Labor in the Age of the Smart Machine

It’s very hard for me to look at this graph of labor’s share of value added in the US economy and not see evidence of the computer age.

Ever since the PC was introduced and started changing companies and the world of work in the early 1980s, labor has experienced a pretty steadily decreasing share of total US value added. Workers, in short, are taking home less and less of the overall economic pie.

This trend exists despite the fact that CEO and other executive pay is included in labor’s share, and has been increasing handsomely. I think this graph would be declining much more quickly in recent years if it only included the pay of rank-and-file workers.

As computers have become more powerful and plentiful, they’ve been adopted instead of people in more and more settings. This cuts total payroll costs, and can also decrease the bargaining power of the remaining workers. Both of these factors tend to make the line in the graph above head south.

I can’t see what’s going to make this graph change direction, especially since labor’s share tends to fall during an economic expansion. Can you see anything that will realistically cause labor’s share to rise in the coming months and years?