> The low labor share in the 1980's is then out of line with the rest of our results. However, it is compatible with the fact that wage growth and labor share started to fall early in the 1970's, caused by factors not present in our study. Political factors such as laws to weaken unions, automation, outsourcing, and globalization were operative even before the rise of monopoly power in the 1980's. Hence, by the time monopoly power came into play, wages and labor share were already low. Hence, apart from rising monopoly power, other factors had an impact on the dynamics of wages and labor share which are not examined here.

Indeed when we compare the inequality present in different industrialized nations with varying degrees of unionization, nations with stronger unions seem to have lower inequality despite experiencing an increase in automation. As stated in an IMF report [1]:

Traditional explanations for the rise of inequality in advanced economies are skill-biased technological change and globalization, which have increased the relative demand for skilled workers, benefiting top earners relative to average earners. But technology and globalization foster economic growth, and there is little policymakers can or are willing to do to reverse these trends. Moreover, while high-income countries have been similarly affected by technological change and globalization, inequality in these economies has risen at different speeds and magnitudes.

So perhaps the combination of automation together with weakened unions is responsible for inequality in industrialized nations?

[1] https://www.imf.org/external/pubs/ft/fandd/2015/03/pdf/jaumo...