Globalization, technical change, and immigration have been tough on the American working class. Real wages in non-farm businesses have risen just 1.0% annually since 1970. And since the start of the Great Recession in 2007, real wages have stagnated, growing just 0.3% per year. Competition in the labor market and high unemployment have enabled businesses to capture most of gains from productivity increases, thus shrinking the share of total production going to labor. In 1970, the share of total value added (or GDP) received by labor peaked at 58.1%. Since then, labor’s share has fallen to 52.7%, about the same level it was in 1948.
The Triad has traditionally been a region of low-cost labor, with a state right-to-work law and a small percentage of unionized workers. As a result, the share of total value added received by workers in the Triad has been smaller than in the nation at large. In 2007, for example, triad workers received 54.3% of total value added in the region as total compensation, while workers were paid 54.6% of total value added nationally.
Since the Great Recession began in 2007, worker compensation as a share of national GDP has fallen from 54.6% in 2007 to 52.7% in 2013. In the Triad, decline has been even more severe with labor’s share dropping from 54.3% in 2007 to 50.8% in 2013.
As the economy recovers and labor markets continue to strengthen, firms both in the Triad and the nation as a whole will be forced to pay their employees a modestly greater slice of the value that they create. This will likely be enough to squeeze margins and foster further investment in labor-saving machinery.
Worker Compensation as a Percent of Value Added