Wealth inequality, household debt, and macroeconomic instability

This chapter presents a four-part exploration of the connection between rising US wealth inequality, household debt, and macroeconomic growth and instability. First, we summarize the evidence on rising wealth inequality. Second, we consider the increased exposure to economic risk faced by individuals and households - giving special attention to the rise of precarious jobs - and highlight the costs and impediments to increased saving by households. Although the COVID-19 pandemic starkly illustrates widespread household exposure to economic risk, we demonstrate that such exposure has been growing for decades. Third, we examine how the growth of household debt represents a key link between wealth inequality, mounting economic risks, and the macroeconomic problems of slower growth and greater instability. Fourth, we offer a brief discussion and conclusion, including some attention to our investigation's implications for public policy.