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U.S. workers took home their smallest share of capital since at least 1947

2026-11-01T23:20:31+00:00

As corporate earnings soar and U.S. GDP balloons, the American workforce isn’t feeling the same boom. American workers are taking home less of the country’s overall income, data from the Bureau of Labor Statistics shows, and employment in the U.S. is set to continue to slow.

Labor share, or the portion of the U.S.’s economic output that workers receive through salary and wages, decreased to 52.8% in the second quarter of 2026, its lowest level since the BLS started recording this data in 1947, according to its labor productivity and costs report. In the previous quarter, labor share was at 53.6%. This decade, the labor share average was about 55.6%.

That’s despite corporate earnings skyrocketing, with profits for Fortune 500 companies hitting a record $2.1 trillion in 2025. The U.S. GDP grew 3.4% in the third quarter last year, exceeding economists’ predictions.

That growth has not only come at the expense of how much of the pie of wealth workers are taking home, but also how many Americans are in the workforce, economists warn.

“That decline in the share of labor has got to be either falling earnings or falling numbers of people,” Raymond Robertson, a labor economist at Texas A&M’s Bush School of Government, told Fortune. “The falling share of income is having to do with the shift towards capital.”

Indeed, there are growing signs that as national income balloons, the U.S. workforce is deflating. Unemployment ticked up to 4.2% in September, and employers added just 584,000 jobs in 2025 compared to 2 million added in 2024. The U.S. added 29,000 jobs in September, about one-third of economists’ projections.

The bifurcation of corporate victories and weak labor data raises concerns among economists of jobless growth jeopardizing the U.S. workforce, as well as a K-shaped economy, where the rich get richer while the poor get poorer, becoming more exaggerated.

“Data right now is very mixed,” Robertson said. “But I think it also all consistently points to this idea that things are getting worse for workers and much better for billionaires.”

What is causing jobless growth?

Robertson attributes weakening labor share averages to the rise in automation, which he noted is displacing workers, with productivity—a metric essentially measuring worker output—continuing to rise. Second-quarter GDP data showed nonfarm productivity growth grew 1.4% last quarter, though the rate has slowed from 2.2% in the same quarter a year ago.

“All these things, bit by bit, are replacing people, and they’re concentrating income and their share of capital,” he said.

Goldman Sachs analysts Joseph Briggs and Sarah Dong estimated in a report, based on Department of Labor job numbers, that AI automation could displace 25% of all work hours. They predicted that over the course of the AI adoption period, a 15% increase in AI-driven productivity would displace 6% to 7% of jobs, and, at its peak, a 1 million increase in unemployed workers, though job displacement as a result of AI has not shown up meaningfully in any economic data.

The displacement could be substantial, the analysts said, but said the impacts of automation will be tempered by a wealth of new jobs created as a result of the technological changes.

Automation is expected to be a boon to corporate profits and GDP, projected to boost GDP by 1.5% by 2035, according to a Wharton brief published in September 2025. Early signs indicate AI could drive productivity gains, with around 80% of employees reporting AI makes them faster at specific tasks, but only 37% of companies seeing an impact of that productivity on operating profits, according to McKinsey data, and AI operating costs continue to constrain its deployment.

Robertson added that growing unemployment, which he expects to see rise over the next few months, keeps wages down, allowing margins and profits to expand.

To be sure, the recent productivity surge has been an “open question,” Morgan Stanley economists have argued, not unanimously attributed to increased adoption of AI or automation. The analysts suggested this increase would be cyclical, or vestiges of pandemic-era habits of companies making more from less.

An Oxford Economists research brief from earlier this year suggested companies are disguising overhiring-related layoffs as a result of AI, but said automation-related workforce reductions have not yet happened en masse. Additionally, while unemployment has been ticking up over the past year, it is still relatively low.

Why is an immigration crackdown backfiring on U.S. labor?

Mark Regets, senior fellow at National Foundation for American Policy (NFAP), sees a different reason for a slowing workforce. He told Fortune President Donald Trump’s immigration crackdown has not done what Trump administration officials, such as White House Deputy Chief of Staff Stephen Miller, said it would in increasing the number of U.S.-born workers. Instead, according to Regets, Trump’s immigration policies have not only decimated the foreign-born workforce, but has also created fewer opportunities for domestic-born workers to find jobs.

NFAP data shows a 1.1 million to 1.4 million-person reduction in the foreign-born workforce since January 2025, consistent with the Congressional Budget Office’s report last year indicating shrinking U.S. population growth as a result of migrants being deported or refusing to come to the U.S. out of fear of hostile polities.

“The data is raising huge red flags that we are losing immigrants of all types that we otherwise would be advancing America’s economy,” Regets said.

Recent BLS data is counter-evidence to Miller’s argument that harsher immigration policy would grow the U.S. workforce. The labor participation rate for foreign-born workers fell from 66.3% to 66% from September 2025 to September 2026, and labor participation for native-born workers has similarly fallen from 61.6% to 60.9% over the same period. Fewer immigrant workers may actually make it harder for U.S.-born individuals to find work.

“A company unable to find the workers it needs for some roles could shut down operations rather than continuing,” Regets said.

He noted skillset diversity in a workplace could boost productivity and justify employing more people. Greater immigration can also increase consumer spending and stimulate businesses, as well as encourage businesses to take advantage of ample labor market availability and seek out their labor instead of offshoring jobs.

How does the U.S. reverse a shrinking labor force?

While friendlier immigration policies could help reverse an exodus of foreign-born workers, Robertson said addressing the workplace automation push would be key to growing the U.S. workforce.

“There are trades that are technology-assisted,” he said. “Those are going to be in higher demand, but you really still have to have a significant investment in skills.”

The young generation of workers are already prepared to adapt to a changing labor landscape. Gen Z are flocking to trade schools in hopes of a finding a job as a carpenter or welder not so easily outsourced by AI, and in 2024, enrollment in vocation-based community colleges increased 16%, according to data from the National Student Clearinghouse.

Companies have taken it upon themselves to provide reskilling opportunities to employees. A CareerTrainer survey from June found that 72% of hiring managers intended to reskill employees. While the U.S. Department of Labor updated guidelines to encourage states to adapt workplace development systems, Robertson argued the government hasn’t done enough in several decades to imbue the workforce with necessary skillsets for future jobs.

“Democrats and Republicans have not significantly invested in training [or] the retraining or active labor market programs that you need to match workers to jobs,” Robertson said. “That’s the obvious solution.”

Without changes, economists see the pattern of an employment slowdown continuing, but with greater concern about the ability for the U.S. economy to sustain growth.

“We need job growth to have a growing economy, and I think we need job growth to pay our debts,” Regets said. “I don’t know how you have job growth with a shrinking labor force.”

A version of this story was published on Fortune.com on Jan. 13, 2026.

More on the American workforce and wages:

Goldman says the economy is rewarding capital ownership over labor—and most Americans don’t own enough of it to benefit
Trump’s farmworker pay cut moved $2.5 billion a year from workers to growers. A judge says it’s illegal, and back pay could follow
The minimum wage is now the lowest it’s been in 70 years—making the federal wage floor ‘officially a poverty wage,’ report finds

Cisco gives engineer unlimited AI tokens to rewrite legacy code

2026-10-30T14:08:20+00:00

Gen Z can’t catch a break. Entry-level jobs are vanishing;some 40% of bosses say they plan to hire fewer grads because AI can do the job cheaper, and young workers are routinely slammed for showing up late and refusing to put in overtime for free. Cisco’s president and chief product officer Jeetu Patel isn’t buying it—he’s just handed one of the company’s biggest jobs to a 27-year-old he found hidden in the org chart “five levels” below him.

“I’ve given him unlimited tokens because he’s going to refactor code,” Patel told Fortune at a small roundtable dinner. “So I’m like, you can go, you can go nuts.”

The “him” is Padmanabhan Krishnamurthy, or “Paddy,” as Patel affectionately calls him. He joined Cisco in 2025 after the $429 billion tech giant acquired EzDubs, the real-time translation startup Krishnamurthy cofounded in 2023. And despite coming in as a former founder with CEO experience, he was, in Patel’s words, “buried away in the organization doing something unstrategic.”

That changed when Patel dropped into Cisco’s San Francisco office, and the pair got talking. Krishnamurthy reckoned he could rewrite Cisco’s legacy code with a two-person team. Patel says even the most AI-forward people on his own team weren’t thinking that way.

So he has given himself four weeks to prove it, with the final goal of refactoring 98% of Cisco’s legacy code within 24 months.

Now, he’s on the hunt for more Paddys: young hires who will “challenge the system and the status quo,” or, as he puts it, be “an energizer bunny that just goes out and kind of revs everyone up.”

Cisco’s president says Gen Z should be teaching his veterans, not doing data entry—and he’s fine with the tension that causes

At most companies, only someone with decades of experience under their belt would be trusted with a project this size. Patel thinks that’s a problem.

“If you don’t hire the early-in-career [workers], and you just let your workforce continue the way that they were, where do fresh ideas get injected? How do you challenge the status quo?” he said.

Seasoned staff can still come up with new ideas, Patel added. What they can’t do is ask the questions that only someone with no experience would think to ask.

And getting the two to get along isn’t always smooth. Patel admits that putting a Gen Zer in a room with people who’ve been at Cisco for decades can create friction—but he says that’s the point.

“Tension is good,” he said. “I actually try to create tension in the teams because you want to have enough friction on the ideas. You don’t want to have friction with people and personalities.”

“What you have to do is establish enough trust with people to say you are going to be expected to create unreasonable goals for yourself,” he added. “And so, in order to go out and achieve those unreasonable goals, think outside of the box.”

And he’s not just pushing senior staff to take notes from twentysomethings. He said that he treats every intern as “kind of a reverse mentor,” and even does talks at colleges to find students who are “hungry.”

His latest Gen Z bet came out of one of those talks, to 17- and 18-year-old Stanford scholarship students. While a line of students fired questions at him, one, Baya, stood off to the side, just listening. She waited until everyone else had finished before she opened up.

He told her to email him every month with what she’d learned about AI. It was a test of follow-through: “Everyone can go out and have one good conversation. But are they going to stick with their commitments?”

She never missed one, landed an internship at Cisco, and redesigned “something” that experienced staff hadn’t been able to crack.

“I didn’t bring her in so that she can do grunt work and do data entry,” he said. “We brought her in so that she could actually teach our people how to think completely differently.” Now he wants to recruit her.

Patel isn’t the only one betting on Gen Z—OpenAI investor Josh Kushner and Will.i.am are hunting for young, hungry talent

Patel isn’t the only boss who sees Gen Z’s lack of experience as an asset.

Thrive Capital’s founder Josh Kushner told Fortune he specifically likes to hire people with less than four years of industry experience.

When he launched the venture capital firm at just 26, he faced pressure to bring in older, more seasoned hires. But, as he put it, “anyone who has experience that is talented will never want to work with a 26-year-old.” So, instead, he recruited the “smartest people that we knew who were our ages.”

And that bet paid off: His firm made early investments in startups worth billions, including OpenAI, which is currently raising up to $30 billion at a $1.25 trillion valuation.

These days, Kushner could easily hire industry veterans with glowing résumés—but he’d still rather “find that young, hungry person.”

Alon Chen, founder and CEO of Tastewise—a generative AI platform trusted by PepsiCo, Nestlé, and Mars—is also actively looking for Gen Zers with zero experience.

“I’m hiring entry-level because they have no boundaries or limitations in how they think about the world,” Chen told Fortune. “They’re almost like AI natives themselves, having been born and raised in this new realm of opportunities. And I see some of the best ideas coming from the younger generation that have not yet been in the job market.”

And Will.i.am has reached a similar conclusion. The Grammy-winning Black Eyed Peas frontman might be best known for his chart-topping hits, but behind the scenes, he’s a serious investor too. He backed Tesla, OpenAI, and Pinterest before they became household names—and now, he’s betting on Gen Z for his next investment.

Why? He believes the next big tech breakthroughs will come from young innovators at MIT and Stanford. “They’re young kids, and they’re native to this,” Will.i.am told Fortune. “So you want to hunt for that. That’s the only thing I’m focused on.”

And Patel told Fortune that the trend toward hiring Gen Z will only continue, thanks to AI.

“The only way for us to keep accelerating is to make sure we’re surrounded by people with a broad range of experience,” he said. “Roughly one-third of my team is experienced, scaled operators who understand how the Cisco engine works. The second third are systems thinkers from the market who bring the outside-in perspective. And the final third is made of entrepreneurial founders, CEOs, and engineers who are AI-native who operate in founder mode.”

“Either of these groups by themselves aren’t nearly as potent as when all three work together. It’s what creates magic.”