…and why we should start worrying that it may not be falling fast enough.
Here is a plot of the labour’s share of national income in the US:
This ratio is countercyclical (profits are more volatile than wages), and although its range of variation is large enough to dominate the secular trend, the trend is negative; since 1970, labour’s share of output has declined by about two percentage points. Several commentators (for example, Angry Bear) have expressed concern.
This concern might be misplaced. Here’s a graph of the share of the population 65 years of age and over:
While the labour share was dropping by two percentage points, the retirement-age group was gaining two points on the rest of the population. If people continue to claim a not-insignificant fraction of national income after they retire, then one of the implications of an aging population is a smaller share for those who are still working.
Oh, and we shouldn’t take too much comfort in the apparent plateau in the retirement-age population. It’s projected to resume its upward trend:
Unless retirement benefits are cut drastically over the next generation (still a possibility, of course), we should expect the labour share to decline even further.
Worthwhile Canadian Initiative 
Nice post. The whole labour share debate, at least in the newspapers, overlooks how much of the capital share actually winds up in the hands of labour through retirement savings instruments.
Interesting take on the issue.
What about the other end of the age spectrum? The number of retirees may be expanding as a proportion of the poopulation, but if the number of people who are under employable age is falling – and I think that’s happening – then maybe the proportion of the population who are of working age won’t be falling as much as you say. Or do only the number of adults count if younger people don’t claim income?
If workers share their income with their children, then a ‘baby bust’ would probably have the same effect as a ‘retirement boom’: a reduction in labour’s share of income. The two effects appear to work in the same direction.