US pre-tax earnings reach highest level since WWII as workers’ share of income shrinks

American corporations are making more money than at any point in roughly 80 years. The workers helping them do it are getting a smaller cut than ever.

Pre-tax corporate earnings hit an annualized $4.8 trillion in the second quarter of 2026, according to Bureau of Economic Analysis data. That figure represents 18% of national income, a proportion not seen since the years immediately following World War II.

The numbers tell a two-speed story

While profits surge, employee compensation is moving in the opposite direction. The share of national income going to workers has fallen to roughly 60%, with some analyses from the New York Fed pegging the figure as low as 54.1% in early 2026.

For context, workers claimed more than 65% of national income in the decades after WWII. Even as recently as early 2020, the figure stood at 57.7%. The slide from there to 54.1% in about six years is a meaningful acceleration of a trend that had been grinding along slowly for decades.

Corporate profit margins reached 19.4% in Q2 2026, the widest recorded since the 1940s.

How we got here

Union membership has been in steady decline since the early 1980s. Fewer unions mean less collective bargaining power, which means less upward pressure on wages. Outsourcing, both domestic and international, has given employers leverage to keep labor costs down while maintaining or expanding output.

Tax structures have also played a role. Certain corporate entities benefit from favorable treatment that effectively widens the gap between gross profits and what ends up in employee paychecks.

Recent advances in AI have given companies pricing power and productivity gains that don’t require proportional increases in headcount or compensation. Productivity and wages used to move roughly in tandem. They decoupled years ago, and AI appears to be accelerating the divergence.

What this means for markets and beyond

For equity markets, fatter margins and record profits flow directly into earnings per share, which flow into stock valuations. Retirement accounts, pension funds, and anyone with exposure to US equities has benefited from this corporate golden age.

Consumer spending accounts for the bulk of US GDP. If wages don’t keep pace with productivity, the engine that drives corporate revenue starts to sputter, even if margin percentages stay elevated.

Economic inequality at these levels tends to generate political responses in the form of regulatory action, tax policy changes, or shifts in labor law, all of which could compress the very margins that are currently making corporate America look so profitable on paper.

In the late 1940s, the profit surge was followed by a period of significant labor organization, rising wages, and a broad-based expansion of the middle class.

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