The American Dream – that if you work hard, you get ahead – is faltering. Over the last generation, the US has experienced the loss of mass upward mobility: it is no longer the case that each generation can expect to do better than the last. A growing gap between productivity and pay, a sharp rise in economic inequality, and limited social mobility have combined to create a squeeze on middle-class living standards whose origins stretch back to well before the most recent recession. This economic malaise is not unique to the US, but it is notably pronounced there.

Historically, the UK has looked different. Our stronger welfare safety net and more generous benefits have helped to ensure that the income instability that is so pronounced in the US is much less significant here. While the UK's employment protection framework is weak compared to other European countries, our inclusive rights-based model gives workers greater security than their US counterparts. Family structure is more stable, with positive effects on household income and economic security. And although the most recent recession is deeper and more prolonged than the downturns of the 1980s and 1990s, unemployment remains lower in the UK than in the US.

But while many commentators continue to emphasise the differences between the US and UK labour markets, there are early warnings signs in the UK that we should heed. Pay is no longer tracking economic growth: median earnings fell for British men between 2003 and 2008, while Gross Domestic Product (GDP) grew by 11%. On the basis of Office of Budget Responsibility projections, wages will be lower in 2015 than they were in 2001. Both countries have witnessed the emergence of a startling gap between the rich and the rest, the like of which has not been seen since early in the 20th century. In 1973, 5.4% of wage and salary income earned in the US went to the top 1% of earners, but by 2007, that had more than doubled to 12.2%. Britain's top 1% of earners received 6.1% of total earnings in 2010, an increase of 71% since 1977.