r = return on capital. g = overall economic growth. If capital returns 6% this year and the economy grows b 4%, it means that capital + this year's return grew by more than the economy did overall. This leaves a smaller share for labour.
But I'd like to have a better understanding of the year over year mechanics. Anyone have a good explanation. I'm willing to put in some effort.
I would speculate that one other mechanic has to do with time. For the vast majority of people there is a hard cap on wage income based on the hours they can possibly work in a day. People who have money to invest can put that to work for them offline, so to speak.
And at a certain threshhold a person can put their money to use to pay for specialized labor (tax attorneys, finance managers etc) to receive an even greater return.