ago, these businesses collectively made far less money than Corporate America. But by 2011, they were generating more income than all traditional U.S. corporations combined — and accounting for most of the rise in the share of income flowing to the top "one percent."
Over the previous few decades, this sort of private business had — quite privately — taken over the American business world. In 1980, pass-through businesses generated about one-fifth of all U.S. business income. By 2011, they generated more than half. Move over, Corporate America. Hello, Pass-Through America!
https://www.npr.org/sections/planet-money/2026/09/14/g-s1-14...
> by 2011, they were generating more income than all traditional U.S. corporations combined
Source?
A source from the linked article: https://www.journals.uchicago.edu/doi/10.1086/685594
> “Pass-through” businesses like partnerships and S-corporations now generate over half of US business income and account for much of the post-1980 rise in the top-1% income share.
This is a quote of the article he linked:
https://www.npr.org/sections/planet-money/2026/09/14/g-s1-14...
In turn it links the source: https://www.journals.uchicago.edu/doi/10.1086/685594
Any LLCs and PLLCs (physicians, attorneys, lawyers, accountants, architects, etc.). An owner of a LLC cannot be an employee of it and therefore is pass-through.
This is purely data with no narrative attached, which is sort of refreshing.
The un-answered question is what is now eating up the percentage that was going to wages?
What are the options? R&D, shareholders, lawyers, advertising/marketing/PR, share buy-backs, political lobbying (cough bribery cough), strategic reserves?
> what is now eating up the percentage that was going to wages?
Here you go [1].
Wages and salaries are down 0.4 percentage points from ‘24, 0.75 from ‘15 and 5 from 2000 [2].
Corporate profits after taxes are up 5 percentage points from 2000, of which 2 percentage points went to dividend increases and 3 to undistributed profits. (Also of note, private consumption of fixed capital +2pp, same as rental income.)
[1] https://fred.stlouisfed.org/release/tables?rid=53&eid=42185 2025
[2] https://fred.stlouisfed.org/release/tables?rid=53&eid=42185&...
The quarterly data is more recent.
https://fred.stlouisfed.org/release/tables?rid=53&eid=17636
All (the value) of the things produced goes ultimately to either labor (wages), capital (interest), or land (rent) - Adam Smith. (tax being an intermediary for the same).
If wages are down then rent or interest returns are up.
Market interest rates are trending up in recent years but in line with / below long term averages.
So obviously rent is doing the heavy lifting. GFC, housing crisis, etc, are all products of the extreme rents and land speculation.
Where does rent go? It can be consumed (luxury goods, etc) but most of it 'grounds out' in labor and capital through subsequent investments.
So higher share going to rent actually looks like larger luxury consumption by the landowners, more services consumed by them, and (probably most significantly) larger capital investments domestically and internationally - huge AI and semiconductor investments, robotics and EV factory build outs, complicated R&D programs, etc). These go on to employ more laborers globally - with the key change being that the return to laborers within any one investment is historically low.
Money is only an intermediary. It is the flow of goods produced (machines built, technologies developed) and services and resources which really matters.
A portion also goes to fighting entropy. Keeping infrastructure intact for example consumes value just for maintaining the status quo.
Technically speaking, maintenance is a capital investment.
Use of some rare natural consumable (lubricating a machine with whale oil?) would still require a) labor b) capital and c) paying rent to whoever owned that slice of nature. So consumption, broadly, may take from nature, but the returns (if there are any) go only to people - as rent, interest, or wages. If there are no returns, then it is just consumption proper.
Naively, people have been working for 75 years over the span of the graph to create valuable IP, scalable manufacturing, unique organisational capabilities, partnerships etc.
If capital is being created faster than it degrades or is destroyed, wouldn't we expect its share of income to increase over time?
It's not obvious to me why labour's share should necessarily remain constant as the economy accumulates hard-to-replicate productive assets.
Because society breaks down when there is an elite class of people who are so wealthy the law no longer applies to them, while a significant portion of people are on the brink of being homeless, and many more are one health emergency away from it.
The economic accounting doesn’t map nearly into what you think of as “labor” and “capital.” For example, the non-labor share includes things like depreciation: https://taxfoundation.org/blog/capital-is-not-taking-half-of...
See also: https://itif.org/publications/2026/08/25/the-false-panic-ove...
Most income gets reinvested; the goal of modern large corporate accounting is to show a huge income, growth of sales, and near-zero profits. I suppose that the large revenues are also at least partly due to financial engineering, through structuring of subsidiaries, etc. Hence wages, which are real costs, look smaller compared to the large amounts of money sloshing around as huge revenues.
I don't think you understand the graph. This is what percentage of income comes from wages. So for every dollar that people earned as income on their tax sheet, 42% was listed as coming from wages. The other 58% comes from other sources like non-wage employer compensation, rental income, private business income, etc.
You can see the breakdown of the categories here:
https://fred.stlouisfed.org/release/tables?rid=53&eid=42185
The whole pie isn’t dollars reported on tax sheets. It’s Gross Domestic Income: https://en.wikipedia.org/wiki/Gross_domestic_income.
there are only two ways to make money - labor and capital - broadly speaking, and continued data points like this one is why the word Oligarchy is increasing in usage... most of us see it and feel it
https://fred.stlouisfed.org/graph/?id=GDIA,GDICOMPA,
Wages for the upper tier, but not in the form of wages
We know it isn't R&D. That got done by universities, and we're in the process of gutting them.
Not just universities. Large tech companies have been excellent at funding R&D.
This turns out not to be the case.
Right, from Wright brothers airplane to modern GPT LLMs founders, they were all university researchers that are now being gutted by Trump:
https://chatgpt.com/share/6adedaac-c650-83e8-bb64-c30c1170fa...
Unless a calamity throws human survivors back to the stone age there can be no future Wright brothers, in the post Tevatron and LHC, James Webb telescope era there will be no new Woz, no new Jobs... 2-3 people in a garage or hanger soldering and welding
Any yet unseen discoveries will require teams of people composing something on the scale of...AI robots and Wolverine like regenerative medicine
And Google and such ...hired PhDs to do that work so they could own it and not have them release it without permission. They weren't hiring basement tinkers.
Look beyond the syntactic totems of power like brand names and logos and it's just soylent green. The contemporary legal and PR gibberish defining ownership and hyping yet another chat app are not real; it's just physics.
Only 17% of people who laid out LLM transformer foundations between 2017 and 2022 had relevant PhDs. Not that I expect it would sway your faith or stop the downvotes, but just quoting anyway:
https://chatgpt.com/s/t_6adee2ceae408191b155de89259ed240
Lmao "look their own AI says their effort and accomplishments were noble and altruistic; what more do you need?"
...it was their final, most essential command...
Will most def use local models to generate code and frontier to guide that local process but it's obviously a text generator that can be weighted to emit whatever Altman or Dario and the rest of big tech (and their inherent self selecting biological imperative) believe is best for them
Right, for the important stuff, not this LLM bullshit, people did have either PhDs or came from eminent universities and organizations:
"The EU's common-charger initiative can be traced to Solomon Passy and Gergana Passy, two Bulgarian politicians who proposed it in 2008. Interestingly, Solomon Passy had a PhD in mathematical logic and computer science."
https://chatgpt.com/s/t_6adeeaf8dc348191ba3a89b5262e09d8
Some even had postgraduate studies in philosophy.
> no narrative attached
That's just a style choice; like using "unalived" to mean the same physical state as "dead"
Muricans love to launder their willful and feigned ignorance behind made up terms to appear objective
It's still the same human story behind the words; a minority hordes all the loot and pays goons to shoot hungry people
> a minority hordes all the loot and pays goons to shoot hungry people
With analysis as generic and shallow as this, I think "muricans" are better off with their willful and feigned ignorance.
ok comrade
Oh no fellow American; I am 100% behind our norm of not having to concern myself with your having food, shelter, or healthcare
Don't mistake my point for giving a fuck that you, of all people, do not end up living in box behind a McDonald's; I don't care, text on a screen. :)
I just prefer brevity and absolute candor not empty platitudes and pointless circumlocution
<scarcasm>Wait till millions of robotaxis hit the streets, the graph will crater!</sarcasm>
Does this include income like RSUs?
> Does this include income like RSUs?
Yes [1].
[1] https://www.bea.gov/help/glossary/wages-and-salaries
what happened in 1971 . com