Workers' Share Shrinks as Mortgage Rates Stay High

Workers received just 52.8% of U.S. economic output earlier in 2026, the lowest share in Bureau of Labor Statistics records dating to 1947. Shareholders and owners of capital have gained while typical workers’ compensation takes a shrinking slice. Heather Long, chief economist at Navy Federal Credit Union, said, “It's really telling you that workers have less and less power in this technology age and certainly in the AI age.”

Gasoline prices had risen about $1.20 per gallon since President Donald Trump returned to the White House, The Washington Post reported. Mortgage rates had climbed above 7%, reaching a three-year high, while diesel at a New Jersey fuel station topped $6.50 per gallon the previous month. Eggs, by contrast, no longer cost more than $6 a dozen. The unemployment rate remained low.

Who Gets the Gains

Long said financial gains were going mainly to shareholders and owners of capital, not typical W-2 workers. She said the decline in labor’s share had accelerated this year, likely reflecting major investment and rapid adoption of artificial intelligence. Workers may keep their jobs in the AI era without receiving much of its financial benefits, she said. Long called the chart “the chart that keeps me up at night.”

Michael Feroli, chief U.S. economist at JPMorgan, said the BLS measure could fall below 50% by the end of the decade if recent trends and expected AI effects continued. Other measures tell a less stark story because they account differently for depreciation, taxes, equity compensation and pass-through corporations.

Abhay Duggirala, an economist at Goldman Sachs, estimated that tax changes, depreciation and the BLS measure’s understatement of incentive and equity-based pay explained 40% of the 7.5-percentage-point decline in labor’s income share since the 1990s. The other 60%, he wrote, reflected higher markups, greater industry concentration, automation and reduced worker bargaining power. “If these structural trends continue, for example because AI is likely to automate many additional tasks, the labor share will likely continue to decline,” he wrote.

A Tax Foundation tabulation that excluded depreciation and taxes found labor’s share remained within historical levels. Richard DiSalvo, a senior economist at the foundation, said workers earn about half of each dollar of gross income, though some income counted as gross does not accrue to anyone. He put capital’s share of net income between 22.6% and 31.7%. DiSalvo said the labor share had declined in the last 20 years, but disputed that it had “marched off the charts like it shows in the BLS data.”

The Cost Reaches Households

Gregory Daco, chief economist at EY-Parthenon, said the economy was growing at a relatively robust pace but “not everybody is sharing that growth equally.” He said corporate profit margins, particularly those related to AI, were at historical highs, while cost-control efforts and workers’ declining bargaining power had constrained labor’s share.

If labor’s share returned to 56% in an economy with $23.6 trillion in inflation-adjusted gross domestic income, household income would rise by $3,900 per household, Daco estimated. A return to early-2000s levels near 62% would mean $14,400 more per household. He called the decline a slow-moving phenomenon with consequences for consumer spending and sentiment. Long connected the falling labor share with household dissatisfaction, populism, affordability concerns and a widening distance between the top 1% and other households.

Consumer sentiment weakened during 2026 amid war-driven gasoline price increases and concern about AI’s effects on employment. Inflation, elevated for more than five years, rose in recent months, prompting the Federal Reserve to raise rates for the first time in three years. Policymakers were meeting that week and were expected to hold rates steady.

Mortgage Relief Comes With a Price Tag

Fortune reported an average refinance rate of 7.292% for a 30-year fixed-rate mortgage on Oct. 27, based on Mortgage Resource Center data available as of Oct. 26. The listed rate for a 20-year conventional loan was 7.095%, and the 15-year and 10-year conventional rates were 6.397% and 6.251%. A 30-year jumbo rate stood at 7.570%.

Mortgage rates stayed near 7% for 30-year fixed loans after the Federal Reserve cut its federal funds rate in late 2024. Rates moved toward 6.5% near the end of February but remained above pandemic-era levels of 2% to 3%. A Redfin report said 82.8% of homeowners with mortgages had rates below 6% in the third quarter of 2024, leaving many reluctant or unable to move or refinance.

Refinancing requires an application and lender review of credit profile, verified income and debt-to-income ratio; borrowers can be denied. Closing costs typically run from 2% to 6% of the loan amount. On a $300,000 loan, Fortune gave a range of $6,000 to $18,000. Relief is not simply a matter of replacing one loan with another: the lender’s review, potential credit-score impact and fees all remain part of the transaction.