Rising income inequality is starting to hit home for many American households as they run short of places to reach for a few extra bucks.
As the gap between the rich and poor widened over the last three decades, families at the bottom found ways to deal with the squeeze on earnings. Housewives joined the workforce. Husbands took second jobs and labored longer hours. Homeowners tapped into the rising value of their properties to borrow money to spend.
Those strategies finally may have run their course as women’s participation in the labor force has peaked and the bursting of the house-price bubble has left many Americans underwater on their mortgages.
“We’ve exhausted our coping mechanisms,” said Alan Krueger, an economics professor at Princeton University in New Jersey and former chairman of President Barack Obama’s Council of Economic Advisers. “They weren’t sustainable.”
The result has been a downsizing of expectations. By almost two to one -- 64 percent to 33 percent -- Americans say the U.S. no longer offers everyone an equal chance to get ahead, according to the latest Bloomberg National Poll. The lack of faith is especially pronounced among those making less than $50,000 a year, with close to three-quarters in the Dec. 6-9 survey saying the economy is unfair.
“I’ve had good jobs and bad jobs. But it always seemed like something would come along and keep me from getting ahead,” said Diana Kraft, 54, a homemaker in Denton, Texas.
Adding to challenges for lower-income individuals is the loss of unemployment benefits, which were supporting 1.3 million long-term jobless people in the U.S. before their expiration Dec. 28. While Congress failed to pass a renewal before adjourning earlier this month, Democratic lawmakers will press in early 2014 for an extension of the benefits, the Senate’s second-ranking Democrat, Dick Durbin of Illinois, told reporters Dec. 17.
The diminished expectations have implications for the economy. Workers are clinging to their jobs as prospects fade for higher-paying employment. Households are socking away more money and charging less on credit cards. And young adults are living with their parents longer rather than venturing out on their own.
In the meantime, record-high stock prices are enriching wealthier Americans, exacerbating polarization and bringing income inequality to the political forefront. Even independent government agencies like the Securities and Exchange Commission and the Federal Reserve have been dragged into the debate.