The US economy has fundamentally shifted in recent decades. Income earned from work has fallen to a record low share of national income, while the share of income earned from capital, like owning stocks or businesses, has risen. This gradual shift has taken place alongside recent economic trends—rising prices and affordability challenges, AI-driven labor market disruptions, extreme wealth concentration—that have contributed to a persistent sense of economic pessimism (PDF) among American households.

The current economy has broken old relationships between work, income, and wealth. How can policymakers provide economic security in the world we live in now?

Some proposed ideas focus on building wealth at key thresholds or sharing wealth more widely. Others propose ways to increase household incomes. And still more seek to better protect workers and households against the whims of the labor market.

Alone, none of these ideas orient the economy toward supporting workers and households. What current conversations—about wealth, income, earnings, and work—too often miss is how tightly these ideas are interwoven. To help families achieve durable economic security in the modern economy, policymakers need to offer integrated policy solutions that address income and wealth together, and analysts need to produce new research and metrics that explore the effectiveness of such policies.

Labor Market Disruptions Are Reshaping Wealth, Income, and Economic Security

On an intuitive level, the connections between income, wealth, and economic security are clear. For most households, most income comes from earnings from work, and wealth accumulates by saving earned income. That wealth is then used to purchase assets (which can allow wealth to accumulate), cover unforeseen costs, and prepare for the future.

Recent changes in employment patterns and earnings have affected the relationship between work and wealth. Unpredictable and volatile incomes heighten workers’ need for wealth—to cope with interruptions in income and feel positively about the future—even as they undermine workers’ ability to build wealth. With disruptions to the labor market from AI, the rising importance of gig work and self-employment, market concentration, the decline of defined benefit pensions, and changes to occupations and the type of work employers seek, people are experiencing less certainty in their hours, salaries, employment benefits, and jobs.

Read the full article about supporting workers in a shifting economy by Rekha Balu, William J. Congdon, and Elisabeth Jacobs at Urban Institute.