INCOME INEQUALITY
TREND SNAPSHOT
Workers at the mid-to-lower end of the economic spectrum are both more likely to hold jobs at high risk of being replaced by technology and are less likely to have the resources needed for training and upskilling. Without change, some of today’s workers will lack the necessary skills to remain employed in the future, which will in turn increase pressure on government services and programs.
Wages for low- to moderate-income workers in the U.S. have been stagnating and failing to keep up with rising costs of living for decades. The gains from increased worker productivity have accrued at the top, leaving most workers with narrower and decreasing margins to save and get by. At the same time, health, housing and education expenses have increased substantially, and debt loads have risen. These circumstances can combine to have long-term effects on the health and mental well-being of workers and their families and can also affect longevity. Inequality can also have long-term effects on society at large due to decreased consumer spending, higher reliance on public benefits and potential social upheaval.
Financial vulnerability exists especially among people of color, who are often concentrated in lower-wage occupations with limited benefits. If incomes don’t rise substantially in these occupations, workers will be unable to retire when they want or need to. An additional challenge for these workers is that many older workers are being phased out of their jobs due to age discrimination and other factors, leaving them in financial hardship.
“I work for a company that provides healthcare solutions, but I can't afford to put my family onto their health plan.”
— Shawn H., Portland, OR, participant in AARP focus group
HOW WILL THIS AFFECT WORK?
With the gap in income inequality growing, there will be challenges for employers and workers alike.
Opportunities for workers
None (there are no opportunities for workers in growing income inequality, making this megatrend critical to address and minimize).
Challenges to workers
- Access to education, upskilling and reskilling that could minimize income inequality is not always available or affordable for everyone (see Megatrend: Lifelong Learning).
- Government-funded job training programs and some public benefit programs are underfunded and inadequate in helping to bridge income gaps.
- Workers with low earnings are more likely to be exploited by employers.
- Financial insecurity and its related stress can impact health and productivity.
- Workers with low earnings also tend to have more volatile earnings and a smaller financial cushion, making it harder to absorb even minimal financial shocks and setbacks.
- Workers with low earnings may need to work into later years to increase their financial security, but may not be able to because of health limitations and the difficulty of continuing work in physically demanding jobs.
Opportunities for employers
None (there are no opportunities for employers in growing income inequality, making this megatrend critical to address and minimize).
Challenges for employers
- Income insecurity reduces productivity as workers experience stress about making ends meet rather than focusing on the work at hand.
- Income inequality can reduce purchasing power and thus consumer demand for some goods and services.
WHAT CAN BE DONE?
- Policymakers can increase access to affordable job training and education opportunities (see Megatrend: Need for Lifelong Learning).
- Include assessment of current skills, transferable skills and skills gap identification.
- Provide special focus to proactively assist workers who are most vulnerable to automation and those who are midlife or midcareer (see Megatrend: Advances in Technology).
- Create clear career path opportunities to higher-wage jobs.
- Create multisector collaborations and private/public partnerships that support education and training necessary to pursue career path opportunities.
- Governments, employers and the financial services industry can create public-private partnerships to develop supplemental savings and investment tools and can include financial education for workers to help them understand how to use these tools to support current and future needs.
- Governments can enforce labor standards and protections.
- Policymakers and companies can improve job quality through paid leave, retirement savings programs, health insurance and other benefits.
- Policymakers and employers can focus on the needs of people historically facing low wages and income inequality when designing new policies and solutions.