# Why the middle class feels broke despite getting richer > Goldman Sachs reveals that capital ownership, not wages, is driving economic gains, and most Americans don't own enough to benefit. - Title: Why the middle class feels broke despite getting richer - Summary: Goldman Sachs reveals that capital ownership, not wages, is driving economic gains, and most Americans don't own enough to benefit. The economy is rewarding… - Keywords: goldman sachs, labor share of income, middle class, capital ownership, wage stagnation, income inequality, automation, corporate markups, worker bargaining power, wealth concentration, ai adoption, pass-through businesses - Source: Fortune — https://fortune.com/2026/09/16/goldman-middle-class-labor-share-income-record-low - Author: Nick Lichtenberg - Read time: 2 min - Topics: goldman sachs, labor share of income, middle class, capital ownership, wage stagnation, income inequality, automation, corporate markups, worker bargaining power, wealth concentration, ai adoption, pass-through businesses ## Workers' slice of the economy hits 80-year low Labor's share of nonfarm business output fell to 52.8% in Q2 2026, the lowest since 1947. The decline has accelerated dramatically this year, dropping 7.5 percentage points since the 1990s. > the lowest reading since the agency began tracking the measure in 1947 ## But 40% of the decline is just accounting tricks Goldman economist Abhay Duggirala found that roughly 40% of the 7.5-point drop reflects measurement quirks, not actual income transfer. The remaining 60%, or 4.5 percentage points, is real. > roughly 40% of the 7.5-point drop reflects measurement quirks ## Tax law pushed business income off the books The 1986 Tax Reform Act raised taxes on C-corporations, pushing business owners into pass-through structures like S-corps and partnerships. The same dollars now show up as profits instead of wages. > Income that once showed up as wages now gets reported as business profits instead ## Depreciation costs are dragging down labor share As computers and software became a bigger part of the economy, depreciation rates climbed. This mechanically lowers the labor share even though capital owners aren't actually pocketing more net income. ## Stock pay hides executive compensation The BLS only counts stock-based pay when it vests, not when granted, understating what high earners receive. This equity compensation overwhelmingly flows to people already positioned to get stock benefits. ## The real 4.5-point shift is structural Rising corporate markups from superstar firms, automation reducing labor demand, and weakened worker bargaining power from de-unionization are driving genuine income redistribution to capital owners. ## The wealthy own almost all the capital gains The wealthiest 10% of households hold the vast majority of corporate equities and mutual fund shares. Superstar firm profits accrue overwhelmingly to a narrow slice of already-wealthy shareholders. ## The middle class is moving up, not down The upper-middle class share of families tripled from 10% to 31% between 1979 and 2024, and median family income rose 52%. But the top 1% roughly doubled its share of all income. > broad prosperity, unequally shared ## The upper-middle class is caught in an arms race Earners making $200,000 to $400,000 are working more and relaxing less to buy scarce positional goods like elite school zones. They're losing ground to the wealthy who both earn high salaries and hold meaningful equity. > working more and relaxing less to buy products and services of declining quality ## AI adoption widens the wealth gap AI usage climbs from 9% among earners below $30,000 to 34% among those earning over $100,000. High earners use AI defensively to avoid falling behind, while displaced workers don't share in productivity gains. ## Goldman predicts AI will shrink labor share further Goldman's analysts expect AI to continue pushing the labor share lower. Whoever owns the companies deploying automation captures the productivity gains as profit; displaced workers don't share proportionally. > if AI continues to automate many additional tasks, the labor share will likely continue to decline ## The real question is who owns the future The economy is genuinely wealthier, but capital ownership determines who benefits. Households living on paychecks are absorbing the difference as gains flow to those who own equity. ## Key takeaway The economy is rewarding people who own capital over people who earn wages. If you only have a paycheck, you're falling behind even as the overall economy grows.