Financialization caused roughly three-quarters of the labor share decline by 1997.

Evidence

It shows that the counterfactual trend closely follows the observed trend before 1980 and starts to diverge in the early 1980s. The gap quickly widens in the next two decades to a 3 percentage-point difference in 2000. Then the gap first declines to about 2 percentage points in the mid-2000s but rapidly returns to about a 2.5 percentage-point difference. If we contrast the observed labor’s share of income with the counterfactual, the difference indicates that financialization accounts for about 73% of the decline in labor’s share between 1970 and 1997 and 58% of the total decline between 1970 and 2008. — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 158

Categorization

• ADDENDUM: Directly empirically quantifies the causal mechanism of financialization on labor income, which supports the historical-theoretical framing in my financialization work.
• XREF: connects to: Financialization may erode the postwar capital-labor social pact — Greta R. Krippner, The Financialization of the American…, 142; Financialization may be the root cause behind deunionization, globalization, up-skilling, and falling investment.; Labor’s share of income declined in the nonfinancial economy from 1970 to 2008 — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 74 (+3 more)

Related

• Financialization caused most of the decline in labor’s income share since 1970 (similarity 0.96)
• Financialization independently explains over half of labor’s falling income share since 1970. (similarity 0.92)
• Labor’s share of income declined in the nonfinancial economy from 1970 to 2008 (similarity 0.88)
• US profit and labor shares moved in exact symmetric opposition over forty years (similarity 0.87)
• Deunionization still leaves much wage inequality unexplained, pointing to financialization (similarity 0.84)
• Financialization may erode the postwar capital-labor social pact (similarity 0.84)
• Financialization may be the root cause behind deunionization, globalization, up-skilling, and falling investment. (similarity 0.84)
• Counterfactual independence assumptions likely understate financialization’s true inequality impact (similarity 0.84)
• Financialization drives earnings inequality nearly as much as declining unionization (similarity 0.84)
• Financialization channels income toward the wealthy and depresses productive investment and wages. (similarity 0.83)
• Inequality dimensions reflect one institutional shift toward financialization (similarity 0.83)
• The US economy became increasingly financialized in the post-1970s period. (similarity 0.82)
• Prior research linked financialization to inequality mostly indirectly, not causally. (similarity 0.82)
• Financialization may be a root cause behind union decline and offshoring (similarity 0.82)
• Greater import penetration lowers labor’s share of income (similarity 0.81)

Broader Connections

• Labor’s share of income declined in the nonfinancial economy from 1970 to 2008 #corroborates (0.80) — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 74
• Financialization may erode the postwar capital-labor social pact #expands (0.78) — Greta R. Krippner, The Financialization of the American…, 142
• Financialization may be the root cause behind deunionization, globalization, up-skilling, and falling investment. #complicates (0.75)
• Financialization channels income toward the wealthy and depresses productive investment and wages. #expands (0.75) — Ken-Hou Lin & Donald Tomaskovic-Devey, Financialization and U.S. Income…, 24