As discussed here previously, the distribution of income has changed in the US since 1970, or about the time that income inequality started to grow. In that year about half of all income was earned from wages, the other half from income came from investments (routed through corporate profits). Since then it has fallen steadily by year to 42.6% overall by wages, a difference of about $11k per household per year.
That suggests that the basic social agreement about what “work” is has changed. In the postwar period, through the 1960s, a fair day’s labor was supposed to be rewarded by a fair day’s pay. How does that work now? It turns out that Gallup has been polling people about this since 2001, and the trend shows that there is little faith in this basic arrangement of our economic “golden era”. The social agreement has, in fact, broken down.
There is no magic “fair” distribution of income in any society. There will always be some inequality and there will always be some corporate income that is realized as profit for investors. The fact that it broke down to a 50/50 split through the immediate postwar period is rather astonishing. Perhaps it is, indeed, what most Americans would call “fair”.
We don’t have polling on how people feel going back that far, but we do have a poll on the topic since 2001. Gallup has been asking 1,018 people of all ages, genders, and races, “Are you satisfied with the opportunity for a person to get ahead by working hard?” The question isn’t whether you can get ahead by working hard, it’s whether the person polled is satisfied with the arrangement.
In 2001, 76% of all Americans were either “satisfied” or “very satisfied” that people get ahead by working hard, 22% “dissatisfied” or “very dissatisfied”. That eroded gradually by year before falling off a cliff after 2008 to where it stands today. Only 54% are happy with the arrangement, 46% not so much. The lines haven’t yet crossed, but they are on a path to doing so.
The breakdown by party is much more interesting. Democrats and Republicans felt about the same satisfaction, 60% and 61% respectively. Independents, however, were overall dissatisfied with only 45% happy with the current arrangement. If that trend holds, the more independent younger generation is going to bring the overall results down to a net negative. (the cross-tabs are not immediately available).
When asked about income inequality in the same poll, 67% reported being dissatisfied, with Democrats and Independents scoring about the same at 75% and 70%. Republicans were much less concerned at only 54% dissatisfied – but still a majority.
This tells us that Democrat are onto a good trend if they can exploit the feelings that Americans have that income inequality – scoring especially well with Independents if they stress that hard work does not create rewards anymore. But what is important here is not electoral politics, per se, but how it plays out in the longer term when creating policy.
The relationship between Americans and work has changed significantly in the last 50 years, and the attitudes of Americans towards work has changed along with it. There is no doubt that a new arrangement has to be found, especially with 2/3 of the population overall unhappy with the way income is distributed. The numbers alone don’t tell the story, but the fact that the changed relationship between workers and work has resonated into a changing attitude does.
What can we expect from this thing called “work” in years to come? If at all possible, I will try to find a similar poll with cross-tabs or dig them out of this one to see how it breaks down by age. There is a sign that among Independents, who tend to be younger, the traditional arrangement that hard work is rewarded has already broken down. That would mean that the next generation will demand a new relationship when they take power in the future.
No matter what, Americans’ relationship with work has changed. But our policies relating to work, from tax law to definitions of a work-week to how income is declared are all left over from an earlier time with very different attitudes. This can’t hold forever.
Hard work is for chumps. You have to know someone to make the big bucks.
There you go! 🙂
One question (and please comment). If labor/wages is often counted as the highest cost to the company with rent, transportation and materials lesser. What is the cost of profit in this new arrangement?
This is where households earn their money, so there are no costs associated with it. It used to be half from wages and half from investments, and now the money earned is less than half from wages. Make sense now?
A Worker Reads History (1936)
Bertolt Brecht (1898 – 1956)
Who built the seven gates of Thebes?
The books are filled with names of kings.
Was it kings who hauled the craggy blocks of stone?
And Babylon, so many times destroyed,
Who built the city up each time? In which of Lima’s houses, 5
That city glittering with gold, lived those who built it?
In the evening when the Chinese wall was finished
Where did the masons go? Imperial Rome
Is full of arcs of triumph. Who reared them up? Over whom
Did the Caesars triumph? Byzantium lives in song, 10
Were all her dwellings palaces? And even in Atlantis of the legend
The night the sea rushed in,
The drowning men still bellowed for their slaves.
Young Alexander conquered India.
He alone? 15
Caesar beat the Gauls.
Was there not even a cook in his army?
Philip of Spain wept as his fleet
Was sunk and destroyed. Were there no other tears?
Frederick the Great triumphed in the Seven Years War. Who 20
Triumphed with him?
Each page a victory,
At whose expense the victory ball?
Every ten years a great man,
Who paid the piper? 25
So many particulars.
So many questions.
Very good. Some of this is not about cold numbers, but instead about how people feel. We won’t change things for the better until we reach that.
There is no doubt people want to work hard in order to have this feeling of accomplishment, social status, and of course the money. What has happened in the last forty years shows that it was never the worker, but the banker, who governed the US. And it is going to continue until some greater event of financial instability (experts like James Rickard already talk about the crisis of liquidity that will hit US stronger than ever before) happens. In the time between, you can collect your food stamps, or go to eat to some charity like bread food bank. But remember when you will go to vote next time – market capitalism IS what all relevant political actors agree on.
Yes, we have to use this time of great change to actively build a system that works for everyone. That system is horribly broken, and the social agreements it was built on seem like a fairy tale now. So let’s do something about it.
Hard work hasn’t been rewarding for years. I can’t believe that a majority has any faith in the system.
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