Abstract: With the rapid development of the digital economy, data elements have become a core factor of production in the digital era. Investigating how firms' investment in data elements improves income distribution has significant theoretical and policy implications for achieving common prosperity and high-quality development. From a factor input perspective, this study examines the effect of firms' data investment on labor income share and its underlying mechanisms, using data from listed companies on the Shanghai and Shenzhen stock exchanges. The results show that firms' data investment can significantly increase labor income share, which still holds after robustness tests. This positive effect is more pronounced in high-tech and state-owned firms. Moreover, data elements affect labor income share through labor-capital structure and cost control mechanisms. The labor-capital structure mechanism significantly attenuates the positive effect of data elements on labor income share across all types of firms, whereas the cost control mechanism strengthens this effect in non-state-owned and non-high-tech firms.