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.
As of April 2026, inflation has outpaced
wages, spiking in May at 4.2% before falling to 3.3% in July. Wages have
continued a downward trend since March 2025 when the annual change was
4.2%, falling to 3.1% in August 2026.
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.
