Posts Tagged ‘economic inequality’
“Ill fares the land, to hastening ills a prey, / Where wealth accumulates, and men decay”*…
Sasha Rogelberg marks a painful milestone…
The U.S. workforce has just made the type of history it likely wishes it didn’t. Working Americans are taking home the smallest percentage of economic output, 52.8%, since the Bureau of Labor Statistics began tracking the metric in 1947.
But as the share of wealth workers take home through wages—called labor share—is shrinking, corporate profits have exploded, with the S&P 500 index gaining 600% since the beginning of the century, while wages have increased just 12.5% over the same period, adjusted for inflation.
In other words: Corporations are raking in cash, but American workers are reaping less and less of the rewards.
The consequences associated with shrinking labor shares are now becoming tangible. A recent Government Accountability Office (GAO) report found that across the 11 states sampled, Amazon, the country’s largest company by revenue, has 12,346 workers on the Supplemental Nutrition Assistance Program (SNAP) and 11,338 relying on Medicaid. That was nearly triple the number of Amazon employees in need of federal assistance compared to 2020, when GAO conducted a similar report. During that same period, Amazon saw an increase in annual profits from $11.6 billion to $77.7 billion. Amazon’s 2025 revenue soared 12% year over year, from $638 billion to a record $717 billion…
… Walmart and FedEx saw similar increases in the number of workers taking federal assistance, as did ride-share and delivery companies.
Kathryn Larin, director for education, workforce, and income security issues at GAO, told Fortune the data illustrates that the Americans taking advantage of social safety net programs today are overwhelmingly in the workforce, with most working full-time. The income threshold for SNAP eligibility is about 130% of the poverty line, suggesting that despite many of these workers clocking in at their jobs, they still don’t have enough money to meet their basic needs…
… Diane Swonk, chief economist and managing director at KPMG, recently warned of the hidden consequences of a shrinking labor share, particularly that despite economic indicators suggesting the economy is stable, most Americans are facing an ongoing affordability crisis. KPMG found in February that since 1982, corporate profits as a share of U.S. GDP increased from 8% to 15.85%. During that same period, employee compensation as a share of U.S. GDP shrank from 66.6% to 61.9%.
“This chart from my recent Economic Compass still haunts me,” Swonk said in a social media post at the time. [See chart at the top of this post.] “A friend refers to it as the ‘revolution chart,’ which [is] disturbing but telling. Inequality fuels social and economic instability.”
This trend has been about 50 years in the making, according to Anna Stansbury, an assistant professor of work and organization studies at the MIT Sloan School of Management.
Fewer workers in the U.S. are represented by unions—20.1% of U.S. workers in 1983 compared to 10.0% in 2025—giving them fewer opportunities to bargain for salaries and benefits, she noted. But more so, Stansbury blames the fissuring of the workplace, or the breakdown of the employer-employee relationship. In the past, the typical employer-employee relationship would be that of direct employment: A worker for a company does their work at the company they are employed by. For example, a large bank like Bank of America used to employ a janitor to clean its offices.
But “in more and more cases, that’s not actually people’s experience of the workplace, particularly in lower middle-income jobs,” Stansbury told Fortune.
Instead, large workplaces like retailers and banks hire gig workers or subcontractors to complete jobs once done by direct employees: Companies hire a security provider, which employs a security guard to work outside that large company’s office. Delivery drivers are contract workers, not full-time employees.
As a result, companies don’t have to provide those workers equity or benefits. If a subcontractor violates labor law, the company contracting them is not liable. In the meantime, these large companies are not only saving money on benefits, but are also getting to argue that they are increasing efficiency by not spending resources on workers whose roles are not directly driving revenue, Stansbury explained. A bank should employ bankers, not janitors, to get the most bang for its buck, the thinking goes…
[Rogelberg examines the argument that AI is a material contributor to the lowering of wages (see also here)…]
… Stansbury has a slightly different theory about AI. While the technology could begin to have an aggregate impact on the labor market, it’s still too early to say whether today’s shrinking labor share is part of a broader economic cycle, or if it’s a secular event, she said.
Unexpected inflation spikes, like what is currently happening, are usually associated with poorer real wages. If inflation is less volatile in the coming years and wage growth recovers, today’s trend of shrinking labor share could turn out to be cyclical, Stansbury said.
On the other hand, Stansbury noted, a tightening labor market should increase labor share, and the labor market is already relatively tight. If inflation stabilizes, employment remains narrow, and the labor share increases, it will be a sign of an economic cycle completing itself. A bigger problem will be if wage growth stays low even if inflation improves and the labor market stays tight.
“If those two things happen and the labor share continues to fall,” she said, “then it would suggest that there’s actually been a secular shift, a secular acceleration in the downward trend.”…
“Amazon workers on food stamps have tripled despite its record revenue—and it’s just the latest evidence of the new economy of shrinking labor shares,” from @fortune.com.
See also: “The combination of economic inequality and economic segregation is deadly,” “No society can surely be flourishing and happy, of which by far the greater part of the numbers are poor and miserable,” and “It’s the economy, stupid.”
* Oliver Goldsmith, The Deserted Village (Read it for free on the Internet Archive)
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As we mind the gap, we might recall that it was on this date in 2011 that hundreds gathered in Zuccotti Park in the Financial District in Manhattan, to kick off the movement that became Occupy Wall Street by occupying the park. Fueled by wide distrust in the private sector after the Great Recession, the movement protested economic inequality, corporate greed, big finance, and the influence of money in politics. The OWS slogan was “We are the 99%.”
While the encampment, and the thousands who visited, were that anchor of the movement, Occupy Wall Street activists disseminated their message through social media, print magazines and newspapers (extant and OWS pop-ups like The Occupied Wall Street Journal), film, radio, and live streaming.
The protesters were forced out of Zuccotti Park on November 15, 2011– then turned their focus to occupying banks, corporate headquarters, board meetings, foreclosed homes, college and university campuses, and to social media.
“It’s the economy, stupid”*…
Many Americans take pride in having the largest economy in the world… which, per the chart above, by one measure we do.
But then, if we adjust for population– calculate per capita– the picture changes…
And we note both that, on a PP basis, the U.S. would be lower and, more fundamentally, that the standing of the U.S. is slipping over time.
If we dive more deeply still, the picture complicates further…
This last chart illustrates the wealth inequality in the U.S., which drops from 2nd to 28th when wealth is measured by the median instead of the average… a wealth gap that has been growing since 1985 (and that is combined with an income gap that has been growing since 1980). For more, see World Inequality Database.
* James Carville
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As we search for the source of that smell, we might recall that it was on this date in 1549 that Robert Kett agreed to head a group of rebels in the English county of Norfolk during the reign of Tudor king Edward VI. The rebels were incensed by enclosure (the fencing off of common lands by wealthy landlords, as a product of which many peasants lost access to grazing, fuel, and small plots they had long used), along with rising rents, inflation, unemployment, and declining wages; as a response, they began destroying fences. One of their early targets was yeoman Robert Kett who, instead of resisting the rebels, agreed to their demands and offered to lead them.
Kett and his forces, joined by recruits from the city of Norwich and the surrounding countryside and numbering some 16,000, stormed Norwich and took the city at the end of July. They were besieged by, then routed, a Royal Army detachment led by the Marquess of Northampton who had been sent by the government to suppress the uprising.
But what became known as “Kett’s Rebellion” ended on August 27, when the rebels were defeated by an army under the leadership of the Earl of Warwick at the Battle of Dussindale. Kett was captured, held in the Tower of London, tried for treason, and hanged from the walls of Norwich Castle on December 7.
“A man must always live by his work, and his wages must at least be sufficient to maintain him”*…
Nathan Yau is back with a(nother) arresting graphic analysis– this time, of the median salaries of different occupations in the U.S. (based on 2024– so, pre-purge— data from the Bureau of Labor Statistics). The median salary for full-time workers in the United States was $49,500; but salaries vary by occupation. The interactive infographic featured in the screengrab above shows– and allows you to explore– the spread…
Healthcare practitioners, such as surgeons and emergency medicine physicians, sit at the top. Airline pilot is the only occupation with a median salary above $220,000 that is not in the healthcare category. Then there are the CEOs and managers, followed by computer and math jobs. After that, most jobs sit below the $100,000-mark by median…
… The internet tends to skew our perception of how much people make. We see the things that people buy, but that is not always a good indicator for the wages people earn. These distributions are more bottom heavy than you might expect if you based your estimates on social media.
That said, all these jobs have a range of salaries, too. It’s not just variation within job categories, but variation for each job. The above charts, along with median salary, show 25th and 75th percentiles.
For example, construction supervisors make a median salary of $78,690, but 25% made $62,400 or less (25th percentile) and 75% made $100,200 or less (75th percentile).
There are also geographic differences, made more interesting by cost of living, but we’ll save that for another time…
Explore the comparative data: “Salary and Occupation” from @flowingdata.com.
It is, of course, important to remember (in a time like this, when so much attention is paid to the very rich) that this data excludes “unearned income,” the revenue that accrues to wealth (stocks, bonds, real estate, et al.) and the benefits of “contingent” stock/option bonuses. Along with inherited wealth, they explain most of the wealth gap (and economic angst) that plagues the U.S. today.
* Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations
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As we investigate inequity, we might recall that on this date in 1859, Norton I distributed letters to the newspapers of San Francisco proclaiming himself Emperor of North America…
At the peremptory request and desire of a large majority of the citizens of these United States, I, Joshua Norton, formerly of Algoa Bay, Cape of Good Hope, and now for the last 9 years and 10 months past of S. F., Cal., declare and proclaim myself Emperor of these U. S.; and in virtue of the authority thereby in me vested, do hereby order and direct the representatives of the different States of the Union to assemble in Musical Hall, of this city, on the 1st day of Feb. next, then and there to make such alterations in the existing laws of the Union as may ameliorate the evils under which the country is laboring, and thereby cause confidence to exist, both at home and abroad, in our stability and integrity.
– NORTON I, Emperor of the United States.
“The most perfect political community is one in which the middle class is in control, and outnumbers both of the other classes”*…
For some, the prospect of further advances in AI and related tech (robotics, connectivity, et al.) conjures a future of existential risk, a Terminator-like dystopian future in which humans fight with “machines” for primacy. For others (among whom your correspondent numbers himself), AI (better understood as “augmented” than “artificial” intelligence) has real promise– but also dangers of a different (and very human) sort. Those technologies, dependent as they are on capital and specific/rare expertise, could fuel further concentration of wealth and power, could usher in an era of even greater inequality. Noah Smith is here to argue that my fears may be misplaced, that augmentation may narrow the skills gap and help reduce economic polarization…
On the app formerly known as Twitter, I’m known for occasionally going on rants about how it’s good to be normal and average and middle-class. To some degree this is because I believe that the only successful society is an egalitarian one where people don’t have to be exceptional in order to live good and comfortable and fulfilling lives. But some of it is also a reaction against the messages I was inundated with growing up. It seemed like every movie and book and TV show was telling me that nerds like me were special — that because we could do physics or program computers or even just play video games, we were destined to be exceptional. In the late 80s and 90s, it felt like we were on the cusp of a great shift, where the back-slapping jocks who had dominated American society in earlier times were on the verge of losing power and status to the bespectacled freaks and geeks. The Revenge of the Nerds was coming.
It wasn’t just fantasy, either. Over the next thirty years, the nerds really did win the economic competition. The U.S. shifted from manufacturing to knowledge industries like IT, finance, bio, and so on, effectively going from the world’s workshop to the world’s research park. This meant that simply being able to cut deals and manage large workforces were no longer the only important skills you needed to succeed at the highest levels of business. Bespectacled programmers and math nerds became our richest men. From the early 80s to the 2000s, the college earnings premium rose relentlessly, and a degree went from optional to almost mandatory for financial success.
The age of human capital was in full swing, and the general consensus was that “Average Is Over”. And with increased earnings came increased social status and personal confidence; by the time I moved out to San Francisco in 2016, tech people were clearly the masters of the Universe.
The widening gap in the performance of the nerds versus everyone else wasn’t the only cause of the rise in inequality in the U.S. — financialization, globalization, tax changes, the decline of unions, and other factors all probably played a role. But the increasing premium on human capital was impossible to ignore.
That trend lasted so long that most Americans can no longer remember anything else. We’ve become used to the idea that technology brings inequality, by delivering outsized benefits to the 20% of society who are smart and educated enough to take full advantage of it. It’s gotten to the point where we tacitly assume that this is just what technology does, period, so that when a new technology like generative AI comes along, people leap to predict that economic inequality will widen as a result of a new digital divide.
And it’s possible that will happen. I can’t rule it out. But I also have a more optimistic take here — I think it’s possible that the wave of new technologies now arriving in our economy will decrease much of the skills gap that opened up in the decades since 1980…
An optimistic take on technology and inequality: “Is it time for the Revenge of the Normies?” from @Noahpinion. Eminently worth reading in full.
* Aristotle
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As we contemplate consequences, we might spare a thought for Joseph Glidden; he died on this date in 1906. An Illinois farmer, he developed and patented the design of the first commercially-feasible barbed wire in 1874 (an earlier, less successful patent preceded his)– a product that would transform the West. Before his innovation, settlers on the treeless plains had no easy way to fence livestock away from cropland, and ranchers had no way to prevent their herds from roaming far and wide. Glidden’s barbed wire opened the plains to large-scale farming, and closed the open range, bringing the era of the cowboy and the round-up to an end. With his partner, Isaac L. Ellwood, Glidden formed the Barb Fence Company of De Kalb, Illinois, and quickly became one of the wealthiest men in the nation.
“An imbalance between rich and poor is the oldest and most fatal ailment of all republics”*…
… so, how we measure it matters…
In 2015, Greece, Thailand, Israel, and the UK were equally unequal. That is, all four countries had the same Gini coefficient, a common measure of income inequality.
The number suggests that the spread of incomes in the four nations was the same. However, a close look at the poorest and wealthiest in those societies reveals a very different picture. The ratio between income held by the richest 10% and the poorest 10% ranged significantly, from 13.8 in Greece to 4.2 in the UK.
The fact is, just because the Gini coefficient is so well known doesn’t mean it’s a particularly useful measurement. Its appeal comes from its simplicity—a number between 0 and 1 that can encapsulate a complex distribution in a single figure—as well as its popularity. It is also regularly published and updated by powerful international organizations like the OECD, the World Bank, and the International Monetary Fund.
However, it has a number of serious limitations. So many, in fact, that the World Inequality Database, one of the world’s leading sources of income inequality data, steers clear. And it’s not alone. While some economists defend the Gini coefficient’s continued use, most agree that as a way to understand income inequality, it’s insufficient on its own…
A primer on the dominant measure of economic inequality, and on some alternatives/supplements to it: “Gini coefficient: An introduction.”
* Plutarch
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As we aim to understand, we might note that today is the Summer Solstice, the day on which the earth’s north pole is maximally tilted toward sun, and there are more hours of daylight than on any other day of the year (in the Northern Hemisphere; in the Southern, it is the Winter Solstice, the shortest day). The June solstice is the only day of the year when all locations inside the Arctic Circle experience a continuous period of daylight for 24 hours. And perhaps more immediately, it is the “official” start of Summer.
(The 21st is the traditional date; in the event, the solstice falls on the 20th, 21st, or 22nd– this year, on the 20th… still, the traditional date is the one folks tend to mark.)
Not coincidentally, today is also National Daylight Appreciation Day.
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