- The US will have 2.5 million millionaires in 2021, the most of any country since 2000.
- It’s a signal of the “quiet ripping off” of the American worker, which has held back wages for decades.
- A recession could worsen inequality around the world.
- For more stories, see www.BusinessInsider.co.za.
As Americans struggle with rising prices across the economy, the rich are getting richer.
According to Credit Suisse’s annual report released Tuesday, 2.5 million “new millionaires” appeared in the U.S. in 2021, nearly half of the global increase of 5.2 million.
According to the report, the increase was “the largest increase in the number of millionaires recorded by any country in any year this century, and reinforces the rapid growth in the number of millionaires seen in the United States since 2016.”
But in the meantime, American workers are getting a smaller and smaller piece of the economic pie, leading to a “quiet blowout” that has held down wages for decades.
“For most of the last 40, 50 years, wage or compensation growth for the average worker has been close to zero,” EPI economist Elise Gould previously told Insider. “These upward trends in hourly wages have profound implications for the standard of living in America and how well people in this country are able to make ends meet. And I think that economic growth has not everywhere translated into general prosperity.”
Coined by the Economic Policy Institute, the “silent purge” refers to decades of stagnant U.S. wage growth despite rising productivity and the cost of living.
In theory, workers’ wages should grow along with their productivity and keep pace with inflation. And by the 1970s, it was common in the US. But then something changed. The wages of the 1% began to outpace economic growth and inflation, while the wages of the average worker lagged behind.
The “quiet purge” means lower wages for Americans while millionaires prosper
For workers, the “quiet shell” has led to decades of wages that have not kept pace with rising costs of health care, housing and food. Meanwhile, in 2020, CEOs earned more than 350 times more than the average worker.
In recent decades, Gould attributes the growth of the “quiet rip-off” to factors that include the stagnation of minimum wage laws, the decline of unions and the pay gap between CEOs and employees.
But recent events haven’t helped either.
According to a Credit Suisse report, the share of the top one percent of global wealth rose for the second year in a row to 45.6% in 2021 from 43.9% in 2019. The report attributes this to rising stocks and home values ​​in 2021.
Although growth in emerging markets has contributed to a slight decline from the nearly 50% seen at the turn of the century, the share of the top one percent of global wealth has not fallen below 40%. And the report notes that some of the factors contributing to the improvement — particularly growth in China — may not be able to count on moving forward.
To some extent, it can be argued that the rise of millionaires in the US, for example, indicates a rising economic tide that lifts all workers. But if that wealth is driven by rising housing and stock prices—things that many Americans don’t own—these developments could exacerbate inequality.
A recession can worsen the “quiet peel”.
This inequality may be one reason why some Americans are “quietly quitting,” “acting on their paychecks,” or joining the Great Retirement. It can also contribute to the growth of labor organization this year. There were about 180 strikes in the first half of 2022, compared to 102 in the same period last year.
As the Federal Reserve and central banks around the world raise interest rates to fight inflation, there is a risk that they could go too far. The consequences could be an unnecessary economic downturn, harming workers and ultimately worsening “silent exploitation” and inequality.
“It is inexcusable, bordering on dangerous, for the Fed to raise rates so aggressively,” former Fed economist Claudia Sam. wrote on Twitter on Thursday. “Is 4 percentage points of core inflation in the US really worth destabilizing Europe and pushing us into a global recession? No, it’s not like that.”
But according to US Fed Chairman Jerome Powell, even if rate hikes will bring “pain” to the average worker, a drop to runaway inflation will mean “much more pain down the road.”
