One of the things we know that ain't so: Is US labor's share relatively stable?

Solow (1958) argued that, from 1929 to 1954, US aggregate labor's share was not stable relative to what we would expect given individual industry labor's shares. I confirm and extend this result using data from 1958 to 1996 that includes 35 industries (roughly two-digit SIC level) and spans the entire US economy. Changes in industry shares in total value-added are essentially unrelated to aggregate labor's share movements. Industry labor's shares comovements contribute positively to aggregate labor's share movements. These findings give us a clearer perspective on one of the stylized facts of economic growth. If the great macroeconomic ratio is meaningful, it must be interpreted in terms of long-run, offsetting shifts in “services” industries versus “goods” industries, both in terms of their labor's shares and shares in total value-added. At least at an annual frequency, there is nothing particularly stable about aggregate labor's share.