Over the next decade, the global pool of labor is likely to expand rapidly for many reasons -- as more workers in China obtain advanced educations and migrate to the coastal cities, for example.
(Interestingly, the labor share has also been declining significantly in China. Part of that appears to be a statistical error, and the remainder reflects an ongoing shift from agriculture to manufacturing. The early stage of that process often involves a decline in labor share, which is then followed by an increase as the development process continues.)
The labor share in the U.S. will probably bounce up and down as the economy slowly recovers. Unless we are somehow going to cut ourselves off from the world, though, we face the prospect of a continued downward trend in the labor share. The trite response to this reality is to call for more education and better training for workers, and more investments in research and development as well as infrastructure. It's true that all such actions would help. But they take time, and even then they would probably only take some of the edge off the decline, not fundamentally reverse it.
No wonder the frustrated Wall Street protesters lack any specific proposals for change: We are effectively missing $500 billion a year in wages, and no one has a credible set of ideas that would bring it back.
(Peter Orszag is vice chairman of global banking at Citigroup Inc. and a former director of the Office of Management and Budget in the Obama administration. The opinions expressed are his own.)