A recent study by America’s Economic Policy Institute shows that US income inequality is now approaching levels not seen since the eve of the Wall Street crash. In 2015, the top one percent of US households received 22 percent of all income (the 1928 figure was 23.9); in 30 metropolitan areas these households took in more wealth than they did in 1928. In practical terms this means that a family in the top income bracket earns more than 25 times as much as those in the remaining 99 percent, and this disparity has accelerated since the 2008 recession. Between 2009 and 2015 incomes for the top 1 percent have grown faster than those in any other demographic in 43 states.
Income polarization reflects a larger shift within the post-industrial US, from a manufacturing and export economy towards what economists often call a FIRE economy – one grounded in the finance, insurance, and real estate. That shift does not bode well for the future of US labour. Although populists like president Trump have promised to bring back well-paid jobs, for at least a generation the post-industrial economy has meant either stagnant or falling wages for most American workers. Trump’s deregulations and tax-cutting will exacerbate these trends, making wealthy Americans even richer while leaving low income families to fend for themselves in a volatile economy.
Statistics do not capture the anxiety that economic insecurity produces in low-income families. Jonathan Morduch, a professor of public policy and economics at New York University and Rachel Schneider, vice president at the Center for Financial Services Innovation, tracked the lives of 235 low- and middle-income families for a year. Their book, The Financial Diaries: How American Families Cope in a World of Uncertainty vividly chronicles how economic stress pushes these families into short term decisions – such as forgoing savings – that often make them more susceptible to long-term poverty. Morduch and Schneider also show that economic anxiety bleeds into every other part of a family’s life, often undermining its physical and mental health and further decreasing its likelihood of escaping from a vicious cycle of low-income jobs and under-resourced neighbourhoods.
The erosion of unions has also contributed to income inequality. Researchers at Princeton have found that today nonunion workers typically earn 20 percent less than their unionized counterparts. Furthermore, the lack of unions in most of the ‘gig’ economy’s most storied successes, have done nothing to alleviate working class America’s chronic financial insecurity. A recent study of Uber and Lyft drivers in the US found that most ride-share workers earn less than minimum wage and some even lose money if car maintenance and insurance costs are taken into account.
The scale of this crisis is rarely addressed in the US media. As Morduch and Schneider note, the latest US Census data “show that 90 million people, nearly one-third of all Americans, experienced poverty for two months or more between 2009 and 2011. In contrast, just 10 million people, less than 4 percent of the population, were poor for the entire three years.” Instead, economic updates tend to focus on surging stock markets and international disputes over tariffs. Meanwhile, millions of Americans continue to work in conditions of chronic uncertainty and insecurity.
These hard facts are worth remembering as we debate the economic future of this country. The US is often held up as an example of what development can do for our economy. Many of us assume that development modelled on the US will transform our economies and decrease our own striking income disparities. But current data from the US shows that this simply is not so, that neoliberal economics can produce huge returns for citizens wealthy enough to invest in a FIRE economy, but they offer little prosperity or financial security for most working families.