Lars Christiansen provides a useful, simple explanation for why the labor share of GDP has fallen, drawing on the writings of Polish Marxist economist Michal Kalecki. Kalecki was focused on centralized planning, yet his thinking seems to make sense. The profit share has increased because we have had fiscal easing with an interest rate peg. Now that interest rates are rising, we should start to see the profit share decrease and the labor share increase as a greater share of national income. Of course, we are seeing other effects, but we can say that rising interest rates should start to affect the share of national income going to profits. This does not mean that labor will be better off. It does mean, on a relative basis, that it will become a more important part of national income.
Simple modeling can help with understanding some complex problems. This is not the first time someone has suggested that the impact of labor's declining share of national income is linked to government policies that are supposed to prevent it.
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