Shareholders, not employees, are raking in money: this is the economy now, and it will get worse (or better?)

Production. Illustrative photo: "Nasha Niva"

To understand how radically the global economy has changed in recent decades, it is enough to look at two iconic corporations from different eras. In 1985, IBM was the most expensive and profitable company in the US, employing almost 400,000 people. Today's Nvidia is worth 20 times more and is five times more profitable (adjusted for inflation), but employs only a tenth of IBM's staff at that time, writes The Wall Street Journal.

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Real market capitalization (vertical axis) and number of employees (horizontal axis) of the largest companies on the first trading day of selected years. Blue color — 2026. Source: FactSet / WSJ

This simple but telling comparison reveals a fundamental shift in the modern economic system: the fruits of economic growth are increasingly disproportionately distributed in favor of capital, not labor.

To understand the mechanics of this process, it is worth referring to the concept of Gross Domestic Product (GDP), which measures all added value in the economy. Imagine a factory: the manufacturer's added value is the sum of sales minus the cost of parts and raw materials. This "pie" is then divided into two main parts: one goes to labor compensation (wages and benefits), the other to capital (profits, interest, depreciation).

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Corporate profits (left) and labor compensation as a percentage of gross domestic income. Source: U.S. Department of Commerce / WSJ

The statistics are relentless: the share received by labor has been shrinking for over 40 years. While in 1980 workers received 58% of the total economic output, measured by gross domestic income (conceptually similar to GDP), by the third quarter of last year this figure plummeted to 51.4%. Conversely, the share of corporate profits during the same period rose from 7% to 11.7%.

History of the Decline

The historical roots of this shift lie in the 1980s and 1990s. The decline of trade unions and global outsourcing undermined workers' ability to demand a larger share of the "pie." At the same time, the very nature of capital changed. Businesses began to spend less on durable buildings and factories, reorienting towards computer hardware, software, and intellectual property — assets that require constant updating.

However, the most powerful factor was automation, the first wave of which hit the manufacturing sector. Machines, robots, and computers began to massively replace people in factories. In 1980, 66% of the added value in industry went to labor compensation, but by the 2000s, this figure dropped to 45%.

Pascual Restrepo of Yale University and Daron Acemoglu of the Massachusetts Institute of Technology estimated that this process alone explains about half of the decline in labor's share between 1987 and 2016.

Undoubtedly, this increased productivity and provided consumers with cheaper goods, but the price was high: workers who previously could expect a decent wage in a factory were displaced into lower-paying service sectors.

The situation escalated after the Covid-19 pandemic. Although a short-term labor shortage forced employers to raise wages, inflation ate up most of this increase. Since the end of 2019, real hourly wages (after accounting for inflation) have risen by only 3%, and aggregate labor compensation by 8%. At the same time, corporate profits soared by a colossal 43%.

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Change in profits and wages since 2019, adjusted for inflation. Blue — corporate profits, black — aggregate wages and social benefits, gray — hourly wages. Sources: Department of Commerce; Department of Labor; WSJ calculations

The Era of "Superstars"

The "big tech" sector plays a special role in this process, with business models fundamentally different from industrial giants of the past. Their capital consists of algorithms, operating systems, and network effects, not physical machinery. For example, Nvidia designs chips but does not even manufacture them itself.

Today's "superstar" companies can generate enormous money with minimal staff. Alphabet (Google) revenue grew by 43% over the last three years, while the number of employees remained practically unchanged. Even Amazon, which owns a huge network of warehouses, has started cutting jobs.

In such companies, the line between capital and labor begins to blur. Employees who create key technologies are considered unique "human capital" and are rewarded with stock.

Sometimes corporations buy entire startups just to acquire specific people — so-called acquihires. A striking example: Meta Platforms paid $14 billion for a stake in Scale AI effectively to attract its founder, Alexandr Wang.

This dynamic has led to the fact that the well-being of the wealthiest segments of the population now depends not on wages, but on the stock market. Household wealth held in stocks now accounts for almost 300% of their annual disposable income (compared to 200% in 2019).

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Volume of stocks owned by households as a percentage of disposable personal income. Q4 2025 data is an estimate. Sources: Department of Commerce via Federal Reserve Bank of St. Louis (1980–2025); WSJ calculations (Q4 2025).

BCA Research strategist Doug Peta notes that a 10% return on stocks stimulates consumption as effectively as an 18% increase in income. This explains why the economy continues to grow despite weak real wage growth for most of the population.

Future with AI: "White Collars" Under Threat

Now a new force is appearing on the horizon, capable of further deepening this divide — artificial intelligence. If past automation replaced "blue collars" in factories, AI is hitting "white collars" in offices.

Dario Amodei, head of Anthropic, directly calls AI "a universal substitute for human labor." This could lead to a world where giant corporations are replaced by compact, highly efficient startups with minimal staff.

The market is already reacting to these changes. Last week, amid news of rising layoffs and fewer vacancies for professionals, the Dow Jones index broke the 50,000 point mark for the first time. Investors understand that the implementation of AI will allow companies to cut personnel costs, increasing profitability. Economist Restrepo predicts that the share of revenue going to labor compensation will continue to shrink.

Just as workers' wages suffered in the past, now the incomes of office workers are under threat, as their tasks (coding, data analysis, legal services) will be taken over by AI algorithms.

In this new reality, there will certainly be winners. These are workers whose activities require complex social skills, physical presence, or manual labor that is difficult to automate.

Consumers will also benefit, receiving cheaper and more accessible services. But the main beneficiaries, as in previous decades, will remain shareholders, to whom the main flow of money from increased efficiency will go.

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