U.S. corporate profits reach record share as worker pay loses ground

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U.S. corporate profits vs. worker pay

Highlights

Pre-tax corporate earnings reached 18 per cent of national income in Q2, the highest share since the post-World War II era, while employees' share fell to 60 per cent.
Real hourly earnings declined 0.2 per cent year-on-year in July, as strong profit growth, higher fuel prices, and the AI-driven tech boom push U.S. equities to record highs primarily benefiting wealthier investors.
An IPS study finds CEOs at major low-wage employers saw pay rise 41 per cent from 2019-2025, while median worker pay increased 21 per cent versus a 26 per cent rise in prices, deepening political backlash.

Profit surge and income split

As reported by Financial Times, Bureau of Economic Analysis data show pre-tax corporate earnings rise to 18 per cent of national income in the second quarter, the highest share since the aftermath of the second world war. Employees' share from wages and benefits falls to 60 per cent, extending a longer-term decline in labor's position within the economy.

Abiel Reinhart, an economist at JPMorgan, says workers have been receiving a steadily smaller share of national income over time, while a significant part of that income is appearing in corporate profit margins. Inflation also continues to weigh on households, with real hourly earnings down 0.2 per cent in July from a year earlier.

This year's strong profit growth helps push U.S. equities to record highs, supported by the AI boom at large technology groups and higher fuel prices that strengthen oil company margins. The gains also lift retirement accounts through stronger stock prices and dividends, but they disproportionately benefit wealthier households that rely more on investment income than wages.

Political backlash and structural pressures

The widening gap between company fortunes and worker pay is becoming a deeper political faultline as more voters express dissatisfaction with the direction of the economy. Both major parties are using more populist rhetoric, while politicians from the left and right are increasingly criticizing corporate power, profiteering and price gouging.

Elizabeth Pancotti of the Groundwork Collaborative says the gains at the top far outpace those seen by lower-income households, describing an economy split between people living off investments and workers dependent on paychecks. Sarah Anderson at the Institute for Policy Studies says frustration over how corporate wealth is distributed could mark the beginning of a more serious backlash.

An IPS study released on Thursday finds that chief executives at America's largest low-wage employers saw pay rise 41 per cent between 2019 and 2025, while the median worker's pay increased 21 per cent, below the 26 per cent rise in prices over the same period. Analysts say labor has been losing leverage since the early 1980s because of falling union membership and increased outsourcing, though it remains unclear whether the sharper deterioration of the past five years reflects a lasting shift, including from AI, or more temporary effects from inflation and the post-Covid period.

Our earlier coverage of AI-linked technology earnings explained how upbeat quarterly updates from names such as Nvidia, Salesforce and CrowdStrike helped lift Nasdaq futures and broaden risk-on sentiment across the market. We also noted that strong guidance and signs of sustained enterprise AI spending were reinforcing investor confidence and supporting U.S. stocks near record levels.

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