Across a large swath of both the left and right this notion has become so accepted that it is treated as self-evident: a tiny percentage of very rich Americans are reaping all the rewards of global capitalism while the rest of the country sees their lifestyles and hopes decline. As is so often the case with a convenient political narrative, the data doesn’t add up.
Our inequality narrative has moved beyond critique. That’s unfortunate, because this tale is just true enough to be convincing and just false enough to pose a threat to our future. What is happening to the great economic middle is far more complex than our simplistic 1% myth. Monsters hide in those details.
Widely reported research released this week by the Pew Center reinforced these misconceptions. It shouldn’t have. Beneath the study’s headline touting a declining “middle class” lies data that points to a far more complex and promising reality. Consistent with a previous post here on the end of the Middle Class Era, and analysis in the book The Politics of Crazy, we seem to be missing a hopeful economic transformation. Only the shadow cast by that trend is evident in income data.
Key to our income concentration myth is a collection of gaps and complexities in our available data that make it difficult to build an accurate picture of income trends. We get our best information about household income from two sources, aggregate tax returns from the IRS and surveys made available by the Census Bureau. Each source is reliable for certain purposes while burdened with their own unique glitches. Our misconceptions about income trends rise mostly from mismatches between those two sources.
Data from tax returns creates one of our most persistent and frustrating distortions. Though aggregate tax records give us a more precise account of income than survey data can provide, not everyone files a tax return and there are many complex forms of earnings that do not compare easily to ordinary income as reported on a W-2.
Worse, tax records only allow us to measure incomes anonymously and in annualized slices. These annual aggregates do not allow us to follow a particular household over time. Our temptation to paste over the gap in our knowledge with assumptions of income persistence or income predictability has been too enticing to resist. It turns out that the persistence we assume in the data does not exist in reality.
Survey data helps augment our understanding by allowing researchers to paint a richer picture beyond IRS-reporting income data. It also introduces a time dimension missing from tax returns. This is helpful, but data gathered in surveys can never match the precision of income tax statistics. People are rarely aware of their income in precise, reliable terms, making it impossible to overlay the Census surveys with IRS aggregates. As a result, the value of Census data is mostly limited to the picture it paints of respondents’ perceptions of their own income trends. A critical look at these two data sources with an eye on their limitations exposes a very different picture of income inequality from the standard narrative.
Between these two sources of data, here’s what we know reliably.
The share of national, annual income going to the middle quintile of earners is in long-term, steady decline. That decline did not start with the Reagan tax cuts, or the Bush tax cuts, or the dawn of the Internet economy. Middle earners have been taking home a declining share of national income since 1957. That’s right, as soon as America began to recover from our Depression/World War 2 hangover the middle started to lose ground.
The share of national income going to the highest earners has been rising. That rise began in 1959, with higher income cohorts gaining ground inexorably at rates that have slowly increased over time. On an annual basis, more and more household incomes are falling at the farther ends of the spectrum. Fewer households are earning salaries in the middle percentiles.
Survey data from the Census, which informed the Pew study, augments our understanding of this phenomenon with a valuable insight. The number of American households earning middle incomes is no longer a majority. More importantly, the overwhelming bulk of Americans moving out of the middle income tier are moving up.
While it is true that our mythical “middle class” is gone, they have not been destroyed. On the contrary, they have advanced. They are steadily graduating up the income ladder to create a new cultural niche. Since 1971, the percentage of households in the top income tier has more than doubled while the number in the bottom has increased by only a quarter.
If this is true, then why does the doom-laden narrative on income inequality to continue to resonate all across the political spectrum? Though relatively few households are falling into poverty their racial composition and regional concentration makes them political dynamite. Blacks, Hispanics and women are all big winners in this economic shift along with almost everyone earning a college degree. Almost half of black families led by a married, middle-aged, college graduate are in the top income tier. Those who have lost ground in relative terms are overwhelmingly white, poorly educated, and rural – a matter for a much longer, more difficult post.
Our perception of this situation might be more hopeful if we could see past another distortion in our IRS income statistics that is only slightly adjusted in the survey data. In income terms, both of these taxpayers will be identified as poor: a single mother earning minimum wage at a fast food restaurant and a second-year law student at Duke. To make aggregate evaluations even more difficult, that law student has probably been sitting in the lowest income quintiles for several years and will continue to show up there for several more. She might take a year off after graduation to travel, and then spend another year living with her parents while doing free or poorly paid work for a global NGO. She might spend ten years contributing to our poverty statistics before starting her real career at age 30 earning $160K a year.
Similar distortions occur later in the career arc. A professional who left a salaried job to launch their own very successful business might register “income” in the lowest quintiles for several years. Once they start getting paid they might immediately soar into six figures, but our annual-only assessment of incomes will not capture this arc, nor account for the ways that wealth might augment income for those temporary low-earners.
At the late stages of the typical career arc this distortion becomes unusually strong. Incomes as measured in tax-accounting terms do not capture many of the methods by which retirees support themselves, especially capital gains and dividends. Those statistics also fail to account for subtle wealth effects, like the impact of a modest home with no mortgage or other reduced expense burdens rising from a lifetime of social and economic stability.
Studies are starting to demonstrate the ways that our changing career arc distorts our statistical understanding of income inequality. In income terms, there is no “1%” as a coherent social group any more than we still have a culturally relevant “middle class.” Almost no one reaches the 1% and stays there and a surprisingly large number of Americans will reach those income levels at some point in their careers.
Several recent studies have sought to track income fluidity. Their findings suggest that almost 12% of Americans will register a 1% income at least once in their career and a whopping three quarters will spend at least one year in the top 20%. More importantly, of those who reach the 1% income level, less than .5% will remain there for a consecutive decade.
Here’s an alternate narrative. It is more consistent with the data and better explains the way our economy is evolving. Thanks to expanded access to education and broader opportunities to use knowledge to earn a living, people start their careers later than ever before. Again thanks to the knowledge economy and improved access to education, those careers are fantastically more lucrative than anything people had access to thirty, forty or fifty years ago. As a result of higher pay and better working conditions, those careers are shorter than they ever were, meaning a much larger chunk of the population spends a large portion of their old age living primarily on sources other than taxable income.
These folks may not represent a majority of American workers, at least not yet, but they are a dominant and growing plurality. More Americans than ever before are graduating from high school. More Americans than ever before are completing college. Our new, more dynamic career arc is coming to define our economy in ways that challenge old understandings of success or failure. Those same forces are changing the meaning of a job.
When a plurality of the population has a career arc matching this pattern – late-starting careers, good incomes in the middle punctuated by occasionally “big-hit” years with ordinary W-2 incomes tailing off early, you get a pattern of average incomes looking exactly like what we see in our income statistics. Lots of people steadily concentrating at the lower incomes, increasingly few in the middle, and an increasingly large cohort showing up each year at the higher ends.
Growing income inequality on an annual basis is absolutely real, but it probably doesn’t mean quite what the Bernie Sanders crowd thinks. We do not have a monolithic bloc of 1%’ers dominating our economy. One of the reasons there is so little general support for radically redistributive policies is that those policies would negatively impact a far larger bloc of voters than their proponents imagine. Most people with a college degree are participating at some stage of their careers in the top tiers of the job market. Economic outcomes are far more dynamic, and improving at a far faster rate than the popular narrative would suggest.
Contrary to popular belief, the world is getting better. However, a significant chunk of the population is missing out on these benefits entirely. When we think of poverty and decline we often draw a mental picture of struggling minorities in our inner cities. Our focus on this outdated picture of poverty helps explain our inability to understand Donald Trump and the rise of the far right in America.
If we are going to develop political policies in line with measurable economic realities then this paradigm should change. Our income statistics and the Trump phenomenon together have a vital story to tell – economic decline is now primarily a white rural problem. We have misidentified the biggest winners and losers emerging from this stage of capitalism. Our politics and our public narrative need to adapt to this volatile emerging dynamic.
Chris Ladd is a Texan living in the Chicago area. He has been involved in grassroots Republican politics for most of his life. He was a Republican precinct committeeman in suburban Chicago until he resigned from the party and his position after the 2016 Republican Convention. He can be reached at gopliferchicago at gmail dot com.
GOPLifer 
[…] The year 1957 is important for reasons that extend beyond our soft-focused nostalgia. It marked an empirical high point in the history of America’s Middle Class. That was the year when the percentage of national income taken home by middle-earners peaked. Since that time incomes in America have been relentlessly drifting toward the ends of the spectrum. […]
And that drift towards the ends of the spectrum is the entire point.
I guess my point, which in fairness I haven’t really articulated yet, is that no, that drift toward the ends of the spectrum is not in fact what is driving the current political moment. In fact, it kind of obscures what’s really happening in the same way that the Bill Clinton scandal came to be defined as a matter of sex.
The people who actually care about income inequality per se are the same people, almost all on the left, who have been motivated by this issue for a hundred years. What is driving the present political moment is not income or wealth inequality, but the ***identity*** of the people who are rising and falling in relative terms.
That might sound like a subtle distinction, but it is important because it has some very dark implications for what this zeitgeist really means and what forces it is likely to spawn. It helps explain why “income inequality” is somehow feeding the rise of Trump & Cruz while Sanders is losing. More to come, gotta move on for now.
Hi Chris
,” that drift toward the ends of the spectrum is not in fact what is driving the current political moment”
That would “explain” America
But the rest of us are getting more and more pissed off about inequality and we don’t have your racial problems or a black president (we have our racial problem which are different)
This is like saying that the decline in violent crime is due to more guns – completely ignoring the same effect happening in the rest of the world
So the US racial problem can only be a part of the reason that people are getting antsy about inequality
How about using Occam’s Razor and observing that people are getting pissed off because the current level of inequality is actually hurting them
To quote a famous Republican, a house divided…
Interesting article in the Atlantic this morning about how different experiences of our current economy led to a disconnect between the Republican Party elite and their less affluent base. It explains the turmoil we’re seeing this election and also the previous presidential cycle.
http://www.theatlantic.com/magazine/archive/2016/01/the-great-republican-revolt/419118/
I came here to post this article. For me, this should be required reading for anyone who frequents the comments section. Fantastic article, and it really crystalizes what were currently seeing in the GOP. Most surprising (and relevent) to me was how non religious Trump supporters are, and how poorly educated. This isn’t an angry religious movement. This is an angry economic movement, even if almost nothing Trump is saying seems economic on its face.
I also think this is an excellent counterpoint to what it seems is Chris’ main thesis that wealth inequality is either a figment of our imagination, or really not as big a deal as we seem to think.
On the contrary, I’m increasingly of the opinion that the vast majority of our cultural tensions and what most would call the nations “problems” are fundamentally economic at root, and heavily exacerbated by wealth inequality.
I believe that what I would call “economic relativism” is the most important factor. I.e. that wealth distribution is THE most important economic indicators for a strong, healthy society, more so then the absolute number.
I.e. I believe that if the AVERAGE American wage was, say, $150,000 but we had the exact same level of inequality as we have now, things would be just as bad and there would be just as much anger and resentment and social upheavel as we are now.
I mean, seriously, even poor Americans are still wealthier then likely 90% of the rest of the planets citizens. That fact doesn’t nothing to dissipate the anger we see. Because their wealth is shrinking RELATIVE to others within their own society.
As weve duscussed befire, the only difference betwen Trump supporters and Bernie supporters is their opinion on the causes/solutions of the problem. That there IS a problem, and WHAT that problem is is not in doubt for a massive slice of the American electorate.
There IS no “GOP establishment” or “Dem establishment”. There’s just an Establishment. I.e. the 1%. And thyre one weakness (in a democracy) is their (by necessity) small numbers. So one powerful tool they have in their toolbox is to divide the much larger (but less powerful) peasant class (I.e. the middle class). So far it’s working well. I don’t think it’s sustainable though. As the quotw goes, You can fool all the people some of the time. And you can fool some of the people all of the time. But you can’t fool all of the people all of the time.
At the end of the day, as much as I respect Lifer’s intelligence and ability to disseminate complex political issues on many different topics, I think on this one topic (wealth inequality) he is severely underestimating the scope and severity of the issue. I think it’s THE cultural/social issue of our time, the root cause of almost every OTHER cultural/social issue, even ones that seem to have nothing to do with economics.
Strange times indeed.
Well articulated, Rob, and I sadly agree. “Recognition” of the problem by those who have the responsibility and authority to address it (Congress, Legislatures, local government, AND business leaders) coupled with willful or oblique disregard, is fueling the problem. Recall my comment about how wealthy this particular Congress is. Then, note their obdurate stance opposing wage increases, eliminating the ACA – the first real insurance millions of people have had, while denying jobs legislation during Obama’s tenure and simultaneously pushing more tax cuts for the wealthy and well-connected.
The New York Times reported yesterday of a last minute insertion of 54 words drafted by lobbyists into the Appropriations Bill. It was championed by Democratic Sen. Reed in behalf of casinos, restaurants and Wall Street interests and will remove $1 Billion in future federal tax payments. It passed and it shouldn’t have had the issue been debated in the “light of day”.
http://www.nytimes.com/2015/12/21/us/politics/hospitality-and-gambling-interests-delay-closing-of-dollar1-billion-tax-loophole.html
When working people see things like this happen that benefit those they perceive to be in the 1%, it creates resentment. Tax cuts that skew solely to the benefit of a privileged few at the expense of everyone else, and that deprive the Treasury of revenue needed to run government for all the people – is wrong. It adds credence to deeper fears that government doesn’t care about the “little man”. Trumpmania has been difficult for Republicans to grasp but it may be the first honest contemporary public expression of the breadth of resentment of those who aren’t participating in the “New Economy”.
As for the accuracy of Chris’ assessment on this issue – he is well-researched but we, his readers, are his eyes and ears to a broader world than his own. Most of us are telling him we are seeing things differently, and that should give him pause. What if he’s wrong? At the very least, it could be an indication that the “New Economy” is leaving many more behind than the data suggests. That dynamic may present new social and political challenges and they will be painful and chaotic.
Very well said Mime
Let me try this one more time, if only as a prelude to where I’m headed with this. Here are a few things we know from the numbers.
This drift toward inequality has been in place since the war era ended sixty years ago. Most people alive today have never experienced a year in which the middle class was earning more national income than in the last. Why are we suddenly concerned about it now?
More people are rising economically than falling by greater than a 2/1 margin. Again, go look at the numbers.
The largest gainers are people with college degrees overall, but the other major standouts in relative terms are women and black families – again, go back to the numbers.
Only one major demographic cohort is actually ***declining*** in economic status, and not just in relative terms: whites who did not attend college, particularly those in rural areas.
David Frum left something out of his analysis because he doesn’t see or understand it. Frankly, no one who wasn’t raised in this country is introduced to its importance here because Americans do not talk about it – race.
For sixty years this trend toward income concentration cranked away, but when does it erupt into a political force? What is the catalyst that inspires a political explosion among lower income whites. I wonder how they would respond to a black President?
Inequality only starts to matter when something else, something far more important happens. We are breaking down this country’s silent racial compact, the unspoken agreement that ties the identities of all “white” people in this country together. For the first time in our history we are doing something that many commentators in the past thought was impossible – transcending race as a central organizing feature of our culture. Who wins in this scenario? Members of non-white groups and whites who have already achieved some success (and capital accumulation) in our society.
Who loses from the decline of race as the definition of one’s future status in life? Trump voters. And they are responding.
More on this, much more, when I can figure out how to write it. This is difficult stuff. Here’s a preview, a review of Derrick Bell’s Faces at the Bottom of the Well:
http://ww2.kqed.org/mindshift/2015/07/02/what-faces-at-the-bottom-of-the-well-teaches-about-race/
No one really saw this coming, not even Bell, but Bell accidentally explained how dangerously destabilizing a movement toward a post-racial society might be. He just assumed it was impossible for that reason. We are testing this thesis in a way he did not anticipate.
And, all of us better pay attention. The “why” this is happening may be less important than “what” is going to be done to manage it. After all, we all have skin in the game.
And I think that takes us down to the core of the disagreement in the comments to this post. I’m convinced that the “why” is everything here. The same people flocking to Trump supported the people who were building this condition for decades, right up to a few years ago.
Why are they only angry now? More coming here…
The “why” is important, that’s obvious. It has always been important, but too few people have been paying attention or trying to address the underlying problems. What is less obvious now is how or what we do as a society to deal with it. Those of us who have been paying attention and working to make life more equitable for others – especially minorities – for years – in large and small ways, aren’t blind to the “why”. Be careful in making assumptions in this regard. Give media dominance over our lives some credit and responsibility here. For too long things happened that the average Joe simply didn’t understand or know about. And if they did, what could they do about it? One thing is certain, the cow is out of the barn and we will either move constructively or we will once more ignore the problem – until the problem becomes a problem.
Lifer, No need to throw gasoline on a fire. What you see as a catastrophe, I see as growing pains.
There were many people in my parents’ generation who thought African-Americans were inferior. That changed with my generation which believed in interracial dating. All of a sudden, the people, now in their 70s and 80s, were met with grandchildren who were mixed race. They learned to love them.
As this country continues on its path to racial intermixing, attitudes toward race will change even more. DNA tests like 23andMe will play a part in showing that we all are a mixture of different ethnicities. My husband’s test came out as 1% Sub-Saharan West African. Even though !% is a tiny amount, it makes a difference knowing that some of his ancestors came here as slaves.
African-Americans have approximately 20% white ancestry on average. It’ll be interesting to watch the next season of Finding Your Roots on PBS. Discovery can be both painful and healing.
Memories of Venezuelan society give me most hope. Although the country certainly had its problems, over 70% of the population was mixed race, and they were casual about skin color for the most part. Income inequality was definitely an issue, and yes, some of that could be correlated to skin color, but since just about everyone was a shade of brown with African descent. it didn’t matter like here in the US. For once, it was nice being able to have conversations without being constantly on guard.
Hi Chris
“This drift toward inequality has been in place since the war era ended sixty years ago”
NOT according to Piketty – he says that it was going the other way up until the 60’s
Anyway the fact that it was drifting that way – and has been for decades is not relevant
What is more important is where it is NOW
If we are heating the water with the frog in it the relevant temperature is when it realises that it is too hot
(The old story about boiling the frog is just an old wives tale)
So we are now the collective frog and we are saying “sodd this it’s too hot in here”
The racial issue is a US problem – other peoples have different racial problems
BUT we all have the problem than too much inequality is:
Reducing competitiveness – (the top guys have too many advantages)
which will reduce innovation
Increasing regulatory capture
Reducing economic growth – (The big toe is hogging all the blood)
Causing all manner of psychological problems in the population – The Spirit Level
https://en.wikipedia.org/wiki/The_Spirit_Level:_Why_More_Equal_Societies_Almost_Always_Do_Better
Destroying our democracy
As Louis D Brandeis said
We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both
These are reasons enough to say “Enough is far too much”
I’ll leave alone your points on income inequality for now because I need to digest your sources a little more, but I want to make a point about something you don’t give enough importance to: income instability. This is a huge reason why people feel much more economically insecure than before.
If you ask people which would you rather have: a guaranteed 40k salary with lifetime employment in one company, no need to move around, minimal chance of layoffs vs. An average of 50k that can vary between 0-150k in any given year, including bouts of temporary unemployment, having to switch entire careers every 5 years, and uproot your family and move cities every 10, most people would choose the former. Consider it equivalent to the risk-return curve when evaluating bonds (I. E. A junk bond yielding 10% can be a worse investment than a govt. Bond yielding 5% when risk is taken into account).
A huge amount of employment risk has been laid off to the worker by companies seeking a “flexible” labor pool. This has been a fantastically good deal for companies that used to have to invest in worker training, etc but can now push that off to the workers themselves.
This points to another truth: while our culture celebrates the alpha males like entrepreneurs, wall St traders, etc. who compete ferociously and are willing to tolerate enormous risks in exchange for massive potential rewards, the truth is that the vast majority of us, especially as we get older and have families, etc. Would much prefer a more stable beta male life of a steady paycheck in an unglamorous field that leaves us enough time and money to enjoy the rest of our lives. These are the jobs that are disappearing and it’s little consolation to be forced to compete for a type of job which you don’t enjoy and for which most people are ill-suited (remember, for any given chimp colony, there’s only one alpha male and a bunch of beta and below males :).
This is definitely a large source of angst for many Americans and likely counterweighs any absolute increase in lifetime earnings. It also will ultimately damage our economic competitiveness if people spend their time developing broad, generic skills rather than the narrow focused skills that their employer requires because they figure they’ll be laid off in a few years anyway. Even worse is forcing people to train for an entire new field every 5 years. Jack of all trades, master of none is no way to build a productive economy…
Ironically if we do decide to build this type of high-risk high-reward economy, the best way to incentivize people to participate is to increase the social welfare state eg guaranteed health care, affordable education, strengthening social security and unemployment insurance, so that people feel safe enough to take on enormous career risks like starting a new business.
Well stated, WX Wall. One criticism of the Middle years is that people were stuck in the same jobs for years. This may not have offered the creative opportunities that today’s mobile entrepreneurial worker has, but what it offered was company loyalty and deep, long personal relationships with peers. As Lifer noted, WWII changed our country and many men were happy to have steady jobs. Today’s talented individuals may be proud of having skills that allow them to move around in the job arena and gain entry to the 1% class, whereas, in previous years, stability was golden. If you asked my father (who worked for the same company for over thirty years – taught himself engineering as he didn’t get to complete his engineering degree due to WWII – he loved his work, his company, and his co-workers were his friends. Our family lived in one city his entire career. His salary was sufficient to allow my mother to stay at home (her choice), have a nice home in a safe, nice neighborhood, and raise and educate six kids. There was great personal satisfaction in that for him. The trade off may have been other more lucrative positions but he was content where he was doing what he was doing. He was professionally and personally fulfilled as money was only important only for comfort and security. His family and his work completed him. How many young entrepreneurs today can claim this?
It’s a very good point. I would make one modification though.
They aren’t really choosing between an predictable 40K and a dynamic $50K. It’s more like a predictable 40 and a wildly dynamic 90-350K. That makes a difference, not just for the person facing the choice, but for the society all around him. Why? Because it compounds the consequences in terms of lost prestige, power, and buying capability for the guy who wants to settle for the steady 40.
In a way, that higher ceiling actually heightens the angst for everyone. Personally, I’m excited about this new economy, but it isn’t hard to see how it’s driving people bonkers. Factor in the ability now for a young black man to dive into that dynamic economy and earn vastly more than his former white neighbors and you ratchet up the discomfort level to 11.
One more reason why I love the minimum income.
Hi Chris
I am still questioning the $350,000 – as a household income – yes
BUT as an individual income NO WAY
That is a lot more than a Plant Manager with a production plant of 500 people and over 100 Million dollars would earn
I’ve heard similar things from colleagues in Europe. Come to America my friend. Keep in mind that there are very few jobs in the US that pay more than +200K in direct annual compensation (salary). There are, however, a very large number of jobs that include some sort of ownership premium along with the compensation. Practically every attorney, accountant, financial advisor or doctor has a pay structure like this where they get an annual cut of the partnership’s revenues. In good years in a solid practice for a senior partner that can double or triple their salary.
Outside of professional partnerships, stock-based compensation is very common. It used to be delivered in the form of options, which did not show up as ordinary income. It is more common now just to deliver annual grants of stock which do get considered income at their original grant value.
A large minority, if not a majority of software or computer industry professionals in public companies accrue these kinds of benefits.
Again, ask yourself – who is paying for all those $800K-$1.2m 3-bedroom/1 bath homes in big cities on the coasts and how are they doing it? These people may not be a majority of American workers, but they are a MUCH larger minority than we generally realize.
Hi Chris
So what you are saying is all of the people who have strict guilds (unions) to prevent other people from competing with them and use a workers co-operative structure make a lot of money
Attorneys, Accountants, Doctors, Dentists
but people who are employed to make things with a traditional structure only make a little money
Funny I thought you didn’t like Unions
“Again, ask yourself – who is paying for all those $800K-$1.2m 3-bedroom/1 bath homes in big cities on the coasts and how are they doing it? ”
IMHO they are doing it the same way as in the UK – mostly by inheritance
Most of these “self made men” started the way the Donald or Mitt did with a large advance from Dad
If you start with over $1,000,000 as a handout it is easy to make a lot more – after 35 years at 6% that is over $7 Million
Most of our current 0.01% inherited it – or more accurately they inherited the seed money that made them Billionaires
Imagine a different world where the Unions had kept their strength and the normal worker was doing as well as the current “Guild Members” (Doctors, Attorneys, Dentists….)
What difference does it make if there is a larger minority of America’s population earning over $800K/year if there is a corresponding increase in the bottom income range and shrinking of the middle class? These may be exciting times for those who are reaching the 1%, but not so for the rest….who are far more numerous than this small, successful group. I have read that the majority of this Congress is more wealthy than any other in history. It certainly hasn’t made them smarter or more capable. I’m happy to see effort and creative genius (or pure luck) be rewarded but I’ll be darned if I think increasing numbers of wealthy makes our nation stronger. I’m hoping this isn’t what is being implied, but it still begs the question: are more or fewer people in America better off under this “new” economic environment? The theory that fewer barriers will break the logjam for those who have previously been unable to participate in the quest for personal success is terrific but it won’t happen nearly fast enough to provide balance in our economy.
***What difference does it make if there is a larger minority of America’s population earning over $800K/year if there is a corresponding increase in the bottom income range and shrinking of the middle class?***
There isn’t.
Please, go revisit the numbers. What we have is a bulge: a large and growing cohort moving out of the middle class. They are well over twice the size of the population that is moving downward. Everybody else is in about the same spot in income terms, but with the cost of nearly everything plummeting.
But that’s still not the most important part.
Also moving up – minority groups who once were systematically excluded from the economy. Their move, and the friction is it creating by replacing poorer, less educated whites in entry government jobs and other middle income employment is the biggest single source of political angst around this issue. That’s important because it is good news, the best news you could ask for.
This picture is what happens when things are working. Things could still be better, but getting better starts with not destroying what works.
NO
that is NOT what the data says
The data says that compared to the MEDIAN some are moving down and more are moving up
As society as a whole is getting richer (due to everybodies hard work) the median is NOT increasing because the top 1% are hogging all of the gains
A better way to do this would be to compare to the AVERAGE
If you compare to the average you get a different picture with almost everybody losing ground
Example to your point, Duncan, in the Houston Chronicle. Blue Cross/Blue Shield (major U.S. health insurer) has strong-armed the health insurance market in TX by cutting out major health institutions as part of their plans. Their justification was due to exceptional losses from the cost of doing business with these providers. Yet, we are now finding out that BCBS was actually awarding its CEO with a $10 M bonus for making such huge profits!!!! At the same time that BCBS is limiting coverage for its policy holders (including many in the middle of cancer treatment)I, they are sitting on $9.9 billion in reserve…..a reserve that ostensibly is to cover dips in losses. The real irony? They are classified as a Non-profit. The story is enlightening for how big business takes advantage of laws and markets while raking in the dough. It is also why I and many other Americans don’t have confidence that those who have power, influence and money, will use it appropriately.
http://www.houstonchronicle.com/business/medical/article/With-billions-in-surplus-health-insurer-defends-6710453.php
There is no question that I am thrilled to see more minorities and women break out and do well. But I again challenge your assertion that the cost of nearly everything is moving down. I am just not seeing that happen broadly. The big ticket items – higher ed, health care, pharmaceuticals, food ( I know we differ on this one for sure, but I see I need to take you shopping (-: housing – (region specific), private elementary and high school for those who feel this is necessary or desirable – and it is in some cases….these are just a few but these carve out huge portions in every family’s budget. Then add in forty years of wage and income stagnation for the vast majority of average workers and try to envision having enough left over to adequately fund a retirement plan – without the benefit of stock options, bonuses, etc. These perks aren’t available to average folks. They have to do it the hard way, and to their credit, many do.
Let me be clear: I am happy for those who aspire, work hard and achieve. Happier still for those who previously had no chance despite being smart and working hard. Having a lot of money isn’t important to me but it is important to have enough to take care of life’s necessities. We share concern for those who need the floor of a basic income – people who are either poorly educated or in jobs that are becoming obsolete without a good shot at acquiring the skills necessary to compete in this different economy. They will be hurt, and that bothers me.
Their misfortune shouldn’t deprive others of their good fortune but I am concerned about what happens to these people.
Hold on there!
“Why? Because it compounds the consequences in terms of lost prestige, power, and buying capability for the guy who wants to settle for the steady 40.”
That statement makes it sound like the guy/gal who “settles” for the “steady $40K” is depriving himself or his family?! Not everyone sees a job in terms of more $$. There are trade-offs, sometimes important ones like living near family (to help them in illness or old age, or receive help from them with kids), or the challenge of moving into an environment that is radically different just to earn another $10K? Housing can be risky if one’s budget is tight and if you buy wrong or get upside down if the job transfer doesn’t work out. There is nothing wrong in making a steady lower wage just as there is nothing wrong in earning a lot of money. Some of the best things in life are not measured in take home pay but in quality of life issues….time with family….a community they love….an area they love….free time….Of course, if there were a basic income, and, assuming they qualified to receive it, they could have all of these things plus a little something extra to help their kids with college, purchase health insurance, buy a new car instead of a used one, and maybe, just maybe, fund their IRA so their retirement would not be social security dependent (if there is a SS by then).
Very good point 1mime
I was an engineer/manager – but that meant that I could only “do my job” at a large manufacturing company
And that reduced the amount of jobs and restricted where I could live which in turn increased a lot of my costs
I have earned a decent amount of money over my career (nothing like Chris’s $350,000/year) but enough to retire comfortably at 57 and I tend to think of my degree as a piece of paper saying “pay this guy twice as much”
But if I was starting again now I’m not sure if going for a trade qualification might not be better
YES – it won’t pay as well
BUT a smaller pay packet in a small cheap town??
Yes and no. The type of jobs you’re talking about, doctors, lawyers, IT guys in Silicon Valley, their income probably does range from 90-350k (and higher). And those jobs always had that type of variability. The fact that these parts of the economy have greatly expanded is great.
The problem is that the 40k jobs have followed their 90-350k brethren in adopting the income instability without a commensurate rise in salary. For example, if you were an electrical engineer in the 70s/80s, you could choose to join a Silicon Valley startup (although admittedly it was much smaller scene than today), or you could choose a more stable career earning less in IBM, which was famous for its life-long employment policies. Plenty of people who could easily have made it in Silicon Valley chose IBM, doing pioneering, ground-breaking work there (I think it still holds records for the most patents and Nobel Prizes awarded to a company). They didn’t get huge bonuses if their work panned out, but at least they had lifelong employment, solid advancement opportunities, and a decent retirement. It was a trade many people took.
Nowadays, the Silicon Valley startup job remains a high risk, high reward career, but the IBM job has almost as many risks (layoffs even when announcing record profits, cutting back on worker training, outsourcing your job to Bangalore or a bunch of part-time consultants, etc.) with no real increase in the reward i.e. salary.
It would be great if what’s happened is that all the “safe, boring” jobs were still available but people are choosing to educate themselves and compete for the bigger, riskier prize of a New Economy job. But I think what’s actually happening is that people are being *forced* into those types of jobs because the “safe, boring” jobs are being eliminated and/or transformed to much riskier propositions without a commensurate increase in salary. I was being generous in my last post saying people had a choice between the two jobs. Actually, the choice is between a $90-350k job with tremendous instability, or a $40k with just a smidge less instability.
I know you’re excited about this new economy, and plenty of people are (I’m in one of those careers as well). But don’t discount the vast numbers of people who would rather take a lower paying, stable job if they were available. Many of those 55 year old tech workers become freelancers and consultants not because they want to, but because due to rampant ageism in Silicon Valley, no one will hire them, and so they’re forced into variable consulting work with no benefits at a time when they still have a house mortgage and children’s college bills to pay, hoping that whatever payout they earned from cashing out their accumulated stock options would be enough to get them through until the kids are set and Medicare kicks in (God help them if they get sick before they hit 65). Many of them would give up quite a bit of potential income in exchange for stability and good health insurance (incredibly expensive on the individual market when you’re 55).
One more thing: I think the fact that people are retiring early from these dynamic careers is actually a point of concern: Yes, it means they’ve made enough money to retire, but why don’t they want to keep earning money? After all, most of these jobs are intellectually stimulating, and not physically demanding (like construction), which means people can comfortably perform them well into their 60s (these days, many 70 and 80 year olds are probably healthy enough to do so). But they don’t want to. I suspect this is mainly because the increasing demands and stress of these jobs is burning them out, and they leave when they get the chance. It’s also probably the reason why lots of educated women in high-powered career tracks return to being housewives when the kids are born and never return to the workplace.
For example, in medicine, the old image was one of a doctor happily making housecalls into his 80s, who never retires until he keels over at a patient’s bedside. Nowadays, physicians are cutting their hours and retiring early (not just women, although the trends are bigger with them) due to the stress and burnout of the field. So I’m not sure that even those people supposedly benefiting from the New Economy are enjoying it all that much.
Macro-economically speaking, this is a tremendous waste of a valuable resource: our best educated, most productive workers are opting out of the workforce early. Why is that, and what can we do to structure the workplace such that we can convince them to stay?
Because, WX Wall, it’s about more than money. What good is money if you don’t have free time? Don’t get to see the kids’ soccer games, never sit down at the family table with the family? Stress doesn’t only happen on the job. It happens in families. When it’s all said and done, what do most people recall with fondness? It’s not their job, it’s their family.
Chris,
I’m a patent attorney living in the DC area and I am not seeing what you are seeing in terms of how attorneys are paid. Becoming a partner has become harder and harder and many attorneys do not make partner. Also, unless you work in the largest of large firms, you are not making the kind of money you envision.
Here are some recent info on attorney salaries:
http://www.nalp.org/associate_salaries_2014
Newer attorneys are also paying a lot more for law school than they did 10, 20 or 30 years ago.
Also, the median household income in even the very rich DC suburban counties is still around $110,000 to $120,000 range:
http://www.politifact.com/wisconsin/statements/2015/mar/02/scott-walker/scott-walker-says-most-10-richest-counties-are-aro/
Also, from my experience, since the influx of more money into the profession, particularly at the top of the profession, the work life at the typical large law firm has even gotten meaner and nastier over the last 30 years for both lawyer and particularly for staff, who are often treated as little more than field hands, whatever the color of the particular staff member.
I’ve seen other places ranking Fairfax County the richest county.
Also, having lived in the DC area for a while, I can tell you that many people are “affording” those homes by being highly leveraged. There appears to still be a very real real estate bubble int he DC area.
The African-Americans are also being totally crushed economically in the DC Area. If you look at recent data, you can see that DC proper is becoming whiter, younger and richer. Meanwhile, Prince Georges county which has for decades been the richest majority black county in America is having to deal with some of the outflow of poor blacks from DC.
There are groups that is shooting past the whites in terms of educational achievement and high paying jobs, but those people various Asian groups such as Koreans, Cambodians and Vietnamese. For example, in 2014, of those students admitted to the Northern Virginia science and technology magnet school Thomas Jefferson 66% were Asian, just 2% were black and just 1.6% were Hispanic. Presumably this means about 30.4% were white, down from 54% in 2004.
https://www.washingtonpost.com/local/education/demographics-shift-at-thomas-jefferson-high-as-asians-make-up-66-percent-of-new-class/2014/04/08/78374f7a-bf23-11e3-b574-f8748871856a_story.html
Hi Guys
Totally off topic but IMHO this is the biggest and best piece of news for decades
http://www.spacex.com/webcast/
Does this mean that Elon Musk is now looking to build his Secret Base in a Volcano?
I’ll bet Musk read Jules Verne as a kid. He is such an interesting person.
WX Wall, you points about burnout in high stress professions is very well taken. I come from a family of professionals and scientists and hangout with other professionals and scientists, and most of us have incredibly low feelings of job satisfaction, even when we are making some of our highest incomes. People who don’t know what these type of jobs are like will say things,such “Then why don’t you work less and accept lower income.” But those “work less and earn a little less” type of jobs are really scarce.
And we are the lucky ones. I have seen how non-professional staff can be treated at a law firm and I have read many teachers’ horror stories about their jobs, so I shudder to think about the type of working conditions other low prestige workers are enduring today.
Income inequality? It’s there to be observed. I don’t know that there’s anything “wrong” with it, unless people are starving on the street. Jesus said his kingdom was “not of this earth” and I’ve always found it to be a truth. I’m a stranger in a strange land. Whatever expectations I had for life when I was a boy I’ve largely abandoned them to a present which is not as grand as I’d imagined, but not too bad after all.
There is a significant difference between a person’s income and wealth and actually having any class at all. I can have all of the culture that I want for free. That should tell you how completely subverted American ideals are.
The Progressives morphed from a group that could include TR, and Woodrow Wilson, to something else altogether. Bestial, feral, demonic, inimical to mankind. This new version, this pseudo version, of progressivism needs to be put down like the parasite that it is, as quickly and efficiently as possible.
I’d forgotten about it until I spent a wasted year in WI. Sure is good to be back in TX.
BW, just as I know that not all Republicans are right wingnuts, surely you know that not all Democrats fit your descriptors.
Not all Democrats fit my descriptors? Of course not, but there aren’t many Birch Bayh types left. Over the last 35-40 years both parties have been undergoing seismic shifts in ideology. The cold war was frightening enough to keep the parties close enough that we didn’t have quite the nuttery that we have today.
We need an other other.
BW, We need eachother.
You must realize you sound like a rambling lunatic right?
Anybody using terms like “demonic” in their descriptors of other people says much more about themselves then any other group they’re referring too.
I feel like your grasp of reality is tenuous at best.
That’s nice.
Sometimes, it is like reading a stroke.
My wage has gone up a percent or two over the last decade or so depending on official government inflation figures. I’m not sure what has come down maybe a new tv not much else, health care, food, utilities, education all eat up more than ever before. I am as middle class as you can get just dollars off median income in Ohio. Things are definitely slipping.
IPLawyer: Having done quite a bit of research on assisted living and nursing homes, I can confirm that in TX, in the Houston metropolitan region, you are typically starting at about $3-$5K/month for assisted living (depending upon single/shared quarters) and about $6K-$8K/month for quality nursing homes(less if room is shared). These numbers assume one does not qualify for medicaid, nor have a long term care policy – which few seniors in their seventies have. If one is into “data”, be fore-warned – stay healthy and save. But, what about one’s parents? Or, a child with special needs? Private agency caregivers who come into a home range from $20-$25/hour. Do the math. And, it still requires someone to pick up the slack for those uncovered hours. If this burden/responsibility falls on the shoulders of a pre-retirement couple, it can stress a family to the max. Many older adults and seniors lost significant savings in the Great Recession. Some lost their homes. If they were fortunate, they had an opportunity to claw their way back, if they had also retained their jobs, or had adequate savings. At a time when couples are saving for their own retirement, their children’s educations, and simply “living”, if they have to help mom and/or dad or granny, that’s hard.
Jobs, savings, income matter. A lot. To more than the immediate parties. It can impact the extended family as well, as IPLawyer pointed out. Those who are hurt the most used to be those with the least educational preparation. The Great Recession challenged this truism as people with work experience and degrees couldn’t find jobs, or found jobs with significantly less income, and not always with health benefits. There are a lot of folks out there who just quit looking and are facing a long retirement but not necessarily one that they feel secure about.
Boy, what a “downer”. Sorry, but it’s all true…hopefully not for any of you but one never knows….
From Wikipedia – “The middle class is a class of people in the middle of a social hierarchy. In Weberian socio-economic terms, the middle class is the broad group of people in contemporary society who fall socio-economically between the working class and upper class. The common measures of what constitutes middle class vary significantly among cultures.” Although middle class in Africa is the $10 – $20 per day range.
From the American mind – ” the ability to graduate High School and go to the mill, mine or factory and get a job, get married and raise kids that will graduate from high school and get jobs at said mill, mine or factory.” (my interpretation)
Problem number 1- The definition of Middle Class kind of fuzzy, So let us go with the American definition.
Problem number 2 – The conditions that created the USA middle class are hard to duplicate. a 10 year global depression. a 4 year world war where all domestic manufacturing was shut down. (No new cars from 42 to 45. And no refrigerators, stoves, or anything that was not war related.) So after the war, there was a huge pentup demand for stuff to be built by factories that were not bombed to rubble as in Europe. Exports soared. Also a GI bill that provided education, housing, and other Public Spending went into the pockets of the returning GI’s. Also a Defense Highway system plowed money into the economy.
Pardon me if I am stating the obvious.
So could we recreate that scenario? The depression and World War we should probably skip. But we could do a few things that created what I consider an accidental middle class. We could make higher education low cost or free like the GI bill did for thousands. We could create a modern Civilian Conservation Corp. We could Increase taxes to the rates that existed after the war. We could say to the citizens, if a war is worth fighting it is worth paying for.
But the Middle Class as you know it is not coming back.
It would be a hard sell, assuming you could get the ear of the public.
If we give up on having a thriving middle class, we give up on this country, our society and our values. I know that it works in Europe.
Never stop asking “why?” Why do we want to bring back the era of the middle class? Can we articulate what it is that was so gosh-darned swell about the era of middle class dominance?
If we can do that, then maybe we can just recreate what it is about that picture which we value rather than trying to travel back through time.
I would say social and political stability are the main arguments in favor of a strong middle class and a more equal society.
http://www.businessinsider.com/the-negative-effects-of-income-inequality-on-society-2011-11?op=1
Also, history is replete with examples of what happens to societies when economic inequality reaches a tipping point, going all the way back to Ancient Rome.
I thought Rome fell because of sexual depravity.
Hate to be glib, but I would counter that history is replete with mismatched analogies to the present.
I agree that income inequality, and particularly wealth concentration, are dangerous, but why? And how much is too much? We really need to wrestle with these questions because inequality is a natural and unavoidable outcome of something else we say we value – individual freedom. We are facing some hard choices in our near future.
By the way, this is all headed toward one optimal conclusion as far as I’m concerned – a basic income.
Hi Chris
“Why do we want to bring back the era of the middle class?”
Dr Brin says exactly “Why”
http://davidbrin.blogspot.co.nz/2011/09/class-war-and-lessons-of-history.html
“What it is that was so gosh-darned swell about the era of middle class dominance”….
Maybe your dilemma is that you weren’t part of it and are limited in looking backwards to relate to it. The strength of the middle class was its breadth and the balancing social and cultural forces within it. The family unit was strong. kids enjoyed a simpler childhood. Mom was typically home, but if she worked, the older siblings helped with the younger kids. People thought for themselves and believed in clear lines of authority. If you got in trouble at school, you got in double trouble at home. Parents encouraged their kids to go to college because they wanted a better life for them, but everyone was expected to get a job. Work was honorable and fulfilling, even when it was hard. People didn’t seem as obsessed about how much money they had or someone else had. It just wasn’t that important. (Really, it still isn’t until you need it (-:) Poverty existed but it was not reviled. How one views this era today depends upon one’s personal experience, one’s views, or, maybe what one hears repeatedly via the incessant opinionated commentary that networks today call “news”.
I believe a strong middle class is essential to all civilized societies, and that it’s decline will diminish our nation.
Sincerely,
The Hallmark Kid
Duncan – Dr. Brin’s view is right on. He did leave out one point about FDR. FDR guided us to the New Deal Capitalism, that’s true. And parts of it have been attacked and trimmed out of our reality. But he also kept us from other “isms” that we could have gone with. Fascism, communism, and others were being talked about and proposed by some. Not that that is a worry now. Is it?
1mime,
Thanks for the trip down memory lane. That describes my childhood pretty well.
Which brings me to something I’ve been contemplating lately. With that kind of upbringing, how did we baby boomers end up the way we did? During the cultural upheaval of the 60s I clearly remember my generation’s rejection of war and materialism. Such idealism and hope. We were going to be different. Somehow that all became reversed and we ended up being far more materialistic than our parents, and just as prone to become involved in useless and costly wars. I find it very depressing that we squandered the legacy our parents built up. Thoughts?
Gosh, Viking, I’m older than you (I assume) but the experience and lessons I learned have pretty well stuck. I am still anti-war (generally), and not terribly materialistic which is fortunate given my husbands care needs. My husband is older than I by a dozen years and probably has been a greater influence on my maturing philosophy over our 51 years of marriage than my parents were, so there is that. Diversity and equality have always been important to me. I am no “Johnnie Come Lately” in this regard. I find that common values and ideals result in agreement on many issues that transcend age. I suspect we are all an amalgam of all our experiences, and that if we are lucky, and try, we continue to evolve in our thinking. Fond memories along the way make the journey more interesting.
Chris – a rhetorical question I assume, but sure. Machiavelli knew this in the early 1500s. If you take too much from the ‘peasants’ so that it starts to threaten their existence, then they hit the streets and rebel and vote for a Trump or Cruz, a national socialist and demagogue. Then you know you have gone too far but it might be too late. Adapted to today’s world as we don’t like to learn from the past: Instead of going for your head they only want your money.
There are lots of whys. Social cohesion and competitiveness come to mind.
When there is true competitiveness people benefit generally. And with competitiveness there will be winners and losers, and necessarily there will be some level of inequality. But when inequality gets to be too great, those with power attempt to suppress competitiveness in order to preserve their status.
What is too much inequality? I don’t have an exact answer, but clearly we’re seeing erosions in social cohesion and has been mentioned elsewhere, significant attempts to suppress competition.
And how to fix things, short of a world war? I dunno, revolution?
1mime,
My comments weren’t specifically about you or me. I was talking about the baby boomer generation collectively. Like you, I don’t think my attitudes have changed that much since the 60s. But some of the people I grew up with who were “flower children” have since become Rush Limbaugh groupies.
If they are female, look at their vocations, or if they marry, what influence their spouse brought to bare. In my family there are six siblings. The oldest three are Democrats, then there was a gap in years and the second “set” of three were born. All three are in the medical profession. They are all Republicans. Same family, same general era, different political outcomes. The only common factor other than womb was their professional area.
And by the way, you know what was FDR’s single largest contribution to the relative income equality we saw in the ’40’s and ’50’s? A federally mandated wage ceiling initially imposed during the war which carried on in various forms into the 50’s. That wage ceiling was dropped briefly in the late forties, then reimposed in ’50 at the start of the Korean War.
This pressed down wages for the most in-demand careers, particularly around technology, which was dominated by the defense industry, for more than a decade. Sure enough, a few years after it expired wages started to spread out again and never stopped.
https://en.wikipedia.org/wiki/Stabilization_Act_of_1942
https://en.wikipedia.org/wiki/Wage_Stabilization_Board
Why do we want to bring back the middle class? Because popular democracy is predicated on people participating in local government, local civic associations and other local voluntary associations that make democracy work. In my lifetime I have seen the decline in social capital described in Robert Putnam’s essay and book “Bowling Alone.”
I have seen kids playing at public playgrounds for all mostly replaced by soccer fields and baseball diamonds for leagues for the kids of parents who can pay for the leagues. I have seen the rich increasingly move into gated communities or communities in dead end streets with no sidewalks and treat the other communities around them merely as streets and highways to drive through. I have seen the “school supplies” that a family must pay for at a public school amount to hundreds of dollars, a situation unimaginable when I was a kid; beyond pencils, crayons, notebooks and book covers, pretty much everything was supplied by the schools. I have seen those who are richer be able to “buy their way out of traffic jams” through “Lexus Lanes” while public transportation has been allowed to rot.
This day-in-day-out increasing stratification in how the rich and the less rich experience the world around them is having a corrosive effect on our social institutions.
What’s missing from this counternarrative is that income doesn’t tell the full story. Making $40,000 a year with full health coverage and retirement is not the same as making $40,000 a year without any benefits.
Another issue: people don’t necessarily define themselves by their income, but based on what they can afford. What about housing? A lot of things may be decreasing in cost, but housing doesn’t seem to be… or, at least, housing in places where most people would actually want to live. Revitalized urban cores haven’t yet led to revitalized public schools (or, at least, this is the perception; there is certainly a racial component to some of this thinking), meaning that families who want to live in the urban core feel compelled to send their children to private schools, adding yet another cost. The other option is commuting, but in large metropolitan areas those commutes can be very long.
What would you say to that?
There’s some really interesting stuff here, Rob, but what about wealth? I know this post is titled to be about income inequality, but I don’t know if we can talk coherently about the one without at least differentiating it from the other.
The numbers on income tell an interesting story about how and when money is earned in this new economy, and who it goes to, and it sounds different from common narrative.
But I think most people who get riled up about inequality (on the right and the left) are not drawing a careful distinction between /income/ inequality and /wealth/ inequality, and thus we have narratives about income that don’t fit the data.
But wealth inequality is a big deal. A really big deal.
A parent’s income may have remained steady during the recession, but that’s little consolation if the accumulated wealth intended to put their children through college and them into retirement is gone. And that lost wealth is passed on to the children, who must now take out loans for their education and may need to support their parent(s) in old age, creating a wealth-hole they must climb out of in the first case and a further expenditure which reduces their rate of accumulation in the second.
A huge part of the continued racism in this country has to do with denying blacks access to the kinds of opportunities for wealth accumulation that whites have. Your post from November of last year, A Vicious Cycle of Looting in America’s Cities, covers this in detail.
In fact, all the numbers for income only describe people who have to work for a living, which the wealthy do not, should they so choose.
Money has a gravitational affect. Accumulate enough of it and (with a little skill) more will be drawn to you. But wealth is harder for the non-wealthy to accumulate or to hold on to. The change in wealth over the recession bears this out: from ’07 to ’14 the bottom 80% of the population went from owning 15% of the country’s wealth to owning only 7%, while the wealth share of the top 1% grew from 34.6% to 37.1%.
In this light, many social programs can be seen as mechanisms to support the accumulation of wealth among those who do not already have it, especially over generations, so that the paucity of the parents will not be so strongly exacted on the children. Think of it as the counterpoint to a tax on inheritance–they are both bringing the outliers closer to the center.
I recently got done reading Robert Reich’s book Saving Capitalism. He thinks that in our markets bargaining power is too lopsided towards the very most wealthy elite. This includes political power. One example is companies patenting everything in sight to the point of absurdity to keep competitors out. As you know in software this is a common tactic used with legal muscle to intimate and bankrupt potential competitors.
Another example I know about is the dollar shave club. I started using their shavers and they are much , much better than any other competitors shavers and a month supply is only a dollar. So what do the big boys do , hint it is not compete against this company, they search their huge library of patents and use one to sue this upstart company. They can do these kind of things because they own the politicians who make our laws and judges that interpret them. And those laws create our markets and assign stronger marketing power to special interest.
I have started to read Carl Rove’s The Triumph of William McKinley. He certainly has a different drift on this President than Dr. Reich who wrote about him in his new book, but he does see his time as Dr. Reich does as a gilded-age and the common man and the rich man fighting over how markets were to have their rules set up and how market power would be assigned.The solution was ultimately political.
I do agree with you Lifer that people do have a life cycle of wealth and income over their life span. But I have read to be in the 1% of income you need around 500,000 dollars a year income. Very few of us will ever see that. Heck I doubt that my dentist brother in law nets that although he may gross that. Most families who are in the top 10% income are two dual high income families. And there still are fewer Hispanic and Black families who make it into middle class or upper class than white families. Those who never had might not notice the downward drift but those who lose will. I think that is why poorer whites are a bit more angry. Even college educated have seen their incomes decline over the last decade.
So this problem is political not economic. We need to reduce the power of money in politics. We need to bust up our largest banks and Wall Street institutions like Hedge Funds. The perfect vehicle to do this is by making it tax disadvantage with huge size. That will reduce the political influence of big money. And also limit it’s ability to kneecap any new competition. But we also have to recognize that sometimes size is necessary for some types of business. The power business has been a good example. Which is why they are a regulated monopoly. But that may change with emerging technology. So we have to remain flexible.
We need to make it cheaper and easier to gain an education and keep skills hone though out life. Online learning can help with that. And I really like your idea of a minimal income versus a minimal wage. This should give the worker a more equal bargaining power because unless you can walk away from a negotiation you really are in a weak position. I know because In my past I have been at times a negotiator for a Union. I don’t want the government to just tax the rich and give to the poor as you just shift control from one lord to another lord. I want a solution that gives working people true bargaining power so the power stays and resides in them. And they can demand a fair share of their labour.
By the way, just to return the numbers, depending on how you frame the question a 1% income comes in either somewhere in the mid-300’s or 400’s. And about one in 8 Americans hits it at least once in their careers.
sorry Chris – this is total nonsense
You say that
I on 8 adult americans earn at least $350,000/year for at least one year???
I call total bullshit
I don’t know anybody who has ever earned that sort of money
(I do know some who have inherited it)
The only way that 1 in 8 Americans “earn” that sort of money is when they sell their house and they have the money for the hour or so until it is spent on their new house
Chris, where did this $300K earnings figure come from?
Depending on how you measure it (individual/household/geography) an overall aggregate figure is around $340K. Here’s an article on it. The research on who gets there is linked in the post.
Here’s a little more on it, more to come later. Have to go. http://www.marketplace.org/2014/05/02/wealth-poverty/making-it-1-percent-more-common-you-think
Four decades of research is substantial, but I wonder if these numbers were adjusted for inflation and assume they are not averages? Most young couples (40-50ish) I know that “might” fall into this category get there by virtue of a dual income family…IOW, both spouses work in positions that are financially rewarding. The chart seemed to be single earner focused but that just seems high….guess it depends upon where you live, etc. Bully for all who get there, however brief.
I will say that the “millionaire next door” concept for retirees is also interesting….to end up with this nest egg after educating children and the everyday costs of food, shelter, health care + saving, that’s pretty amazing. I know several retirees who fit this criteria and I can promise you, you would never know it by analyzing their life styles. I’m with BigWilly in that it’s how one lives rather than how much they earn that is most important. Still, as the years creep past, it’s good to have savings for both comfort and security. Happiness is still priceless (-:
I’m getting the impression that there is some disconnect here about the general shape of the economy at the higher third. The two concepts that might be most helpful to understand are the new extremes of dynamism that people experience, and the extent to which workers in modern careers are being compensated with capital, in occasionally large, but highly irregular volumes.
Forget about sports stars and CEO’s and College Presidents. The people who give the high end of the economy the shape we are starting to see mostly fit this model:
– Professionals with an ownership interest in a firm (accountants, lawyers, real estate brokers, financial advisors who own a partnership stake)
– Sales professionals in either very dynamic or very technical fields, computers/software, pharma, oilfield services, etc
– Senior corporate management roles (Director or above)
– Business owners of almost any kind beyond sole proprietor
– STEM jobs
– Careers of any kind (marketing, sales, advertising, whatever) related in some way to software or computer technologies
If you think it though, that’s actually a lot of people. However, they are pretty geographically concentrated. There aren’t a lot of them living in Lake Charles, LA or Dayton, OH or Jacksonville, FL. Disproportionate numbers of them live in the Acela corridor in the NE, Chicago, or the Pacific Coast.
At mid career, say in the their 40’s, any of these people (except the business owner – an unusual case with a strange income structure) will regularly be earning in excess of $150-200K almost every year. But they will have variable compensation, stock grants, partnership dividends, commissions, etc that could double or triple those numbers in their best years. That won’t happen every year, but it will happen consistently.
That’s one side of the dynamism of those careers – very high incomes that only hit occasionally. Here’s the other side.
Almost any of those same professionals could lose their job at almost any moment. Many of them will change jobs every 2-5 years. At a career peak, a software developer might lose her job because the company was bought for a fortune. Or she might lose her job because the company suddenly cratered and the owners locked the doors.
Finding another income usually isn’t difficult, but finding the right new job in career terms can be a challenge. It would not be unusual for them to be out of the workforce entirely for months at a time, or maybe even a year, more than once every 10-15 years. These careers are lucrative but volatile.
These careers also tend to taper off relatively young compared to the past. That’s partly because these careers are very lucrative. It’s also partly because that kind of dynamism takes a toll. When your company gets sold and you’re 35, you go find another job. When your company gets sold and you’re 55, maybe you take a year off, then do consulting work for a while, then gradually drift out of the workforce.
And if you have two of these professionals living in the same household, then they will have household incomes in the $300-500K range very consistently.
Want evidence of this? Look at real estate prices in the Northeast and the Pacific Coast. Where do you suppose people are getting the duckets to bid up those markets?
That dynamism helps explain how an income that ranks in the 1% annually can be experienced by 12% of the nation’s households at one point or another in their lifetimes. That figure, based on research that stretches back decades fails to capture the present trend. The number of people starting careers today that will see a big 1% year is probably much higher than 12%.
And yes, this is a dramatic departure from the experience of most workers earning wages in the bottom half of the income spectrum. It is also a departure from the life experience of people in large swaths of the country who frankly do not want to experience this kind of dynamism and desperately wish it would go away. High incomes are not enough to compensate some folks for the pressure of living in one of these major population centers and the uncertainty and struggle that accompanies that career path.
That’s an interesting explanation, Lifer. Our oldest two are pretty much following this career track but both spouses work. Our youngest is the “free spirit” doing lots of different things and is making a fine living – but, interestingly, money is not what motivates him. He probably fits the Millennial profile….doing what he loves, living with a small footprint (he’s in one of those “soft” engineering fields Fifty hates so much – sustainable design) and big into the environment… lives in a small town because that’s where he feels most comfortable (he’s my only Democrat kid, too (-: ….gotta have somebody to share with!)
I love the fact that the jobs market today allows young people to have more freedom of choice in all respects – what they do, where they do it, how long they work. As I have stated many times, money is only important when you need it…..but it sure is nice to do what you love and be adequately compensated to boot. This is the changing scene you’ve sketched for us in your posts. It was a different world for those of us who are older where the traditional job market was more “fixed”, but jobs today offer more creativity and happiness for those who find their niche and can earn a decent living doing it.
Getting back to the topic of income or wealth divide, though, at some point, society needs to find a balance so that more people have this opportunity to find their niche. Clearly, quality educational opportunity levels the playing field. As Stephen and Unarmed pointed out, this is the investment that America needs to make not only for its people but for the sake of our country’s global competitiveness. What an interesting future it is going to be….I just want more people to participate in it.
Chris
You normally make sense
But now you are deliberately misinterpreting the data
The problem is not really the 1%
The problem is the 0.01% or even the 0.001%
They are the ones that have stolen the worlds capital
When a handful of old families owns more wealth than 90% of the population you are squeaking about the fact that 1 in 12 Americans will spend 1 year in the 1%
Some inequality is needed to make society run well
But we are well past that point
As an analogy
When I used to “tune” my old mini the first thing you needed was a bigger carburettor for more power – however fitting a carb off a 7 liter V8 did NOT make a 1 liter mini go any better!
http://www.independent.co.uk/news/uk/home-news/inequality-richest-one-per-cent-have-as-much-wealth-as-the-poorest-57-per-cent-combined-a6779201.html
What is the answer?!!!
The nuances of the discussion need more interpretations, please (insert deity here) help me. Hope…….. lost for words….. scary times…
We are better than this. History is repeating itself and the press are silent
Are ,is English was never my strong suit, my apologies to the more enlightened.
Hi Tex
IMHO the answer is
(1) Wealth tax
(2) An “Ownership Requirement”
I will explain
Everything needs an “owner” so there should be a register showing which human being owns what
If after a limited number of steps (12 ???) you cannot identify a human owner then that “wealth” does not have an owner and must belong to the society it is embedded in
All “owners” must pay the “Wealth Tax” – probably starting at a low percentage at about $1Millon
“Our focus on this outdated picture of poverty helps explain our inability to understand Donald Trump and the rise of the far right in America.”
Question: Is this also one of the reasons the far-left (as in actual far-left, not Sanders style social democracy) has been knee-capped in the US for so long? Because the demographics it usually recruits from, namely minorites and poor people in urban areas, have seen a rise in living standards and thus aren’t desperate enough to be attracted to radical movements?
Yes, yes, yes. And the left has been closed off from access, especially cultural access, to the people who have been most negatively impacted by these economic changes.
Are you talking about racial segregation that separates the poor from whites? It is an interesting question to ask why an uprising on the left has not occurred. Maybe it has to do with the increasing police presence and incarceration in these urban areas.
These urban areas are improving at a far faster rate than the majority-white countryside. In a perverse turn, that helps explain the wave of protests we are seeing in cities now. These minority communities in inner cities have resources, heft, and even education levels that did not exist in previous generations. Inner cities are not a bright future recruiting ground for the left. In fact, there is a big split coming on the left and urban blacks are driving it. They are growing more prosperous and as this occurs, their needs are becoming far more complex and diverse than the Democrats’ current big tent can accommodate.
What I’m talking about is the cultural divide between the organized center of the left and the people in that countryside. They simply have no shared language to speak and no channels over which to communicate. There is no rural left in America and hasn’t been for more than half a century. Think of Howard Dean’s comments a decade ago.
I had to split out a huge chunk of this piece talking about this angle. More coming here, but it needs more time to “cook” in my head.
I am looking forward to when the ‘cooking in your head’ is done and we can read about it. What I struggle with is your notion of ‘improving’. I don’t see it in people’s behavior, reactions, and opinions, but I also fail to see it in the data. It is not ‘trickling down’ and people have found out. The data shows that all economic growth is absorbed at the top, leaving the rest of America stagnant to down. The percentage of poor people has gone up, not down and families in the middle are struggling more often than not.
What the data also shows is that quality of life in the US has ben dwindling compared to other Western countries. Upward mobility gave way to downward mobility. Pensions evaporated. Savings got eaten up by the 2008 recession. Tuition goes up. Healthcare goes up. Debt goes up. Salaries are stagnant to down. Bargaining power evaporated. Jobs are more easily outsourced than ever. And software is eating the world and our jobs – and not the Mexicans.
I hope your next piece offers more data on this. I would also welcome more discussion about how we create a new social contract to provide income to people in a world where productivity gains are realized by automation and computers. A word that does not offer paying jobs for everyone.
One point we haven’t covered concerning the rural white community is their strong devotion to social and culture-war issues. Often, it seems that these issues take precedence over economic ones when rural whites cast their votes. Or, as we commonly hear, they “vote against their economic interests.”
A lot of words Chris and a lot of wishful thinking. Here is the simple narrative: Stagnation is causing anger and that anger is causing radicalization. It is real because people experience it and they react to it. We are spiraling down and not up and nothing is ‘trickling down’ as we have been promised all these years.
This radicalization causes us to look outside our in-group for the culprits of this malaise and that is where the muslims and ISIS come in. Fear is the instrument, but the purpose is to distribute the remaining pie among us and excluding those we identify as the bad guys. It is a simple narrative, but it comes up and is successful everywhere where there is stagnation.
Go ask the people and you will see that economic stagnation is the root cause of all the anger. Income inequality is real, it is growing, and it matters. Technology is accelerating this trend and some projections show that by 2035 45% of today’s jobs will be eliminated. Mix that with the fact that most baby boomers lost their pensions due to corporate restructuring and bankruptcies. No wonder we no longer can see a path to retirement or to get our kids through college. We are angry, both on the right and on the left for the very same reason.
Instead of focusing on ISIS, which has zero impact on our real lives, we need to focus on re-writing the social contract and re-learn to invest into ourselves and our common good if we want to get out of the stagnation. But that is much harder than creating more fear. We are sliding down the slope towards fascism and a way out remains elusive. We already have an entire lineup of demagogues ready to take power.
Here is an article that describes this much better than I could: http://ow.ly/VPzOk
***Go ask the people and you will see that economic stagnation is the root cause of all the anger.***
Go ask people and they will tell you that GMOs cause cancer and Mexicans are taking their jobs. The distinction I’m trying to draw is a fine one, but I think it is important. If I want to discover what is real I need to look beyond what people feel. I need data and I need an intelligent means to interpret that data.
When you look at data on our economy, “stagnation” is not what you find. The data says that something different, or perhaps just more subtle is happening.
Let me offer a thought. If I am a rural white southerner, or a blue collar worker in a Northern suburb and I measure my condition in relative terms versus blacks and Hispanics around me, then I will perceive a stagnant or even declining well-being. And it will be real.
That is meaningful and real, but it is also a narrow and dangerously incomplete picture of the world. Their condition is not a product of stagnation. It’s due to expanding opportunity for everyone else. If, on the basis of their angst, we shut down the engines that are producing this condition, everyone will suffer.
Ignoring data to protect a cherished narrative is perilous. I should know, I’m a Republican.
We agree one one thing: The anger of our time is caused by economic factors. I am a data scientist and thrive on stats. Your conclusion seems bizarre if I understand you right:
You say: “Let me offer a thought. If I am a rural white southerner, or a blue collar worker in a Northern suburb and I measure my condition in relative terms versus blacks and Hispanics around me, then I will perceive a stagnant or even declining well-being. And it will be real.”
So the poor are improving and the whites are getting jealous and overall our economy is not stagnant but going up? Is that what you get out of the Pew study? Is this what all the anger is about: jealousy? Have you tested this narrative in the Republican bubble? I would bet that your white southerner or blue collar worker in a Northern suburb would disagree. The issue is much closer to home, much more existential that just watching your neighbors improve. Broad swaths of this country are in stagnation with geographic inequality compounding.
Lifer: ” I want to discover what is real I need to look beyond what people feel. I need data and I need an intelligent means to interpret that data.”
If this were true, Donald Trump wouldn’t be leading the GOP…..Feelings matter. Data matters, but, it’s obvious, that feelings “trump” (ahem….) data again and again. Now, this doesn’t mean the data is wrong, just that many people don’t believe it, or, are motivated by it. The deficit in your analysis, IMHO, relates to jobs, which, of course, gets back to economics, which gets back to anger (and fear) and hopelessness.
I agree with Ethan and Tom on their points. My children and yours (and most children of those who post here), have a built-in safety net. Mom and Dad can put Humpty Dumpty back together again. Kids have a home they can live in while they wait for a job that correlates with their new college degrees. Heck, many of these kids’ college loans were subsidized by mom and dad. They can stay on mom and dad’s health insurance (thanks to the ACA) until they’re 26. There is a whole network of support from granny toauntie to mommy that quietly exists for these kids. What happens, though, to those in their middle years who lose a job, or are unable to work at a job commensurate with their skills, not to mention, their obligations (mortgage, children’s education, retirement? This poses a whole different scenario. Again, those who have a family safety net probably have a savings safety net, even if it is not robust.
Point being, income matters, which point you have acknowledged in your support for a Basic Guaranteed Income. Adequacy of means matters for a lot of reasons – snot all of which are tied to one’s obligations, but in how one “feels” (there’s that word again) about themselves and their opportunities in life. As has been noted any number of times, it’s the poorer, less educated white class who are principally buying into “Trumpmania” precisely because they feel threatened and they are angry. Surely it isn’t because they like his hair. Or his well-articulated proposals that are so very logical.
So our economic system really is zero-sum?
Or our economic policies act as if it’s zero-sum? Or create a zero-sum environment? It seems against some natural law for an economy to actually BE zero-sum.
This Pew study further underscores the increasingly strong role that education plays in determining one’s economic status.
http://www.pewsocialtrends.org/2014/02/11/the-rising-cost-of-not-going-to-college/
The value of a high school diploma has fallen dramatically. Globalization and automation have decimated available jobs in fields that do not require an advanced education. The only exceptions I can think of are non-outsourceable fields such as plumbing, home electrical services, etc.
It’s also sad to say that, for various reasons (social, inherent ability, etc.), a large proportion of the population is not prepared to succeed in colleges and universities. It seems they’re doomed to an existence in the lower economic tiers.
You got it, Viking. Think: birth control. This one tool makes a huge difference in the ability of young women (to consider this one group) to pursue higher ed, vocational training, or another job. Throw babies into the mix and it can still be done, but oh how very much more difficult.
A fairly large sector that doesn’t require advanced education is the service industry….It is also a good place for one who has a strong work ethic and good people skills to advance into management.
Don’t want to hijack this because its going to be an interesting discussion, but what in the actual f is wrong with this guy?
http://www.rawstory.com/2015/12/trump-spokesperson-why-bother-having-nuclear-weapons-if-youre-afraid-to-use-them/
Its like his ENTIRE strategy is to dumb the conversation down so much that even a 5 y/o can grasp it (but of course leaves zero room for any of the nuance necessary for geopolitical issues).
Wtf isbhe even talking about nuclear weapons for? I thought the bigbthreat was Islamic Terrorism? Not even Ted Cruz is dumb enough to even remotely think that nuclear weapons are a potential solution tobthat problem.
So if not then, is he talking about Russia? Him and Outin were bff’s yesterday.
Not to mention, OF COURSE you’re supposed to be scared to use nuclear weapons. That’s the entire point. They’re terrifying weapons and any CinC needs to understand once you open that door (again) there’s no shutting it.
Does this moron think nuclear weapons are just another phallic symbol we can use when we’re bored as a way to show off how large our penises are?
My impression is that the concepts of actually using nuclear weapons, fighting WW3, etc. are an itch that some politicians can’t seem to scratch. Scary times may be ahead.
Interesting case Chris. But I’m not convinced.
Going by the orinceole of Occams Razor, isn’t the simplest reason for so many millions of people feeling worse off and missing out on the American Dream that they actually are, rather than that they just don’t realize they’re actually better off?
There is widespread consensus among the left and the right that something is broken. That we’ve been sold a faulty bill of goods. I don’t think you can manufacture that. You can’t convince millions that they’re worse off when they actually aren’t. You can absolutely sway people with the REASONS for why they’re worse off, but not the fact THAT they’re worse off.
That’s the big divide between the right and the left, the reasons for the problem, and the solutions. The fact that there’s a serious problem with the status quo is not disputed. And most compellingly, The People seem to have come to this conclusion on their own. There is no widespread mainstream media narrative informing people of this fact. It very much is from a grassroots level.
When the average income for the middle class hasn’t risen in FORTY YEARS (when adjusted for inflation) while the incomes for the top 10% have risen exponentially over that time, and when the share of national income going to the middle class has gotten consistently smaller over that time, combined with skyrocketing tuition costs (at a time when an education in our knowledge based economy makes it increasingly crucial to HAVE an education) I just think the simplest answer is probably the correct one: if it looks like a duck, and sounds like one, it probably is one.
I think the reason for why (as you state) this narrative goes undisputed by both sides is that it’s a self evident truth to a large and increasingly larger slice of the population.
The causes and solutions for the destruction of the middle class are of course subject to intense debate, and anybody who says they know 100% what’s going on is either a liar, or an idiot.
But the fact that there IS a problem? I don’t think that can be explained away with charts and graphs. I mean, I’m all for hard data. But there’s at least as much hard data just as reliable that can be used to argue the exact opposite of your position here.
All around a solid response. What I noticed as I dug into the data is that this is a very complex situation. It does not boil down to a single conclusion. I would emphasize these things:
***There is widespread consensus among the left and the right that something is broken.***
This is ALWAYS true. Go back and read political commentary across the decades and you will never find a period when analysts are not making this observation. It is a human instinct. You can’t sell a newspaper with this headline “Things were amazing today!” This is why we look to the data rather than public mood to find out what’s real.
The depth of the public mood around this subject, in my opinion, is attributable to the political heft and sensitivity of the people who are demonstrably experiencing the worst outcomes – lower income, less educated whites who used to enjoy a special protected status in our economy.
***When the average income for the middle class hasn’t risen in FORTY YEARS (et al)***
That’s not exactly accurate. Again, these numbers are complex, partly because we’re blending relative statistics with absolute ones. Middle incomes, at the median, have only slid since 2000. The bulk of that slide was related to the financial collapse. That trend has already reversed, though the lost ground has not been recovered.
More detail from the Pew study, though the context might be a little confusing:
“The news regarding the American middle class is not all bad. Although the middle class has not kept pace with upper-income households, its median income, adjusted for household size, has risen over the long haul, increasing 34% since 1970. That is not as strong as the 47% increase in income for upper-income households, though it is greater than the 28% increase among lower-income households.”
***There is no widespread mainstream media narrative informing people of this fact***
Really? Really really? Isn’t that conclusion posted nearly everywhere right now?
What if something really hopeful is happening and we wreck it because we don’t understand it? Look closely and some very exciting things emerge from these income statistics. Minorities and women are climbing at a faster pace than everyone else in our economy. The cost of almost everything is practically in free-fall. Education, rather than land-ownership, is the hinge of economic success and more people than ever before are getting an education.
It is a complicated picture. I think our prevailing narrative is missing the most interesting dimensions of this story.
Chris, I’m a big fan of your blog and your writings, but I think just looking at “income” doesn’t give even a fuzzy picture of what has been happening in post-World War II America. For example, does the income data capture if a person does or does not have a pension?
Does the income data capture the fact that a family that might have gotten by with one income in the 60s now has two incomes in the 2010s? Sure if you have a family with two incomes the total family income may indeed even be greater than the 60s family when adjusted for inflation, but what if the 2nd spouse has to spend 40 hours to net just $10,000 per year in extra income for family after taking into account daycare, additional transportation expenses, etc. Does that family really feel richer?
Or take the retirement community my parent retired to in the early 1990s. When they joined the community, the retirees included not only lawyers and doctors, but ministers, small business owners, teachers and government workers. Also, many people retired there in their 60s and in reasonably good health. But within just 20 years time, most of the people retiring there were government workers and people who were much older and in much poorer health. Older government workers have become a dominant clientele for the retirement community because they have both guaranteed pensions and healthcare benefits in retirement, something not shared by most people in the private sector, even workers who once had such benefits prior to their companies being acquired.
Or consider the cost of assisted-living for a family member. The average cost for assisted living is said to be $3,000 or so per month, but from my personal experience, that is probably on the low side. Sure families could take care of their elderly family members in their own homes, but how many jobs today allow workers to take care of elderly family members or family members with health issues?
Or consider how much the cost of health care exploded and college have exploded in the last thirty years. Each of those costs can exceed what a family spends on everything else during the year with the possible exception of its annual mortgage (or if it chooses to buy a motor vehicle with cash).
Conversely, a lot of things such as nearly every consumer product has gotten a lot cheaper including TVs, computers, furniture, music, basic level electronic appliances, etc. Even smartphones which, at first may seem expensive, probably save a consumer money in some ways compared to the same consumer in the 60s. For example, you no longer need to buy a separate camera, movie camera, record player or phone. Consumers no longer have to pay for physical records or cassettes or for songs they don’t want. Consumers do not have to pay for film, having film developed, etc. Having been alive during the 60s, it really is amazing the consumer goods paradise we currently live in.
Travel by plane is also a lot cheaper than it was during the government regulated era of the 60s and 70s. People forget how rarely middle class people flew up through the 70s.
There are also what I call “friction costs” that may not show up in pure income statistics. For example, let’s say I have one job for 5 years at $40,000 per year and then a new job for $45,000 in a different city for five years. I can come out behind to someone who had a job for $40,000 for 10 years, because the person that stayed in his/her job did not have to sell an old house and buy a new house and pay the many costs that come with moving. Or lets say the reason I had to get the new job was that my company which was the major employer in my town shut down, so my old house’s value has now plummeted and that’s why I had to move to get the new job. Now I can come out considerably worse even after having a better paying job for the last 5 years.
And there are probably a hundred other things that make it difficult to make a meaningful apples to apples comparison of the middle class today to the middle class of the 50s, 60s or 70s based just on income or a statistics only related to income.
Hi
IMHO one of the ways to compare is to compare with other countries,
Back in the 70’s (and before) there was no question at all
The best place to be a normal working guy was the USA
Roll forwards to now
There are probably 20+ countries that are better for the working guy
This is what bugs the middle class – they are not the best off anymore
IPLawyer
First, you make some good points. I don’t want this to sound uncharitable, but the subject can’t be avoided. I’ve deferred writing about it because it is even more complex than this income piece and perhaps even more inflammatory, but here it is.
Your anecdotal retirement community caught my attention. Browse the images of that place in your mind, with its middle income retirees like government workers and teachers. How many black faces do you recall in that image?
This gets to the heart of the issue.
How was America able to deliver such an apparently idyllic quality of life for ordinary steel workers and government employees with such low levels of educational attainment? How were they able to accumulate enough retirement income over the course of a modest career that they could retire to an ersatz Florida world all their own?
Hint, it wasn’t unions or high taxes or strong family values.
First of all, it wasn’t nearly so idyllic as we imagine in retrospect. And second, that lifestyle was propped up by a massive underclass of non-white Americans whose resources were being systematically looted to benefit white male workers.
Want to know why good, honest, hardworking people with little or no education can’t get ahead anymore? Because they no longer enjoy systematic racial subsidies that propped them up for the entire length of the American experience.
Now, women and black people and Hispanics and Asians and all kinds of folks can get an education, start businesses, and compete in job markets on terms which, though still not equal, are equal enough that less successful whites are starting to lose ground in absolute terms. We no longer reserve every single government job of any consequence for white males. We no longer reserve every single good-paying union trade job for white males. It is a different world, more fair, more just, and more free and as a consequence, more competitive and challenging – at least for aging whites.
We experience outcomes which are far more unequal for one reason more than any other – our political, cultural and economic system is no depressing competition to protect white men.
These new competitors are people who never before had the pensions you describe, or long term care insurance, or even health insurance for that matter. Black and Hispanic workers, or women without a husband, never dared imagine that they could quit working when they were old and sick, much less be carried off to a magical Florida to ride out their golden years. Middle class America never existed for them. They don’t miss it.
We can’t really talk about the end of “Middle Class America” without talking about the end of white male America. I just didn’t have space in this post. As a consequence this post kind of hangs in the breeze like a Christmas garland that’s come loose. I’ll get there, but this is going to take a little time.
Hi Chris
To your notion that
“we can’t have the middle class because it was effectively based on a brown/black underclass”
I say look at the rest of the world
I recently retired from a Municipal Utility. My fellow workers look like the city we work for. A pretty even mix of White,Black, Hispanic and Asian faces. This has been true over my thirty year career. And retirees are well off and are that minority majority mix. My company did away with the define benefit pension for newer workers, offering a 403 B plan instead. But ended up having to offer an even richer retirement scheme for these workers as they were having trouble keeping new talent. We are a very skilled and educated bunch overall. This is not the standard story line. So things are changing in the sense if you have talent with education and experience you can get rewarded no matter what your skin hue is. I see places in the south like Orlando or Miami Florida as laboratories. A multi-ethnic diverse culture is starting in cities and then moving outward. I really think we are a preview where the nation as a whole is heading. And yes education opportunity is a must. But what do we do for those who do not have the ability to do technical jobs? It is not just whites that have that problem but every group.
It’s not that we can’t have a middle class so to speak, it’s that our image of what a middle class is comes from a lie. Our 50’s middle class was constructed out of oppression, plain as day. It was built on the backs of women and minorities who did not get a chance to participate equally, but had value extracted from them nonetheless.
And the collapse of that middle class is not a finality, it is a progress toward something freer, more open, far more diverse, and better in nearly every conceivable way – except that outcomes will be consistently less equal. That’s what happens when people are free.
Not everyone will benefit equally from this transition, and the people who are benefiting the least are also relatively influential politically. They are rural and white and male and for the most part over 45. They are working very hard to shut down this transition.
They are starting to create serious political problems. Those problems will be much more damaging if we cling to myths about the past.
“it is a progress toward something freer, more open, far more diverse, and better in nearly every conceivable way – except that outcomes will be consistently less equal. That’s what happens when people are free.”
I am on board with freer, more open and diverse….if it results in “better”, but, I am left with many questions about this replacement for the Middle income group. Better for whom? Those who are born whip smart? Born to wealth? Employed in fortuitous situations? Those who work really hard but lack other criteria? Do you envision sufficient numbers to strengthen our nation without exacerbating the class divide?
I, too, am interested in seeing how this “cooks” in your head. Change is happening and the generation charged with managing it has a big job ahead. Exciting times, for sure, if one is on the crest of the wave and not floundering on the rocks.
You keep mentioning that cost of almost everything is in free-fall. Food cost, though plentiful and varied, is not falling (note: I do the grocery shopping. Production costs may be lower due to large commercial farming, but consumer pricing does not always reap this pricing benefit in the stores.) Health care cost is assuredly rising. Medication cost is going through the roof. Housing is very area-sensitive in terms of cost. Higher education costs are through the roof. What am I missing here of the “big” costs?
Rob – I think you nailed it. It is not complicated and I disagree with Chris’ notion that it is. I also agree that the cause for the anger is the same on the right and on the left. The difference is that the nationalist reaction always originates on the right. The left is guilty in that they don’t create a strong enough counter argument. This is exactly why Bernie is raising and why I think he has a good chance of winning against Hillary. There is a lot of anger on the left too. This covers the same topic: http://ow.ly/VPzOk