Abstract: This paper argues that the decline in the labor income share since the 1970s is a consequence of the emergence
of a relatively larger generation, the Baby Boomers, compared to other cohorts. I develop an OLG model in which public policy is
endogenously shaped by the population's age structure through voting. When young, Baby Boomers vote to increase unemployment benefits
to mitigate unemployment risk, raising the value of their outside option in wage bargaining and enabling them to negotiate higher wages.
Firms respond by substituting labor with capital to limit workers' rent appropriation, causing a decline in the labor share. Once the
Boomers retire, this effect reverses but is offset by capital accumulation driven by the Boomers' high savings rates, fueled by higher
wages, further reducing the labor share. Calibrated for France and the United States, the model's simulations replicate the observed
decline in labor share and labor market dynamics. The model predicts that, from 2020 onward, approximately one percentage point of labor
income share will shift to capital income every 20 years, on average, through the end of the 21st century.