The Great Household Divergence - Economic Inequality and the Roots of Social Fracture for the 99%

Nancy O. Andrews

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: For decades, the debate over American inequality has centered on a single question: how unequal has the United States become? Increasingly, the more important question is different: does it matter that some Americans are pulling dramatically away from everyone else, even as real income rises for most people? This paper argues that the United States has undergone a Great Household Divergence: four decades of extraordinary prosperity coinciding with widening disparities in household market position — disparities that shape employment, status, dignity, health, and neighborhood opportunity. Economic distance has become social distance, accompanied by rising polarization and democratic strain. Mobility eroded for large segments of the population, leaving some American communities with world-class opportunity while others resemble the developing world. This paper weaves together literatures on inequality, mobility, polarization and social policy. It argues that the prevailing policy model has focused too heavily on correcting market outcomes after the fact, and points upstream toward pre-distribution policies that shape wages, collective bargaining, state-level employment institutions and macroeconomic conditions aimed at tighter labor markets. The central implication is that social cohesion in the U.S. cannot be restored through post-tax redistribution alone. Addressing inequality is more than the simple arithmetic of redistribution; it also requires attention to social cohesion, the earning power of Americans and human dignity.

Keywords: Great Household Divergence; Income and Wealth Inequality; Intergenerational Mobility; Political Polarization; Social Cohesion; Pre-Distribution; Labor Market Institutions; Monopsony (search for similar items in EconPapers)
JEL-codes: D31 D63 D72 H23 J38 J62 (search for similar items in EconPapers)
Date: 2026-10-23
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:2685

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