The Nature of Economic Inequality in America

Overcoming Class Blindness

This is another in a periodic series of posts about political economy. Specifically, I’m interested in how we conceptualize economic inequality, how it’s covered by the media, and how it impacts our elections.

As is usually the case, I’m trying to make sense of a range of things I’ve been reading in combination with the rhetoric around the One Big Beautiful Bill. I recently upgraded to a paid subscription for economist Paul Krugman’s SubStack. Over the weekend I finished reading Joan Williams’ Outclassed: How The Left Lost The Working Class and How to Win Them Back (recommended by Scot McKnight) and Malcolm Foley’s The Anti-Greed Gospel. Reading these gave me flashbacks to teaching social stratification classes. Which I hated: there’s only so many ways you can say “the system sucks” over the course of a semester. Still, there is great value in the early sociological theorists making sense of social class.

Three things stand out to me from the historic sociological treatment of stratification. Karl Marx is right that material economic factors get reproduced in other structures within society (regardless of his revolutionary aspirations). Max Weber helps us understand the various ways social inequality is expressed — class (economics), status, and power — and that the interplay between the three factors creates serious tensions. Thorsten Veblen let us see the role of Conspicuous Consumption in both material and cultural forms through which inequality is manifested.

The Pew Research Center has a methodology for determining “middle class”: It is between 67% and 200% of median household income. The most recent (2023) data from the Federal Reserve Bank of St. Louis has median household income as $80,610. which puts the middle class range between $54,000 and $160,000. I find the bottom of that range to be questionable depending on where one lives.

As Weber observed, income is only one aspect of stratification. Status (often measured by educational level) and access to power are equally important factors. Even when economic measures are relatively strong, people lacking access to status and power become frustrated. And, as Veblen observed, because these latter factors are often controlled by those at the top of the stratification ladder, a feeling of alienation or “never measuring up” if felt by those further down.

Two more factors to consider. Income varies widely by race and ethnicity in spite of what the Trump administration likes to claim. More significantly, wealth inequality is exponentially greater than income inequality.

Behind the paywall of Krugman’s SubStack, he’s been doing a series on inequality. In the first of these, the beginning of this month, he mapped the nature of inequality using what’s called a Gini coefficient. A Gini score of zero means that everyone is the same and a score of 100 means that there is a sharp divide between haves and have-nots.

In the US post-WW2, the coefficient bottomed out at .35 in the late 1960s. Then it began a nearly uninterrupted climb until the economic disruptions of Covid. It peaked at just over .46 in 2020. That rise in income inequality is largely driven by the dramatic increases among the top of the economic distribution. In yesterday’s post, he focused on the oligarchs and wealth gains.

It’s hard to compare these two charts because they cover different time frames. But I would note that the slope of the lines post-1980 look very similar. Krugman observes that in the late 1980s, the top 10 economic powerhouses, as measured by the Forbes list, were in tech, media, or retail. In the 2010s, the list comes from internet folks and hedge fund managers. Moreover, this latter group has made us dependent upon their services (Amazon, Facebook, Google, X) so we have little choice but to continue to support them.

It’s here that Joan Williams’ book comes into play. She argues that as a society we suffer from class-blindness. Political contests are run on cultural factors and identity politics. When we do talk about economics, it’s in a “raising all boats” manner.

Both President Trump and Kamala Harris campaigned on building the middle class. As he put it, “from the middle out”. But where does that leave those in working class occupations? They haven’t earned college degrees at the same extent, are more place bound, and have high measures of pride in their work. Arguments in favor of free college, student loan forgiveness, and money for new homeowners don’t say anything about their needs. And far too often, educational elites are perceived to be (or actually are) talking down to them. Williams writes:

The Far Right’s formula has been to listen [to those workers] and then provide an explanation for the flood of pain and frustration it hears. I firmly believe that it’s the wrong explanation, but here’s the point: you can’t fight a vivid and compelling explanation without an alternative explanation. (259)

She argues in one chapter that issues of race are best dealt with as a combination of race and class issues.¹ The point here is to create solidarity on a class basis that cuts across racial lines. As Malcolm Foley observed early in his book, economic exploitation is prior to prejudicial attitudes. Williams quotes the work of Ian Haney Lopez (warning, a critical race scholar!).

Haney Lopez’ research found that formulations like “wealthy special interests who rig the rules: and “the greedy few” polled better than phrases like “the wealthy few.” We now know why: many in the Missing Middle admire the rich and seek to be like them. (203)

This is what’s always bothered me about Bernie Sanders’ mantra railing against “millionaires and billionaires”. It’s not their wealth that’s the problem: it’s their ability to structure inequality in ways that play to their advantage at the expense of those left behind.

This same critique was made by Perry Bacon in the Washington Post. He suggests Democrats should quit aiming for the mythical middle. Instead, he says, then need to 1) be interesting, 2) run against the political establishment and the wealthy, and 3) find compelling candidates. The future lies in telling the story of how you can improve the status of the “Missing Middle” and to do so with authenticity. And my two cents worth: stop imagining JB Pritzker or Mark Cuban as you ideal candidates!

Weber rightly noted that political power was the most significant issue in stratification. Because as long as political power is so aligned with economic inequality, it will never be in politician’s self-interest to address the broad-based needs within modern society.

Here’s an easy way to illustrate the nature of the power imbalance. The One Big Beautiful Bill is constructed to maintain tax cuts, most of the benefits of which go to the wealthiest Americans. At the same time, it is attacking Medicaid and SNAP benefits by imposing additional work requirements and reporting expectations². They would never dream of putting reporting requirements on their wealthy supporters (although stopping fraud at the top is of much more economic value than cutting the safety net). We can’t even extend social security payroll taxes to high income Americans.

So, somebody needs to directly tackle the political realities of income inequality. This is difficult in a post-Citizens United world, but not impossible. Creating new methods of campaign financing and engagement with the Missing Middle might just open a pathway for Democrats to reverse their fortunes with those who feel left out.³

1. Although she take a cheap shot at my political scientist cousin Diana Mutz in the process.

2. I believe their numbers grossly overestimate the percentage of able-bodied Medicaid recipients. The onerous reporting requirements are the real way that the bill would save money. If Democratic states were smart, they’d be developing mechanisms to streamline those reports to minimize those kicked off the system for paperwork errors.

3. Kat Abughazaleh’s upstart congressional campaign in Illinois is worth paying attention to for precisely this reason.