Workers have been falling behind dramatically in the tug of war between capital and labor, stoking serious concern about the trust holding the economy and society together.
Diane Swonk, chief economist and managing director at KPMG, highlighted troubling data on corporate versus workers’ earnings that was included a report she recently authored.
It showed corporate profits as a share of U.S. GDP have soared to 15.85% from 8% in 1982. By contrast, employee compensation as a share of GDP has tumbled to 61.9% from 66.6% in 1982.
While labor’s slice of the economy has previously been lower than it is today, the overall trend line has pointed down and the gap compared to corporate earnings is now at a post-World War II record high.
“This chart from my recent Economic Compass still haunts me,” Swonk said in a social media post last week. “A friend refers to it as the ‘revolution chart’ which [is] disturbing but telling. Inequality fuels social and economic instability.”
She added the divergence helps explain how the economy looks on paper and how it’s experienced by most Americans.
Indeed, while aggregate data show cooler inflation, steady income gains, and resilient consumer spending, the details reveal a sharp divide. For example, the richest 20% of households account for nearly all U.S. spending growth since the pandemic, while the bottom 80% have merely kept up with inflation.
Today, Americans are grapple with an affordability crisis that has stretched across a range of basic expenses, including food, electricity, insurance, health care, childcare, and housing. “It gets to the multi-decade erosion in trust—there is an undercurrent of betrayal,” Swonk warned. “Something in our economic narrative is broken.”
In her report, she explained this loss of trust extends globally and across multiple decades, but especially in developing economies over the past year.
At the same time, the generative AI revolution and President Donald Trump’s tariffs have stirred more economic anxiety about job safety.
“CEOs are citing AI as a reason for hiring freezes and layoffs, before the productivity associated with AI is realized,” Swonk wrote. “That could prove penny wise and pound foolish; it stokes public backlash to AI, which is intensifying.”
To be sure, there are still some tailwinds that should benefit workers and the overall economy. Trump’s tax cuts will deliver a temporary lift, the World Cup will help ease a tourism downturn, inflation will continue to gradually cool, and massive AI capital expenditures will keep propping up GDP growth.
On the other hand, investors are nervous, uncertainty still hangs over the direction of economic policy, and the housing market remains in the doldrums, she said.
“The result is an economy that appears resilient but feels increasingly fragile,” Swonk concluded. “Growth has held up, yet the connective tissue that supports labor markets, investment, and global cooperation is fraying. Workers are more anxious, investors more herdlike, and markets are more vulnerable to shocks than headlines suggests.”
Her warnings echo what Nobel prize-winning economist Daron Acemoglu has been saying for years about the origins of economic and political decay.
In a recent interview with Fortune’s Jake Angelo, he said the U.S. is headed for a grim future and outlined two shifts relative to AI development he sees as critical to avoiding deeper decline: cracking down on economic inequality and tempering job destruction.
“If we go down this path of destroying jobs [and] creating more inequality, U.S. democracy is not going to survive,” Acemoglu said.
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