Posts Tagged ‘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.
“An imbalance between rich and poor is the oldest and most fatal ailment of all republics”*…
The rich in the U.S. just keep getting richer. Over the five decades, incomes have risen materially faster at the very top than anywhere below, and similarly, wealth has accumulated much more quickly at the top than anywhere below. A report from the Stone Center On Socio-Economic Inequality (at CUNY) looks at the mutually-reinforcing relationship between these two dynamics…
Homoploutia describes the situation in which the same people (homo) are wealthy (ploutia) in the space of capital and labor income in some countries. It can be quantified by the share of capital income rich who are also labor income rich. In this paper, we combine several datasets covering different time periods to document the evolution of homoploutia in the United States from 1950 to 2020. We find that homoploutia was low after World War II, has increased by the early 1960s, and then decreased until the mid-1980s. Since 1985 it has been sharply increasing: In 1985, about 17% of adults in the top decile of capital income earners were also in the top decile of labor-income earners. In 2018 this indicator was about 30%. This makes the traditional division between capitalists and laborers less relevant today. It makes periods characterized by high interpersonal inequality, high capital-income ratio, and high capital share of income in the past fundamentally different from the current situation. High homoploutia has far-reaching implications for social mobility and equality of opportunity. We also study how homoploutia is related to total income inequality. We find that rising homoploutia accounts for about 20% of the increase in total income inequality in the United States since 1986…
Note that the report was written in the 2020 (and published in The Review of Income and Wealth in 2023). The dynamic has continued since; the polarizing impact has grown.
“Homoploutia: Top Labor and Capital Incomes in the United States, 1950–2020,” from @stone-lis.bsky.social. (Read the full report here.)
[image above: source]
* Plutarch
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As we evaluate equity, we might recall that it was on this date in 1970 that The Oregon Highway Division attempted to destroy a rotting beached Sperm whale with explosives, leading to the now infamous “exploding whale” incident.
“When you come out of the storm, you won’t be the same person who walked in. That’s what this storm’s all about.”*…
Jack Goldstone and Peter Turchin have a theory, one that led them some years ago to predict political upheaval in America in the 2020s. Here, their explanation of why it’s here and what we can do to temper it…
Almost three decades ago, one of us, Jack Goldstone, published a simple model to determine a country’s vulnerability to political crisis. The model was based on how population changes shifted state, elite and popular behavior. Goldstone argued that, according to this Demographic-Structural Theory, in the 21st century, America was likely to get a populist, America-first leader who would sow a whirlwind of conflict.
Then ten years ago, the other of us, Peter Turchin, applied Goldstone’s model to U.S. history, using current data. What emerged was alarming: The U.S. was heading toward the highest level of vulnerability to political crisis seen in this country in over a hundred years. Even before Trump was elected, Turchin published his prediction that the U.S. was headed for the “Turbulent Twenties,” forecasting a period of growing instability in the United States and western Europe.
Given the Black Lives Matter protests and cascading clashes between competing armed factions in cities across the United States, from Portland, Oregon to Kenosha, Wisconsin, we are already well on our way there. But worse likely lies ahead.
Our model is based on the fact that across history, what creates the risk of political instability is the behavior of elites, who all too often react to long-term increases in population by committing three cardinal sins. First, faced with a surge of labor that dampens growth in wages and productivity, elitesseek to take a larger portion of economic gains for themselves, driving up inequality. Second, facing greater competition for elite wealth and status, they tighten up the path to mobility to favor themselves and their progeny. For example, in an increasingly meritocratic society, elites could keep places at top universities limited and raise the entry requirements and costs in ways that favor the children of those who had already succeeded.
Third, anxious to hold on to their rising fortunes, they do all they can to resist taxation of their wealth and profits, even if that means starving the government of needed revenues, leading to decaying infrastructure, declining public services and fast-rising government debts.
Such selfish elites lead the way to revolutions. They create simmering conditions of greater inequality and declining effectiveness of, and respect for, government. But their actions alone are not sufficient. Urbanization and greater education are needed to create concentrations of aware and organized groups in the populace who can mobilize and act for change.
Top leadership matters. Leaders who aim to be inclusive and solve national problems can manage conflicts and defer a crisis. However, leaders who seek to benefit from and fan political divisions bring the final crisis closer. Typically, tensions build between elites who back a leader seeking to preserve their privileges and reforming elites who seek to rally popular support for major changes to bring a more open and inclusive social order. Each side works to paint the other as a fatal threat to society, creating such deep polarization that little of value can be accomplished, and problems grow worse until a crisis comes along that explodes the fragile social order.
These were the conditions that prevailed in the lead-up to the great upheavals in political history, from the French Revolution in the eighteenth century, to the revolutions of 1848 and the U.S. Civil War in the nineteenth century, the Russian and Chinese revolutions of the twentieth century and the many “color revolutions” that opened the twenty-first century. So, it is eye-opening that the data show very similar conditions now building up in the United States…
They unpack their diagnosis, examine historical examples of successful– peaceful– resolution, and outline steps they recommend for a recovery from the hole we’ve dug for ourselves: “Welcome To The ‘Turbulent Twenties’,” from @noemamag.com.
For another “big cycle” take: “It All Has Happened Before for the Same Reasons” from Ray Dalio (@raydalioofficial.bsky.social).
On on the subject of what happens if efforts to stem a turn to autocracy that would (Goldstone and Turchin argue) lead ultimately to revolution and systemic failure, an optimistic (?) view from Luke Kemp, author of Goliath’s Curse: The History and Future of Societal Collapse argues that “Collapse has historically benefited the 99%.”
And for a suggestion that history does indeed rhyme, a headline from 1939: “Goebbels Ends Careers of Five ‘Aryan’ Actors Who Made Witticisms About the Nazi Regime” (gift article from The New York Times).
* Haruki Murakami, Kafka on the Shore
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As we batten down, we might recall that it was on this date in 1977, in the 5th season premiere of the series Happy Days, that a water-skiing “Fonzie” (Henry Winkler) jumped the shark— which has become a descriptive phrase for a creative work– or entity– that has evolved past its prime, that has reached a stage in which it has exhausted its core intent and is introducing new ideas that are discordant with or an extreme exaggeration (a caricature) of its original theme or purpose.
An example relevent to the piece linked above (in this case, of new, discordant ideas masquerading as “old” and authentic): “How Originalism Killed the Constitution,” from Jill Lepore.
“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.
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