Even in a country that tolerates inequality, political consequences follow when the rising tide raises too few boats.The impact of stagnant wages has been dulled by rising house prices, but still most Americans are unhappy about the economy.Its workers now produce over 30% more each hour they work than ten years ago. Though incomes were rising fastest at the top, all workers' wages far outpaced inflation. The pace of productivity growth has been rising again, but now it seems to be lifting fewer boats.
But, whatever the measure, it seems clear that only the most skilled workers have seen their pay packets swell much in the current economic expansion.
The fruits of productivity gains have been skewed towards the highest earners, and towards companies, whose profits have reached record levels as a share of .
Other rich countries are watching America's experience closely.
For many Europeans, America's brand of capitalism is already far too unequal.
Privately, some policymakers admit that the recent trends have them worried, and not just because of the congressional elections in November.
The statistics suggest that the economic boom may fade.In 1916 the richest 1% got only a fifth of their income from paid work, whereas the figure in 2004 was over 60%.The rise of the working rich reinforces America's self-image as the land of opportunity. Several new studies* show parental income to be a better predictor of whether someone will be rich or poor in America than in Canada or much of Europe.Over 70% of Americans support the abolition of the estate tax (inheritance tax), even though only one household in 100 pays it.Americans tend to blame their woes not on rich compatriots but on poor foreigners.Even so, ordinary Americans seem to believe that theirs is still a land of opportunity.The proportion who think you can start poor and end up rich has risen 20 percentage points since 1980.Eight out of ten, more than anywhere else, believe that though you may start poor, if you work hard, you can make pots of money. The political consensus, therefore, has sought to pursue economic growth rather than the redistribution of income, in keeping with John Kennedy's adage that “a rising tide lifts all boats.” The tide has been rising fast recently.Thanks to a jump in productivity growth after 1995, America's economy has outpaced other rich countries' for a decade.Eventually, the country's social fabric could stretch.“If things carry on like this for long enough,” muses one insider, “we are going to end up like Brazil”—a country notorious for the concentration of its income and wealth. Despite a quarter century during which incomes have drifted ever farther apart, the distribution of wealth has remained remarkably stable.