Latest news with #incomeInequality
Globe and Mail
19 hours ago
- Business
- Globe and Mail
Income inequality is a vital issue. Why is nobody talking about it?
It is sad the issues currently dominating the headlines are the reshaping of global trade, the White House's battles with elite universities and immigration. There's not a peep from the U.S. government, academia or Wall Street about something that is vital to our social stability now and in the future. That crucial issue is massive income and wealth inequality, which has gone unaddressed by policymakers for years, regardless of whether Democrats or Republicans are in power. It is not foreign producers and exporters who stole jobs away from America and hollowed out the middle class. It is the entire tax system, especially how it directs government subsidies and support. The government never made adequate efforts to retool and retrain workers most affected by globalization. That amounts to years of neglect at the highest levels of the public sector. We need to constantly remind ourselves that capitalism needs democracy, and democracy needs social stability. Nothing I see policy-wise right now tells me we are heading in a very good direction. This is the problem with the tariff war and the 'big beautiful' budget bill. None of these really help the 'little guy.' From 1950 to 1980, productivity growth averaged just over 2 per cent annually, and real worker compensation per hour matched that pace. Something happened in 1980. I have often said that Ronald Reagan was the greatest president of our time, but I'm not so sure any more. While the Gipper had exceptional leadership and communication skills, it was his policies that got the ball on income inequality rolling here, especially on tax reform. Top marginal corporate tax rates were 46 per cent then and are 21 per cent today. Everyone embraced the reforms at the time, notably on Wall Street. But productivity has increased at a 2-per-cent average annual rate since 1980, while real work-based incomes have averaged half that pace at just over 1 per cent per annum. Compound that divergence over a 45-year period and it amounts to a whole lot of money. You see how dangerous this is, right? In a balanced economy, workers should be reaping the fruits of their labour. Their real compensation growth should match the labour component of productivity growth that they bring to their employers. So, who benefited from the continued expansion in labour productivity if it wasn't the workers? It was the owners of these businesses. From 1950 to 1980, unit profits in the non-financial corporate sector rose at an annual average rate of 2 per cent or more. Businesses and workers shared equally in the productivity gains. But since 1980, unit profit growth has doubled to more than a 4-per-cent average annual rate. Washington found a very clever way to keep lower-income individuals feeling they could afford the American Dream. The government deregulated the financial sector and allowed them to plug the proletariat with debt. The outstanding level of debt in the household sector has surged by more than 10 times since 1980 to $20-trillion. (All figures in this piece are in U.S. dollars.) The number of households has only expanded by 70 per cent over this period. In 1970, personal debt (loans and mortgages) was $7,000 per household. In 1980, it went up to $17,000. A decade later, after a proliferation of financial innovation and ever-increasing access to credit, that number rose to $38,000 by 1990. Then to $70,000 in 2000, $120,000 in 2010 (after a debt-laden mortgage boom), $130,000 in 2020, and now $150,000. In 1970, credit cards were a $5-billion business. Only high-income earners with a credit score could access a card, and they had one American Express card. It was a status symbol. Even in 1980, it was just a $60-billion business. Today? Try $1.3-trillion! This, along with government-insured mortgages, encouraged people – and particularly those in the low and middle classes – to replace the incomes they should have received from their productivity with easy access to credit. How can this possibly end well? Now that the Fed has raised rates more than four percentage points from the cycle lows and is leaving monetary policy deliberately tight, we are seeing the strains beginning to surface. Delinquency rates have surged on credit cards and auto loans; now that has spread to student debt, and even mortgage late-payment rates are edging higher. Consumer confidence for the lowest-income cohort has plummeted to all-time lows. Because young adults are saddled with so much debt, with few job or income prospects, their confidence levels have also plumbed the depths as they confront an additional problem, which is that the dream of owning a home is now just that – a dream. A median starter home price today averages out to $342,000 – with median incomes for this group at $68,000 and qualifying income for a mortgage loan at $100,000, how on earth can they ever move out of their parents' basements? There are 45 million Americans between 25 and 34 still living at home! It's time to stop this obsession with blaming foreign trading partners for our problems at home and start focusing on the real problems that are homegrown. The tax system has not only failed to cover the insane level of government spending, which has somehow been allowed to surge more than 50 per cent above the level immediately preceding the pandemic in 2019, but has failed to prevent income inequalities from rising further to unprecedented levels. Means-testing Social Security or widening the bands of the income tax rate schedules have somehow become taboo; not to mention tightening the bands between net effective corporate rates and personal tax rates. And that, my friends, will carry with it the laws of unintended consequences. Not now, perhaps, but in the future. David Rosenberg is founder of Rosenberg Research.
Sky News
27-05-2025
- Business
- Sky News
The 'ludicrous' divorce settlements leaving many women 'devastated'
Abandoning her career to look after their two daughters was what Isobel's* ex-husband wanted. Six years after their divorce, she earns a quarter of his salary while caring for the children six out of seven days. Despite having two university degrees, she is "trapped" on universal credit and frustrated with a "ludicrous" divorce system that didn't account for years of unpaid work to support her ex and raise their family. "I feel hugely let down and I feel cheated by a system that feels so orchestrated towards women being on the back foot," said Isobel, 44, from Berkshire. Data suggests she is not alone. Divorce slashes women's household incomes far more than men's, new research by Legal and General has revealed. Wives can expect their income to be halved on average in the year after ending the relationship, compared with a 30% drop for husbands. A closer look at Isobel's divorce settlement - and why half didn't seem anywhere near fair Isobel was earning £19,500 working for a pharmaceutical company in 2007 when she married her ex-husband. She took voluntary redundancy while on maternity leave in 2008 and over the next nine years only briefly worked part-time. "It [the jobs] didn't last very long because he didn't manage very well with me being at work," she said. When they divorced in 2019, she had been back in work for two years. But her care assistant salary was just £17,000 - much less than her likely salary if she hadn't given up her career to be a mum. As for her husband - he was now taking home approximately £52,000. In a roughly even settlement, she was awarded the car, one buy-to-let flat with £50,000 equity, and £55,000 of £200,000 equity from the family home, plus child maintenance. He was awarded the remainder of the equity and a separate buy-to-let flat. She spent £20,000 on solicitors' fees and, given her low wages, much of the rest of her capital was used to pay off debt accumulated after separating and renting from 2018 onwards, she said. "Why on earth would it [the settlement] be a 50-50 split when my earning capability is a quarter of what he earns?" said Isobel, who is now a nurse on £25,000 a year while her ex-husband earns six figures. "I've had six years out of work, I'm the primary carer for the children, I'm never going to be able to get a job that gives me £100,000, am I? That's ludicrous. And why is that not taken into account?" Some more data Double the number of divorced women (14%) have cut their hours to manage caring responsibilities compared with men (7%), Legal and General (L&G) found. "Women still pick up the majority share of caring responsibilities, both for children as part of the family unit, but also elderly relatives," said Lorna Shah, managing director of retail retirement at the pension provider. Shah sees a lot of cases where married women prioritise the family unit over their own financial well-being and long-term earning potential. Emma Hitchings, professor of family law at the University of Bristol, agrees: "Wives, and particularly mothers, are in a precarious financial position at the point of divorce." Her wide-ranging 2023 study, Fair Shares on Divorce, found married women were more likely to be employed part-time, with 28% taking home under £1,000 a month compared with 10% of men. One key asset that's often overlooked - pensions Pensions are one of the three main assets divvied up in any divorce settlement, alongside capital and housing. Yet Hitchings said her study found there is a "lack of awareness, understanding and interest in pensions" on divorce. "Women are far more likely to surrender any rights over pensions," said Shah, adding they often prioritised the family home. Legal and General found 28% of women waived their rights to access their partner's pot, compared with 17% of men. This is despite women having smaller pensions for the same reasons their wages are lower post-divorce: the gender pay gap (which stands at 7%), longer parental leave and more career breaks for childcare. "There's a reticence for some women to call on their partners' pensions," said Shah. "I think it feels like it's not theirs, but obviously if they've had joint finances as part of a marriage, then actually they've contributed to that in other ways and therefore it should all be considered." Grace's divorce and her husband's 'hidden' pay rises Among the women waiving that right is Grace*, 48, from the Midlands, who feels "forced to take the bare minimum" in her ongoing divorce proceedings. Her husband has offered her £70,000 if she doesn't make a claim to his pension or future earnings, she said, and she feels she has to agree so she can leave their home as quickly as possible with a deposit for another house. "I'm devastated if I'm being honest with you because all I ever worked for was just to have a solid home and a family." In 2005, she gave up her £26,000 job at an energy company and the £160,000 home she owned in Greater London to move in with her husband-to-be and his children. Grace said she invested £30,000 in renovating their home in the Midlands and, while still working full-time, took on the role of "homemaker". "I would be the one looking after the house, the general running, the washing, the cleaning and all the typical wifey things." Her husband took control of all the finances - to the point she was "shocked" to find out he had not disclosed pay rises from £50,000 to £80,000. Grace earns £26,000. "I feel incredibly ripped off - manipulated. I feel hopeless," she said, adding the house she once owned in Greater London is now worth approximately £400,000. "The worst thing is that I feel it's really hard to wrap my head around everything after having let go for so many years to let him control everything - and then trying to make the right decisions when you're emotionally distraught all the time." Knowledge is power Lack of understanding is common in divorce proceedings, Professor Hitchings' study found. Again, the division of pensions provides a perfect illustration. That's because pension sharing requires a court order, and there is less understanding of the process since legal aid for private family proceedings in England and Wales was cut in 2015, she said. In 2023, only 11% of divorcees with a pension yet to be drawn had made an arrangement for pension sharing. Some 37% did not know the value of their own (let alone their ex-spouse's) pension. Around 10% of homeowners with a mortgage did not know what the equity in their home was at the point of divorce. Karen Stainton, 55, found her background in finance invaluable during a protracted and painful divorce 10 years ago. She offered to pay her ex-husband a £135,000 lump sum out of the proceeds of the house, in return for him waiving access to her pension. "And why should he, after he'd not given me any child benefit or helped me look after the kids after the split," she said. She took on three jobs and worked seven days a week to earn the £45,000 she needed to look after their children, Joe, John and Peter, aged 18, 15 and eight, at the time of the divorce. "I was completely running on adrenaline. It wasn't good," she said. But a decade later, her pension is valued at £450,000 - far more than the lump sum. Law 'definitely needs reform' Professor Hitchings added that there are areas of the law that "definitely need reform". It gives couples too much discretion at the expense of having a full account of all of their assets and their future prospects, particularly pensions. In December, the Law Commission published a scoping report on whether the existing law - the more than 50-year-old Matrimonial Causes Act of 1973 - needs reform. The government was given six months to respond to the report and decide whether the commission should investigate further and suggest options for reform. "We are grateful to the Law Commission for reviewing the current laws governing finances in divorce, including in relation to pensions," said a Ministry of Justice spokesperson. "The government is carefully considering the findings of the report and will provide a response in due course." What divorcees can do Whether a divorcee should prioritise pension sharing, capital, or the family home depends on their circumstances, said Shah. "Gather as much information as you can up front; try to get some financial advice if you can afford it or guidance otherwise," she added, pointing to a financial health checking service Legal and General provide online. "Divorce is a really emotional time for everybody involved. But being able to take that step back and actually look at it from a logical perspective on really what is the best for both parties, both at the time and in the longer term, is really important."
Yahoo
27-05-2025
- Business
- Yahoo
The 'ludicrous' divorce settlements leaving many women 'devastated'
Abandoning her career to look after their two daughters was what Isobel's* ex-husband wanted. Six years after their divorce, she earns a quarter of his salary while caring for the children six out of seven days. Despite having two university degrees, she is "trapped" on universal credit and frustrated with a "ludicrous" divorce system that didn't account for years of unpaid work to support her ex and raise their family. "I feel hugely let down and I feel cheated by a system that feels so orchestrated towards women being on the back foot," said Isobel, 44, from Berkshire. Data suggests she is not numbers Divorce slashes women's household incomes far more than men's, new research by Legal and General has revealed. Wives can expect their income to be halved on average in the year after ending the relationship, compared with a 30% drop for husbands. A closer look at Isobel's divorce settlement - and why half didn't seem anywhere near fair Isobel was earning £19,500 working for a pharmaceutical company in 2007 when she married her ex-husband. She took voluntary redundancy while on maternity leave in 2008 and over the next nine years only briefly worked part-time. "It [the jobs] didn't last very long because he didn't manage very well with me being at work," she said. When they divorced in 2019, she had been back in work for two years. But her care assistant salary was just £17,000 - much less than her likely salary if she hadn't given up her career to be a mum. As for her husband - he was now taking home approximately £52,000. Read more from Money: In a roughly even settlement, she was awarded the car, one buy-to-let flat with £50,000 equity, and £55,000 of £200,000 equity from the family home, plus child maintenance. He was awarded the remainder of the equity and a separate buy-to-let flat. She spent £20,000 on solicitors' fees and, given her low wages, much of the rest of her capital was used to pay off debt accumulated after separating and renting from 2018 onwards, she said. "Why on earth would it [the settlement] be a 50-50 split when my earning capability is a quarter of what he earns?" said Isobel, who is now a nurse on £25,000 a year while her ex-husband earns six figures. "I've had six years out of work, I'm the primary carer for the children, I'm never going to be able to get a job that gives me £100,000, am I? That's ludicrous. And why is that not taken into account?" Some more data Double the number of divorced women (14%) have cut their hours to manage caring responsibilities compared with men (7%), Legal and General (L&G) found. "Women still pick up the majority share of caring responsibilities, both for children as part of the family unit, but also elderly relatives," said Lorna Shah, managing director of retail retirement at the pension provider. Shah sees a lot of cases where married women prioritise the family unit over their own financial well-being and long-term earning potential. Emma Hitchings, professor of family law at the University of Bristol, agrees: "Wives, and particularly mothers, are in a precarious financial position at the point of divorce." Her wide-ranging 2023 study, Fair Shares on Divorce, found married women were more likely to be employed part-time, with 28% taking home under £1,000 a month compared with 10% of men. One key asset that's often overlooked - pensions Pensions are one of the three main assets divvied up in any divorce settlement, alongside capital and housing. Yet Hitchings said her study found there is a "lack of awareness, understanding and interest in pensions" on divorce. "Women are far more likely to surrender any rights over pensions," said Shah, adding they often prioritised the family home. Legal and General found 28% of women waived their rights to access their partner's pot, compared with 17% of men. This is despite women having smaller pensions for the same reasons their wages are lower post-divorce: the gender pay gap (which stands at 7%), longer parental leave and more career breaks for childcare. "There's a reticence for some women to call on their partners' pensions," said Shah. "I think it feels like it's not theirs, but obviously if they've had joint finances as part of a marriage, then actually they've contributed to that in other ways and therefore it should all be considered." Grace's divorce and her husband's 'hidden' pay rises Among the women waiving that right is Grace*, 48, from the Midlands, who feels "forced to take the bare minimum" in her ongoing divorce proceedings. Her husband has offered her £70,000 if she doesn't make a claim to his pension or future earnings, she said, and she feels she has to agree so she can leave their home as quickly as possible with a deposit for another house. "I'm devastated if I'm being honest with you because all I ever worked for was just to have a solid home and a family." In 2005, she gave up her £26,000 job at an energy company and the £160,000 home she owned in Greater London to move in with her husband-to-be and his children. Grace said she invested £30,000 in renovating their home in the Midlands and, while still working full-time, took on the role of "homemaker". "I would be the one looking after the house, the general running, the washing, the cleaning and all the typical wifey things." Her husband took control of all the finances - to the point she was "shocked" to find out he had not disclosed pay rises from £50,000 to £80,000. Grace earns £26,000. "I feel incredibly ripped off - manipulated. I feel hopeless," she said, adding the house she once owned in Greater London is now worth approximately £400,000. "The worst thing is that I feel it's really hard to wrap my head around everything after having let go for so many years to let him control everything - and then trying to make the right decisions when you're emotionally distraught all the time." Knowledge is power Lack of understanding is common in divorce proceedings, Professor Hitchings' study found. Again, the division of pensions provides a perfect illustration. That's because pension sharing requires a court order, and there is less understanding of the process since legal aid for private family proceedings in England and Wales was cut in 2015, she said. In 2023, only 11% of divorcees with a pension yet to be drawn had made an arrangement for pension sharing. Some 37% did not know the value of their own (let alone their ex-spouse's) pension. Around 10% of homeowners with a mortgage did not know what the equity in their home was at the point of divorce. Karen Stainton, 55, found her background in finance invaluable during a protracted and painful divorce 10 years ago. She offered to pay her ex-husband a £135,000 lump sum out of the proceeds of the house, in return for him waiving access to her pension. "And why should he, after he'd not given me any child benefit or helped me look after the kids after the split," she said. She took on three jobs and worked seven days a week to earn the £45,000 she needed to look after their children, Joe, John and Peter, aged 18, 15 and eight, at the time of the divorce. "I was completely running on adrenaline. It wasn't good," she said. But a decade later, her pension is valued at £450,000 - far more than the lump sum. Law 'definitely needs reform' Professor Hitchings added that there are areas of the law that "definitely need reform". It gives couples too much discretion at the expense of having a full account of all of their assets and their future prospects, particularly pensions. In December, the Law Commission published a scoping report on whether the existing law - the more than 50-year-old Matrimonial Causes Act of 1973 - needs reform. The government was given six months to respond to the report and decide whether the commission should investigate further and suggest options for reform. "We are grateful to the Law Commission for reviewing the current laws governing finances in divorce, including in relation to pensions," said a Ministry of Justice spokesperson. "The government is carefully considering the findings of the report and will provide a response in due course." What divorcees can do Whether a divorcee should prioritise pension sharing, capital, or the family home depends on their circumstances, said Shah. "Gather as much information as you can up front; try to get some financial advice if you can afford it or guidance otherwise," she added, pointing to a financial health checking service Legal and General provide online. "Divorce is a really emotional time for everybody involved. But being able to take that step back and actually look at it from a logical perspective on really what is the best for both parties, both at the time and in the longer term, is really important." *Names have been changed to hide the identity of some interviewees.
Fox News
13-05-2025
- Business
- Fox News
Billionaires boomed in Biden era as Fed became 'engine of income inequality' powered by COVID policies: expert
The nation's wealthiest residents saw their billions grow even larger in the years following the COVID-19 pandemic due to policies from the Federal Reserve that have deepened the chasm of income inequality, economic experts report. "If you look at the amount of federal regulation, the amount of federal taxes, if anything… the economy has gotten less friendly toward big business, and toward rich people," economist Peter St. Onge told Fox News Digital in a May phone interview. "What's actually been happening is that the Fed has been driving income inequality. And, I think for a long time, Republicans were sort of in denial – not just Republicans, but sort of free market types were in denial – and they didn't want to talk about income equality." "I think they should absolutely talk about it, because what's causing it is not free markets," he said. "It's something that I think everybody should oppose, which is government manipulation of the monetary system." St. Onge was reacting to data showing that billionaires' share of the GDP increased from 14.1% in 2020 to 21.1% in 2025, as reported by Johns Hopkins University economic professor Steve Hanke. JPMorgan Chase's private bank estimated that the number of billionaires in the U.S. increased from 1,400 in 2021 to nearly 2,000 as of 2024, the Wall Street Journal reported in April. The Federal Reserve is America's central bank, which sets monetary policies and oversees banks. It acts independently, meaning it does not require approval from the president or Congress when enacting policies. St. Onge explained to Fox News Digital that "debt is a rich man's game" and that billionaires have benefited financially since the pandemic as the Fed worked to "manipulate interest rates" down below market value, which subsidized loans. "During COVID, you could get a mortgage for, you know, three, three and a half percent, when inflation was running higher than that," he explained. "You were literally being paid to borrow money, which is not a free market outcome.… So it makes loans cheap and the rich overwhelmingly borrow money." The average debt for the top 5% of Americans sits at about $600,000, he said, while the average debt for the vast majority of Americans is roughly $74,000. "That's about a nine times difference," he said of the data. "So if you make loans too cheap, you are giving nine times more money to rich people.… If you make loans cheap, you're functionally giving $9 to rich people for every $1 to give everybody else." Assets are even more skewed, he explained, with the top 5% of Americans holding $7.8 million in assets compared to the average American's $62,000 – notching 130 times the difference between the two demographics, he said. "The value of a stock or even a house are based on the future stream of income, and those are all discounted by the interest rate," he said. "And so pretty close to mechanically, if you cut interest rates in half – long-term interest rates – you are doubling the value of stocks." St. Onge pointed to the American economy in the 1970s and the early 2000s, outlining that growth "took a big step down" in the 2000s while asset values, such as housing prices and the stock market, skyrocketed. "The reason is because, since the 1970s, the Fed has very aggressively held rates low, and so this has caused all those assets to go up. So stocks have gone up, housing has gone up. And again, those are rich men's games. Overwhelmingly, people who own stocks are rich. Housing is even more skewed." "So if you've got a nine times difference on loans between the bottom 50% and the top 5%, and then you've got 130 times on assets, then the Fed manipulating rates down – they're not doing it to make rich people rich, hopefully – but that's sort of the consequence of doing that," he said. "Holding long-term interest rates low is to shower money on rich people and to shower it in proportion to which they're rich, right? So the most extreme version of that is going to be billionaires." Economist Steve Hanke discussed how the Federal Reserve has fanned the flame of income inequality through its policies at a conference earlier in 2025 at the Mises Institute, an economics-focused think tank based out of Alabama. "In 2020, billionaires' share of GDP was 14.1%. Now, it's 21.1%. The Fed increased the money supply, asset prices went up, & guess who owns the assets? Billionaires. By ignoring the money supply, the Fed is an ENGINE OF INCOME INEQUALITY," he posted to X in April of his findings. "Take the Federal Reserve's excessive money printing during the pandemic," Hanke said in an interview published by the think tank in April. "The transmission mechanism of monetary policy roughly dictates that changes in the money supply are followed by changes in asset prices in 1–9 months' time, changes in real economic activity in 6–18 months' time, and finally changes in the price level in 12–24 months' time." "Thanks to the Fed's helicopter money drops beginning with COVID, the annual growth rate of the US broad money supply peaked at 18.1% per year in May 2021," he added. "Lo and behold, the transmission mechanism followed – the S&P 500 reached a local maximum in December 2021 (6 months later), and inflation peaked at 9.1% per year in July 2022 (14 months later)." The result, he said, was skyrocketing wealth inequality to the tune of billionaires increasing their share of the GDP by 7.6 percentage points in just four years. St. Onge said the Fed's policies have been political in nature, while remarking he would welcome "naive" Democrats who bang the proverbial campaign drum of income inequality to jump onto the "end the Fed bandwagon." "They have a naive argument where they look at rich people and they say, 'Hey, this is so terrible. We live in this dog-eat-dog jungle of an economy,'" St. Onge said of Democrats who campaign on income inequality. "And that is inaccurate," he added, citing Federal Reserve policies that have amplified income inequality. On the opposite side of the political coin, Vice President JD Vance has railed against the Biden administration and "Wall Street barons" for policies he said have hurt the working class. During his acceptance speech after officially becoming the vice presidential nominee in July, Vance said an affordability crisis is strangling the working class, while touting that the Trump administration would end economic "catering to Wall Street." "Wall Street barons crashed the economy and American builders went out of business," Vance said from Milwaukee in summer 2024. "As tradesmen scrambled for jobs, houses stopped being built. The lack of good jobs, of course, led to stagnant wages. And then the Democrats flooded this country with millions of illegal aliens. So citizens had to compete – with people who shouldn't even be here – for precious housing. Joe Biden's inflation crisis, my friends, is really an affordability crisis." The Federal Reserve Board declined comment when approached by Fox Digital regarding St. Onge's and Hanke's remarks.
Harvard Business Review
08-05-2025
- Business
- Harvard Business Review
How Companies Can Navigate the Age of AI-Driven Inequality
After more than two years of build-up and buzz, headlines are still promising that AI is introducing societal changes of revolutionary proportions. Meanwhile, there's persistent unease about the socioeconomic fragility the technology could cause. Nobel laureates, such as MIT's Daron Acemoglu, are worried about its capacity to worsen income inequalities, and ordinary American workers are anxious about AI's impact on jobs. In fact, trust in AI has been declining, despite improvements in its performance.
