I was having a conversation with a good friend of mine yesterday about the “enshittification”* of companies and how annoying it is. This led to a rather deep conversation about how we, as a society, appear to be fucked (to put it bluntly).
This got me thinking – what went wrong? I already had a basic idea about where we’d kinda veered off in the wrong direction, but what actually went wrong?
This led me down a research rabbit hole, and what I found was both illuminating and concerning. These financial stresses that so many of us feel aren’t personal failings, it’s the depressingly predictable result of specific economic changes that began decades ago.
The Numbers Don’t Lie Son.
In the UK, 49% of workers are living payday to payday, higher than France’s 43%1. Across the big sea in the US, that number reaches 78% of Americans2.
What I found particularly striking about this is that this financial balancing act extends far beyond minimum wage workers. Research shows that about a fifth of US households earning six figures or more are living paycheck to paycheck3. In the UK, one in five people close to the middle of the income distribution say that they struggle to afford food and other essentials4.
The data also reveals that 43% of people seeking debt help from the charity StepChange are in full-time employment5, suggesting that having a job, even a full time one, doesn’t guarantee financial security.
The Almighty Wage Stagnation.
The root becomes clearer when we examine wage trends. British workers have now experienced fifteen years of wage stagnation, leaving them £11k worse off per year compared to where wages would be if pre-2008 growth had continued 6.
To put this into historical context, real wages grew by 33% each decade from 1970 to 2007, but are now back at 2005 levels 7. Meanwhile, our worker productivity has continued to rise, creating a huge (and growing) gap between the value we as workers create and the wages we receive 8.
The Policy Changes That Made This Happen.
This shift didn’t happen naturally, it resulted from specific policy changes that were implemented across developed countries, starting way back in the 1980s. Economic historians identify several key factors:
Deregulation and Labour Market Changes
- Weakening of collective bargaining rights and union membership
- Introduction of “flexible” employment contracts with little or no job security
- Shift towards gig economy and temporary work arrangements
Financialisation of the Economy
- Corporate focus shifted away from long-term investment to maximising shareholder value now
- Rise of private equity and leveraged buyouts that prioritise extracting short-term profit
- Increased use of stock buybacks and dividend payments instead of wage increases
Changes to Social Policy
- Reduction in public investment in housing, education and healthcare
- Privatisation of previously public services, exposing us as consumers to the volatility of the market
- Cuts to social safety nets and unemployment protections
The Enshittification Effect.
Tech writer Cory Doctorow described a pattern that he calls “enshittification” – it’s the systematic degradation of services over time. His three-stage process helps explain these broaded economic trends:
- Stage 1: Companies offer high-quality services to attract users or workers.
- Stage 2: Once established, they shift that focus onto serving business customers (advertisers, publishers) and shareholders.
- Stage 3: Finally, they extract the maximum available value from all parties for the benefit of the owners and investors.
The research suggests that this extends far beyond digital platforms into many sectors of the economy, even into employment itself9.
The Economic Consequences of Financial Insecurity.
This widespread financial stress creates much broader economic problems that affect everyone:
Reduced consumer spending: When we’re living hand to mouth, we’ve got less money to spend on goods and services, which reduces the overall economic demand.
Public health impacts: These financial stresses contribute to mental health problems, chronic disease and reduced life expectancy, increasing the healthcare costs across society.
Reduced economic mobility: When normal people are struggling to meet their basic needs, they’ve got less ability to invest in education, training or entrepreneurship.
Political instability: Economic insecurities seem to directly correlate with political polarisation and support for extremist movements across multiple countries.
Evidence-Based Solutions Or; How Do We Fix This Shit?
Research from various economic traditions suggests that there are actually several ways to skin this particular cat:
Strengthening Worker Bargaining Power
Studies have shown that countries with a higher incidence of union membership and collective bargaining tend to have lower inequality and higher median wages. This sectoral bargaining, where entire industries will negotiate wage standards, has been shown to be effective in Nordic countries.
Social Safety Net Improvements
A universal basic income? No longer just for Star Trek it seems! Research on UBI trials, universal healthcare systems and robust unemployment insurance suggests that these policies reduce financial stress, which in turn, improves economic outcomes. Countries with much stronger safety nets generally show lower rates of financial insecurity.
Financial Sector Regulation
Economic analysis of the pre-1980s shows that restrictions on financial speculation and requirements for productive investment correlated with more stable wage growth and lower inequality.
Progressive Taxation (it’s not a dirty word) and Public Investment
Historical data shows us that periods of higher progressive taxation and public investment (such as that in the post-war era) coincided with prosperity across the board, and much lower financial insecurity.
International Comparisons
Cross-national research gives us some pretty useful context. Countries with different policy approaches show a varying level of financial stress.
- Nordic countries with strong social safety nets and collective bargaining show much lower rates of financial insecurity.
- Germany’s co-determination system, where workers have board representation, correlates with more stable wages.
- Countries with universal healthcare show lower rates of medical debt (obviously) and financial stress (duh).
The Research Consensus
Economists disagree on a lot of things, but there is growing agreement that the current levels of financial insecurity are economically insufficient and socially destabilising. Multiple studies suggest that policies strengthening the bargaining power of the worker, providing universal basic services and regulating financial extraction could address many of these problems.
The challenge here isn’t in identifying any solutions; luckily, researchers have already documented what works. The challenge here is building the political will to implement these changes that prioritise a broad-based prosperity over short-term profit maximisation.
Looking Forward to the Future
The data suggests that right now, we’re at an inflexion point. Current trends are obviously unsustainable, both socially and economically. The question isn’t whether a change is gonna come, but what form it will take.
Understanding these patterns and their causes is only the first step to addressing them. The research on this is clear: widespread financial insecurity isn’t inevitable. It’s the result of specific policy choices, and different policy choices will obviously produce different outcomes.
The research on these topics is extensive and ongoing. If you’re interested in diving deeper into any particular aspect of this, wage stagnation, financialisation or policy solutions, then there is a wealth of academic literature out there from economists across the political spectrum.
*Enshittification: A term coined by Cory Doctorow. I’ll probably write something about it at some point.
- https://uk.adp.com/about-adp/press-centre/over-half-of-global-workforce-living-paycheck-to-paycheck.aspx ↩︎
- https://www.forbes.com/advisor/banking/living-paycheck-to-paycheck-statistics-2024/ ↩︎
- https://edition.cnn.com/2024/10/27/economy/wealthy-households-living-paycheck-to-paycheck ↩︎
- https://www.financialfairness.org.uk/docs?editionId=b8e632ea-c68c-4f69-b33a-b117009b1fbc ↩︎
- https://themoneycharity.org.uk/the-money-stats-march-2024-improving-signs-not-yet-enough-to-lessen-household-squeeze/ ↩︎
- https://www.bbc.co.uk/news/business-64970708 ↩︎
- https://www.economicsobservatory.com/why-has-it-taken-so-long-for-stagnant-pay-to-become-central-to-uk-politics ↩︎
- https://academic.oup.com/oxrep/article/41/1/105/8157931 ↩︎
- https://en.wikipedia.org/wiki/Enshittification ↩︎
