EU's labor income drops to 40-year low

European workers' income as a percentage of the economy has fallen to a 40-year low as globalization increased labor supply and technology improved manufacturing processes.

Labor income share of gross domestic product in the European Union fell to 57.8 percent last year, compared with an average of 64.2 percent since 1960, the European Commission in Brussels said in a report today. That compares with a 60.2 percent share in Japan last year and a 60.9 percent share in the U.S. in 2005.

"Technological progress made the largest contribution to the fall in the aggregate labor income share," according to today's report. "Globalization also had a negative impact" as the supply of labor worldwide quadrupled between 1980 and 2006.

Technological advances in machinery and production processes have allowed companies to boost output without adding workers, which can boost economic growth without an increase in labor income. Still, unskilled workers are more negatively affected, as capital and new technology "complement skilled workers," according to the report.

The EU's labor income share, which measures the part of value added allocated to labor in GDP, peaked at 69.9 percent in 1975. The Japanese rate also reached its highest that year, at 76.4 percent, while the U.S. achieved 65.9 percent, its highest level, in 1970.