Anna Stansbury - Worker Power, Wages, and What's Gone Wrong in the American Labor Market

[upbeat music] Workers' share of national income has been falling for 40 years. The question is why and whether anything can be done. My guest today to help us get to the bottom of it is Anna Stansbury, assistant professor at MIT Sloan, great recommender of books, and one of the sharpest minds working at the intersection of labor markets and macroeconomics. Here's our talk. Welcome to The Economics of Work. I'm excited to welcome Anna Stansbury, assistant professor at MIT, and the economist who I think is the best in the biz when it comes to discovering and articulating the relationship between labor markets and big macroeconomic questions. Anna, welcome to the show.

That's a very kind introduction, Ben. Thank you. I'm excited to be here.

For sure. No, it, it's true. Okay. So I wanna start with labor share of income. So, you know, global income, general GDP, you know, is attributable to labor and capital. Labor share of income's like this big question that I think g- is, is being brought up more and more. What do you make of how that's trending and where you think it's going?

Yeah. So I think the big picture on the labor share of income in the US is that it is trending downwards slightly and has been doing so for about the last 40 to 45.

From what to what? Like, like what are the bounds of that?

It depends exactly how you measure it, and we can get into the measurement weeds 'cause there's a lot of ink expended on this and also misconceptions, I think, about the measurement. But roughly speaking, my favorite measure of the labor share would be you look at employee compensation in the non-farm business sector in the US out of net product of the business sector. You're taking the total, like GDP equivalent that's produced, but you're subtracting out depreciation. If you look at that measure, then it used to be about two-thirds was the labor share, and it's gone down from about there to about 60%, just a bit below 60%. So that would be the kind of-

Okay. So like a seven percentage point decrease. And, and for over what time frame?

Over, uh, since the early 1980s.

Okay. So a long time.

So quite a bit.

So it's like-

Yeah

... kinda gradual, but like very meaningful.

Yes, exactly.

Is that really just the US? Like, I mean, I know it's like very hard to get that globally, but like if you have to take a shot in the dark, like what, what do you, what do you think those numbers are globally?

Again, very debated question. I don't wanna-

Yeah

... make it sound like this is settled science. It depends exactly how you measure it. My best read of the evidence is that this phenomenon is stronger in the US than in most other countries. So many other countries have seen some portion of a labor share decline, but many also haven't or have seen some increase, and it's stronger in the US than other countries. There's a big wrinkle, which is whether or not you include housing. Measurement question, but massively changes the results. But there's research from a researchers, Sophie Pichon and German Gutierrez, that basically says if you take out housing, then the labor share looks like it doesn't decline that much almost anywhere except the US.

So interesting. So what's happening in