In tight labor markets, the labor share of income rises: Change in labor’s share of income per 1 percentage point decline in the unemployment gap, overall and by unemployment gap values

Overall 0.16%
>1 0.08%
≤1 0.312%
>0 0.137%
≤0 0.47%

Notes: The unemployment gap is the actual unemployment rate minus the estimate of the natural rate of unemployment. Bars represent the regression coefficient on the unemployment gap from a regression, with the change in the labor share of income as the dependent variable. Controls include productivity growth and the four-quarter change in the unemployment rate; dummy variables for the business cycles of the 1950s, 1960s, 1970s, 1980s, and 1990s, and for the 2001–2007 business cycle; and business cycle–specific trends for each of those time periods. An asterisk indicates the coefficient is not statistically significant at conventional levels.

Sources: Author’s analysis of data from the Bureau of Economic Analysis (BEA) National Income and Product Accounts (NIPA), unemployment rates from the Bureau of Labor Statistics (BLS), and estimates of the natural rate of unemployment from the Congressional Budget Office (2019).

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