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In 2021, the US added 2.5 million millionaires, the most of any country since 2000.
It’s a signal of the “quiet fleecing” of the American worker that’s been keeping wages down for decades.
A recession could worsen inequality across the globe.
As Americans are grappling with rising prices across the economy, the rich are getting richer.
In 2021, the US added 2.5 million “new millionaires,” according to Credit Suisse’s annual wealth report released Tuesday, accounting for nearly half of the global increase of 5.2 million.
Per the report, this growth marked the “largest increase in millionaire numbers recorded for any country in any year this century and reinforces the rapid rise in millionaire numbers seen in the United States since 2016.”
But meanwhile, American workers are receiving a smaller and smaller piece of the economic pie, resulting in a “quiet fleecing” that’s been keeping wages down for decades.
“For much of the last 40, 50 years it’s been close to zero wage growth or compensation growth for typical workers,” EPI economist Elise Gould previously told Insider. “Those trends in hourly wage growth have profound consequences for American living standards and how well people in this country are able to make ends meet. And I think that the growing economy has not universally translated into broadly shared prosperity.”
Coined by the Economic Policy Institute, “quiet fleecing” refers to the decades of stagnant wage growth in the US despite rising productivity and costs of living.
In theory, workers’ wages should rise in tandem with their productivity and keep up with inflation. And up until the 1970s, that was generally the case in the US. But then something changed. The wages of the 1% began outpacing economic growth and inflation, while the pay of the average worker fell behind.
“Quiet fleecing” means lower wages for Americans while the millionaires thrive
For workers, “quiet fleecing” has resulted in decades of wages that haven’t kept up with the rising costs of healthcare, housing, and food. At the same time, CEOs were paid over 350 times as much as the typical worker in 2020.
Over the past decades Gould attributes the rise of “quiet fleecing” to factors that include stagnant minimum wage laws, the decline of unions, and the CEO-employee pay gap.
But more recent developments haven’t helped matters either.
Per the Credit Suisse report, the top one percent’s share of global wealth rose for a second consecutive year in 2021 to 45.6%, up from 43.9% in 2019. The report attributes this to rising stocks and home values in 2021.
Though growth in emerging markets has contributed to a slight decline from the near 50% seen at the turn of the century, the one percent’s share of global wealth hasn’t fallen below 40%. And the report notes that some factors helping drive improvement — particularly growth in China — may not be able to be counted on moving forward.
To some degree, one might argue the growth in US millionaires for instance, points to a rising economic tide that is lifting all workers. But when this wealth is driven by growth in home and stock values — things many Americans do not own — these developments can exacerbate inequality.
A recession could make “quiet fleecing” worse
This inequality could be among the reasons some Americans are “quiet quitting,” “acting their wage,” or joining the Great Resignation. It could also be fueling the rise in labor organizing this year. There have been roughly 180 strikes in the first half of 2022, up from 102 in the same period last year.
As the Federal Reserve and central banks across the globe raise interest rates to combat inflation, there is the risk that they could go too far. The consequences could be inflicting an economic downturn of an unnecessary scale, hurting working workers, and ultimately making “quiet fleecing” and inequality worse.
“It is inexcusable, bordering on dangerous for the Fed to be raising rates so aggressively,” former Fed economist Claudia Sahm wrote on Twitter Thursday. “Is 4 percentage points on US core inflation really worth destabilizing Europe and pushing us into a global recession? No, it is not.”
But according to US Fed Chair Jerome Powell, even if raising rates brings some “pain” for the average worker, falling to corral inflation would mean “far greater pain later on.”