The American affordability crisis is a multifaceted beast that has been growing for 45 years, driven by low pay and high prices. There are many factors pushing up prices well beyond normal inflation, including monopolistic price gouging, tariffs, personalized (aka surveillance) pricing driven by AI, profit-taking middlemen, privatization, and premiumization of markets.
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The American affordability crisis is a multifaceted beast that has been growing for 45 years. It’s driven by low pay and high prices. Over the last 45 years, many workers’ pay hasn’t kept up with the increase in prices. What pay increases there have been have gone disproportionately to high earners. Good, middle-class blue- and white-collar jobs have been lost to globalization, while the pay for remaining jobs has shrunk due to the purposeful undermining of unions and global wage competition. The result is a crushing affordability crisis for many current and formerly middle-class households, as well as for lower income households. [1]
According to a Brookings Institute analysis, 43% of American families can’t afford to pay for the housing, food, health care, child care, and transportation they need. This figure is 59% for Black families and 66% for Latino families. There’s been a dramatic shift in income from workers to executives and investors: in 1947 workers received 70% of total national income, while today they get only 59%. Unlike the previous 35 years, after 1980, workers did not receive wage increases that reflected their increases in productivity: from 1979 to 2025 workers’ productivity increased by 87% but their compensation only increased 33%. According to a Rand Corporation analysis, in 1975, the 90% of workers at the bottom of the income spectrum received 67% of national income, while in 2019 (the latest data it had) they received 47% of national income. It calculated that if those workers in 2023 had received 67% of national income (as they did in 1975), they would have earned an additional $4 trillion or, on average, each worker would have made $28,000 more than they did. Over the period from 1975 to 2023, if workers had received 67% of national income, they would, in aggregate, have received $79 trillion more in income. [2]
There are many factors that have been depressing workers’ compensation. They range from the failure to raise the minimum wage to the dramatic weakening of unions to the monopolistic power of huge employers. I’ll address these issues in future posts. This post will begin a discussion of why prices are so high.
There are many factors pushing up prices well beyond normal inflation. They include:
- Monopolistic price gouging by huge companies due to a lack of antitrust enforcement, a lack of regulation, regional concentration, and other factors.
- Tariffs. The best estimates are that they have added about 1% to the inflation rate so far.
- Personalized (aka surveillance) pricing driven by artificial intelligence (AI) algorithms that squeeze every dollar possible out of consumers.
- Profit-taking by middlemen (aka intermediaries) from ticket resellers to drug benefit managers.
- Privatization and the fraud that often accompanies it.
- Premiumization of markets, meaning that products and prices target consumers with high incomes.
Capitalism is out of control in the U.S. Competition has been stymied and monopolistic power is widespread in the U.S. economy. This means the “invisible hand” of a market economy and the economic “rules” of supply and demand do not work to keep prices down and quality up. The rules of the economic game have been rigged to favor large corporations, financial manipulation, and wealth. One indicator that clearly confirms this is that corporate profits are at historically very high levels in terms of percentage of revenue.
Many sectors of our economy are dominated by a small number of large companies that have monopolistic power, especially when the companies serve different, concentrated geographic areas. This has happened because of the failure to enforce antitrust laws for 45 years (except for four years under President Biden). This has allowed dominant companies to buy up competitors or put them out of business, often using illegal business practices that weren’t stopped or punished.
Regulation has been compromised (aka captured) by large companies through their political influence garnered by campaign spending and lobbying, as well as the revolving door of personnel between government regulatory positions and private industry jobs. As a result, many aspects of corporate behavior have been deregulated, allowing companies to increase profits through, for example, price gouging, high interest rates on loans and credit cards, high fees for overdrafts and late payments, and junk fees on entertainment tickets, hotel rooms, and airline fares (among other things).
Companies with monopolistic power (sometimes through illegal collusion with the few other large companies in an industry) can raise prices almost at will, generating abnormally high profits. They can also degrade service and product quality because there is no competition that can offer consumers a better deal. For example, Amazon, through extensive surveillance of both buyers’ and sellers’ behaviors, can manipulate the market to extract high prices from consumers and low prices from suppliers, generating huge profits for itself. HP (and others) won’t let you use replacement parts (such as ink cartridges) made by a competitor. Companies from Apple to John Deere to car makers won’t let third parties repair their devices or machines. And Monsanto won’t let farmers save seeds from their crops to use for planting next season; it requires them to buy new seed from it.
Technology companies and others, using AI with vast amounts of personal data and tremendous computer processing power, can tweak prices instantaneously so each consumer pays the maximum they’re willing or able to pay at a specific moment in time. For example, Uber will charge you more when it knows your phone is running low on battery power and you need to quickly accept your ride. It will also charge you more based on your past behavior: for example, if you always grab the first option that is offered. If it knows you’re a shopper and will wait for a better offer, it will offer you a better price to get your business. It may even charge you more if it knows you recently had a pay day. It also pays drivers differing amounts based on a similar calculus. If a driver always grabs the first job that shows up, it will pay them less than a driver that waits for a better paying option.
Airlines have engaged in some degree of individualized pricing for some time, e.g., the person sitting next to you probably didn’t pay the same price you did. Hotels have been found to offer different prices depending on where you’re located – more if you’re in a pricey suburb than if you’re in a lower income city neighborhood or rural community – assuming your location is an indication of how much you’re able and willing to pay.
My next post will discuss the effects on prices of profit-taking intermediaries, privatization and related fraud, and premiumization. After that, I’ll discuss the factors keeping workers’ pay low.
[1] Kuttner, R. 12/1/25, “Sources of America’s hidden inflation,” The American Prospect (https://prospect.org/2025/12/01/sources-of-americas-hidden-inflation/)
[2] Meyerson, H., 12/3/25, “The $79 trillion heist,” The American Prospect (https://prospect.org/2025/12/03/79-trillion-heist-worker-pay/)
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