Here, he states that it is customary to think of the value of a firm in terms of (1) returns to labor and (2) returns to capital. He argues that there is a third factor, (3) position in the market, that provides a rent to the owners and shareholders of the company. Just as a title/deed provides the owner with a geographical rent opportunity, regulation creates an opportunity for a company to extract an abstract sort of monopolistic rent within a market. Estimates of this component of rent lie between 10-30% of GDP, and it changes as a function of regulation.
He argues that the division of this rent "has been shifting against the labor side for several decades" starting under the Reagan administration, due to (1) the decline of unions and collective bargaining (right to work laws, "hardening of business attitudes") and (2) the "casualization" of labor, i.e. the increase in part-time/contract-based labor that many companies are able to force onto a workforce that would, in many instances, favor full time employment. These casual workers "have little or no effective claim to the rent component of any firm's added value."
In summary, the aggregate workforce is losing bargaining power whereas the aggregate business owners (investors) are gaining bargaining power within the economy, allowing the investors and owners to carve out a larger share of rent profits.
While Solow does point out that international competition and "the biased nature of new technology" both play a role in this phenomenon, he strives to emphasize the importance of internal social change in the division of economic rent.
Personally, I think that he is dancing around a much more controversial thesis: inequality is a direct result of poor government regulation and oversight (starting with Reagan) which is due to a deterioration of the separation of powers between the public and the private sectors as corporate owners and investors have been able to buy influence in Congress and further support/entrench regulation that favors their own interests. Unions/collections of workers no longer have the power to combat corporate interests at the political/legal level and are being dismantled/shafted which leads to many individual laborers being shafted as well, which is the cause of the nonexistent wage growth.