The COVID-19 pandemic significantly disrupted employment, making it challenging to increase the labor share. However, the recent expansion of the digital economy has revitalized economic growth and markedly improved productivity. This raises a critical question: can the growth of the digital economy not only boost labor productivity but also increase labor share and reduce income inequality? This paper explores the impact of digital economic development on labor share, examining the underlying mechanisms at play. Our findings suggest that the digital economy has the potential to reshape employment structures, leading to an increase in the labor share. However, the extent of this impact varies across different industries. Furthermore, from an industrial chain perspective, the digital economy has created technology spillover effects that benefit upstream and downstream sectors. In light of these findings, it is crucial to continue fostering the growth of the digital economy to address potential negative impacts on the labor share in the future.