Increasingly complex labor disputes have become a problem that can not be ignored in China’s economic development. Analysis by using the provincial panel data from 1998 to 2016 shows that the number of average labor disputes cases per labor is significantly positively correlated with the average capital stock per labor and is significantly negatively related to labor income share, and that average capital stock per labor is significantly negatively correlated with labor income share. The increase of labor disputes in China will prompt manufacturers to use the capital to substitute labor and produce the phenomenon of capital deepening while the promotion of capital deepening extent will decrease labor income share and capital deepening has the mediating effect in the influence of labor disputes on labor income share. Therefore, China should actively build harmonious labor relation, strengthen the capacity to mediate the labor disputes, implement the synchronous growth of residents’ income while the economy grows, and realize the synchronous promotion of labor income while labor productivity grows.