A new age of the worker will overturn conventional thinking

FEW ideas are more unshakable than the notion that the rich keep getting richer while ordinary folks fall ever further behind. The belief that capitalism is rigged to benefit the wealthy and punish the workers has shaped how millions view the world, whom they vote for and whom they shake their fists at. It has been a spur to political projects on both left and right, from the interventionism of Joe Biden to the populism of Donald Trump. But is it true?

Even as the suspicion of free markets has hardened, evidence for the argument that inequality is rising in the rich world has become flimsier. Wage gaps are shrinking. Since 2016, real weekly earnings for those at the bottom of America’s pay distribution have grown faster than those at the top. Since the Covid-19 pandemic this wage compression has gone into overdrive; according to one estimate, it has been enough to reverse an extraordinary 40 per cent of the pre-tax wage inequality that emerged during the previous 40 years. A blue-collar bonanza is under way.

Across the Atlantic, such trends are more nascent, but still apparent. In Britain, wage growth has been healthier at the bottom of the jobs market; in continental Europe, wage agreements are building in higher increases for the lower paid. Long-running trends in inequality are being questioned, too. A decade ago, Thomas Piketty, a French economist, became a household name by arguing that it had surged. Now increasing weight is being given to research which finds that, after taxes and government transfers, American income inequality has barely increased since the 1960s.