Comment by jameslk

That overall drop in share of income since 2000 is related to the "giant sucking sound" Ross Perot warned about in 1992:

"It's pretty simple: If you're paying $12, $13, $14 an hour for factory workers and you can move your factory South of the border, pay a dollar an hour for labor, ... have no health care, that's the most expensive single element in making a car, have no environmental controls, no pollution controls and no retirement, and you don't care about anything but making money, there will be a giant sucking sound going south."

While Perot was warning about NAFTA, the jobs did go elsewhere: China and other countries with cheaper labor. Globalization led to labor competition, which increased the supply of workers.

Meanwhile, companies captured the value of the increased supply of workers. More cheap labor = more production, for a world that had latent demand for cheaper output. It ended up a net benefit for businesses (capital owners), and overseas workers. This is at least partially if not significantly where the growing gap between wage growth % and GDP growth % comes from.

The macro economists were right that globalization would be more efficient overall for the world, economically. But that came at the expense of the US labor that saw its wage growth eroded as a consequence.