The data comes as stock prices continue to hover near all-time highs, while wage growth is barely keeping up with inflation.
On Friday, the Bureau of Labor Statistics reported that wage growth slowed to its lowest rate in five years in August and remains below the broader pace of price growth.
It’s the latest data point reflecting a decades-long stagnation in returns to labor, while corporate profits have exploded.
Since approximately the start of this century, the S&P 500 stock index has gained about 600%. Over the same period, inflation-adjusted worker earnings have climbed just 12.5%.
Wages vs. inflation
Since April, the prices consumers pay are rising faster than wages.
What’s driving it all?
Economists aren’t really certain about the exact cause, but a confluence of factors appears to be at work, according to Mike Konczal, vice president of policy and research at the Economic Security Project and a former White House chief economist in the Biden administration.
The start of the century coincided with what is known as the “China Shock,” as Beijing’s entry into the World Trade Organization massively accelerated globalization and offshoring.
The shock chipped away at the number of traditional blue-collar workers in the U.S., and it reduced the bargaining power of those who remained.
Meanwhile, technological advances have allowed the typical worker to generate larger volumes of more valuable services.
But those gains are being captured as company profits, not as wage growth.
The trend appeared to reverse, or at least stabilize, for a brief period during the post-pandemic economic reopening. But exactly why that happened is still not entirely clear.
The decline resumed after President Donald Trump returned to office in 2025.
Konczal said some economists believe corporations have sought to increase their profit margins at the expense of higher wages for workers in order compensate for the economic uncertainty that Trump’s tariff policies have created.
Regardless of the specific reasons behind the renewed drop in gains for labor, the decline has implications for all of society, Konczal said.
It stands to increase wealth inequality by putting more resources in the hands of capital owners — namely stock market investors — while the returns to workers stagnate.
It also has fiscal implications: Konczal said efforts to increase taxes on wealth or corporate profits have proved politically untenable so far, compared with the current arrangement of taxing earned income and wages instead.
“The economy can start to become unequal in a way that it’s not just the CEO who makes more, but people who own shares do, and that wealth is very, very unequal,” he said.
