This is What a K-shaped Recovery Looks Like
Tags: Social Justice, Economy, Economic Development, Income Inequality, Economics

This economy’s income inequality is well documented. The pandemic has begun to accelerate the widening of this gap. Those who are able to work during a lockdown are HEAVILY advantaged. Now that it appears the United States has squandered the benefits of a lockdown, one has to accept the fact there will be more lockdowns.

Remote working was a small minority before the pandemic. This is no longer the case. In fact, remote workers may be in the majority during serious lockdowns. However, they are no longer paying for dry cleaning or eating lunches with colleagues while they work. They are still making the same amount of money but no longer paying for a long commute or all the other expenses related to working outside one’s home.

The remote tech worker’s salary did not go down but their cost of living probably did decrease. By now many of them are looking at the last hundred days and realizing their bank accounts are little bit fatter. Many of these people were also making too much money to even get the full stimulus check but they did not care. Their bank accounts have now swollen well past a measly stimulus check from the government.

When you consider this is only after a few months and the stimulus checks kept the gap from being even wider, you begin to see how quickly this gap is going to get very wide. Those on the privileged side of the remote work gap are experiencing deflation. Their cost of living in general is falling. Deflation is already here for this group even while they continue to bring in money.

There is inflation happening though also. In fact a case could be made that stocks are the preferred currency for at least a generation and that is where inflation has been hiding. We have seen plenty of inflation in the stock market this century. Even though the Federal Reserve keeps saying inflation is barely 2% it sure did not feel like that for a lot of people. We all began to wonder whether the Federal Reserve’s calculations were measuring the correct things.

The pandemic has brought this “measurement gap” into sharp contrast. People are beginning to notice that a pandemic puts a serious load on production. There surely has to be increased costs and therefore increased inflation but where is it? Everyone is realizing the Fed’s equations are not measuring inflation correctly. It is becoming very clear the inflation is already occurring in the preferred currency, stocks. Preferred among the new preferred currency, the tech stocks are really becoming expensive.

The pandemic is surely making food costs go up. People need food so it is the type of inflation which people really feel. If you are sitting there waiting for the next stimulus check, you really notice when a chunk of cheese goes up by 25% over a few weeks. If you are sitting in your home office making the exact same salary you had before but no longer have the load of a commute or lunches etc. well you barely notice the price of cheese.

Income inequality is bad enough. When you couple it with two completely different economic realities where the poorer half is experiencing crippling inflation while the richer get richer through a deflationary cycle built on the backs of the poorer, a bad end seems inevitable. The rich can afford to have everything delivered, they love the fact gas prices are lower because delivery costs are lower. The poor unskilled worker has to brave the pandemic to make a pittance as a delivery driver. You can see how this conflict could really get out of hand.

I do not believe these two different economic realities are sustainable. I do believe there will be some kind of rebalancing. When an economy of this size rebalances, there can be some very serious consequences for EVERYONE on the teeter-totter. Sometimes the rebalancing can be so violent though the teeter-totter gets broken.

We are all in the same boat though. When the Titanic went down quite a number of the rich and well-off drowned along with the steerage passengers. Maybe, just maybe, those on the “heavy” side of the boat might want to slide a little bit of their stack over to the “light” side. Heavy seas are in our future. None can deny this fact. A listing boat is far more likely to go down in any kind of choppy sea, let alone a REAL storm. Our boat is in great need of rebalancing. If the load remains only upon the backs of the poor and soon to be poor then we will surely capsize in any future storm.