The Economist reports on a study by the IMF (32-page pdf) that attempts to explain how and why labour’s share of income has been decreasing over the past couple of decades:


There’s one factor that they don’t seem to have examined: demographics. One of the implications of an aging population is an increase in the percent of people who are retired. If at least part of their retirement is financed out of accumulated savings, you’d expect that capital would generate a larger share of total income – which means that the labour share would have to fall.

In an earlier post, I noted that the 2 percentage point decline in the US labour share since 1970 has been accompanied by a 2 percentage point increase in the retirement age population. This may not be a coincidence. According to the IMF,

The decline in the labor share since 1980 has been much more pronounced in Europe and Japan (about 10 percentage points) than in Anglo-Saxon countries, including the United States (about 3–4 percentage points).

I took a brief look at the on-line UN population data base, and found that the declines in labour share appear to be larger in countries where the retirement-age population is growing more rapidly (the country aggregates aren’t the same as the ones the IMF used, but I’m too lazy to make the correspondence):