The Upper Middle Class as a new American Aristocracy

[lpetrich]

The Birth of the New American Aristocracy - The Atlantic

Author Matthew Stewart describing an earlier, fading aristocracy:

At the age of 11 or 12, I gathered from him, between his puffs of cigar smoke, that we owed our weeks of plenty to Great-Grandfather, Colonel Robert W. Stewart, a Rough Rider with Teddy Roosevelt who made his fortune as the chairman of Standard Oil of Indiana in the 1920s. I was also given to understand that, for reasons traceable to some ancient and incomprehensible dispute, the Rockefellers were the mortal enemies of our clan. Only much later in life did I learn that the stories about the Colonel and his tangles with titans fell far short of the truth.

After his very middle-class upbringing, "I’ve joined a new aristocracy now, even if we still call ourselves meritocratic winners."

By any sociological or financial measure, it’s good to be us. It’s even better to be our kids. In our health, family life, friendship networks, and level of education, not to mention money, we are crushing the competition below. But we do have a blind spot, and it is located right in the center of the mirror: We seem to be the last to notice just how rapidly we’ve morphed, or what we’ve morphed into.

The meritocratic class has mastered the old trick of consolidating wealth and passing privilege along at the expense of other people’s children.

After noting the 1% vs. 99% story that many of us have been telling ourselves, he concludes that it is very oversimplified.

It is in fact the top 0.1 percent who have been the big winners in the growing concentration of wealth over the past half century. According to the UC Berkeley economists Emmanuel Saez and Gabriel Zucman, the 160,000 or so households in that group held 22 percent of America’s wealth in 2012, up from 10 percent in 1963. If you’re looking for the kind of money that can buy elections, you’ll find it inside the top 0.1 percent alone.

Every piece of the pie picked up by the 0.1 percent, in relative terms, had to come from the people below. But not everyone in the 99.9 percent gave up a slice. Only those in the bottom 90 percent did. At their peak, in the mid-1980s, people in this group held 35 percent of the nation’s wealth. Three decades later that had fallen 12 points—exactly as much as the wealth of the 0.1 percent rose.

However, the 9.9 percent, the upper middle class to upper class, has been holding steady.

So what kind of characters are we, the 9.9 percent? We are mostly not like those flamboyant political manipulators from the 0.1 percent. We’re a well-behaved, flannel-suited crowd of lawyers, doctors, dentists, mid-level investment bankers, M.B.A.s with opaque job titles, and assorted other professionals—the kind of people you might invite to dinner. In fact, we’re so self-effacing, we deny our own existence. We keep insisting that we’re “middle class.”

As to how much one would have to increase one's wealth from the national average to enter this class, in 1963, it was only 6 times, while in 2016, it was 12 times. To get to the middle of it requires 25 times. Thus being much like the 1920's.

Not surprisingly, not many people do so in practice. "Contrary to popular myth, economic mobility in the land of opportunity is not high, and it’s going down." A good measure of that is "intergenerational earnings elasticity", how much one's earnings differ from the earnings of one's parents. Around 1970 it was less than 0.3, and it is now 0.5 and climbing. Looking at the US's northern neighbor, Canada, it has an IGE about half that. In between, there is plenty of mobility, but the US has much less mobility at the bottom and at the top.

Comparing different countries, the more inequality, the higher the IGE. Those on the top become experts at keeping themselves there. Economist Alan Krueger calls it the Great Gatsby Curve, after that novel of 1920's excess.

Money may be the measure of wealth, but it is far from the only form of it. Family, friends, social networks, personal health, culture, education, and even location are all ways of being rich, too. These nonfinancial forms of wealth, as it turns out, aren’t simply perks of membership in our aristocracy. They define us.

For instance, "According to one study, the last time marriage partners sorted themselves by educational status as much as they do now was in the 1920s."

In 19th-century England, the rich really were different. They didn’t just have more money; they were taller—a lot taller. According to a study colorfully titled “On English Pygmies and Giants,” 16-year-old boys from the upper classes towered a remarkable 8.6 inches, on average, over their undernourished, lower-class countrymen. We are reproducing the same kind of division via a different set of dimensions.

Obesity, diabetes, heart disease, kidney disease, and liver disease are all two to three times more common in individuals who have a family income of less than $35,000 than in those who have a family income greater than $100,000. Among low-educated, middle-aged whites, the death rate in the United States—alone in the developed world—increased in the first decade and a half of the 21st century.

 

[lpetrich]

Then about elite universities and how they perpetuate their upper-middle-class and upper-class clientele, complete with allowing in token members of the classes lower than them.

In 1985, 54 percent of students at the 250 most selective colleges came from families in the bottom three quartiles of the income distribution. A similar review of the class of 2010 put that figure at just 33 percent. According to a 2017 study, 38 elite colleges—among them five of the Ivies—had more students from the top 1 percent than from the bottom 60 percent.

College education increases one's earning power -- more in the US than elsewhere. It's now 70%, when it used to be something like 20% in the 1950's. Looking elsewhere, France and Germany: 40%, Japan: less than 30%, Norway and Denmark: less than 20%. Elite universities like Harvard provide an even greater premium, with the top 10% earning more than 3 times more than for college-educated top 10% in general.

Part of it is choosing certain categories of jobs.

Well over half of Ivy League graduates, for instance, typically go straight into one of four career tracks that are generally reserved for the well educated: finance, management consulting, medicine, or law.

US doctors earn twice as much as other industrialized countries' doctors, and that is in part because their professional organizations do various things to push up their wages, like restrict how many people may try to become them. US lawyers are similar, and other professions have similar systems of restrictive credentialing.

What the author describes about the tech industry is the result of some decades of emergence and growth. The five top companies now have 40% of NASDAQ's stock value, and: "Much of the rest of the technology sector consists of virtual entities waiting patiently to feed themselves to these beasts."

Then the biggest of them all, the financial industry.

Americans now turn over $1 of every $12 in GDP to the financial sector; in the 1950s, the bankers were content to keep only $1 out of $40.

Complete with being bailed out at taxpayers' expense in 2008.

THe rest of the population has not been doing so well. "Auto workers, for example. Caregivers. Retail workers. Furniture makers. Food workers."

You see, when educated people with excellent credentials band together to advance their collective interest, it’s all part of serving the public good by ensuring a high quality of service, establishing fair working conditions, and giving merit its due. ... When working-class people do it—through unions—it’s a violation of the sacred principles of the free market. It’s thuggish and anti-modern.

Then he asked what if ordinary workers hired consultants and "compensation committees" drawn from their fellow workers. That's what CEO's do.

THen,

Across countries, the same correlation obtains: the higher the college premium, the lower the social mobility.

 

[lpetrich]

Turning to government,

We in the 9.9 percent have mastered the art of getting the government to work for us even while complaining loudly that it’s working for those other people.

Like the Federal income tax. But,

The poorest quintile of Americans pays more than twice the rate of state taxes as the top 1 percent does, and about half again what the top 10 percent pays.

The author then went on to discuss tax breaks, a form of backdoor handouts.

Something like "Keep your government hands off my Medicare!"

Next up is "The Gilded Zip Code". Property values in some neighborhoods have been going up grotesquely, from their inhabitants having the money to bid those prices up.

The returns on (the right kind of) real estate have been so extraordinary that, according to some economists, real estate alone may account for essentially all of the increase in wealth concentration over the past half century.

Thus making some cities unaffordable for people without much income.

Part of it is local zoning regulations, making it difficult to build more dense housing. But these regulations benefit those whose houses have become grotesquely expensive. So allowing more dense housing would lower the value of existing housing.

Gilded zip codes deliver higher life expectancy, more-useful social networks, and lower crime rates. Lengthy commutes, by contrast, cause obesity, neck pain, stress, insomnia, loneliness, and divorce, as Annie Lowrey reported in Slate. One study found that a commute of 45 minutes or longer by one spouse increased the chance of divorce by 40 percent.

Gilded zip codes also have higher-quality schools than most other neighborhoods.

 

[lpetrich]

Consider the reception that at least some members of our tribe have offered to those who have foolishly dared to draw attention to our advantages. Last year, when the Brookings Institution researcher Richard V. Reeves, following up on his book Dream Hoarders, told the readers of The New York Times to “Stop Pretending You’re Not Rich,” many of those readers accused him of engaging in “class warfare,” of writing “a meaningless article,” and of being “rife with guilt.”

The sort of people who brag about how they never needed anybody's help.

Not surprisingly, many people have not appreciated the rise of this class. About the Trump presidency,

It rode in on the back of an alliance between a tiny subset of super-wealthy 0.1 percenters (not all of them necessarily American) and a large number of 90 percenters who stand for pretty much everything the 9.9 percent are not.

Also,

The residents of Trump country were also the losers in the war on human health. According to Shannon Monnat, an associate professor of sociology at Syracuse, the Rust Belt counties that put the anti-government-health-care candidate over the top were those that lost the most people in recent years to deaths of despair—those due to alcohol, drugs, and suicide.

Though President Trump lost by 17% among college-educated people, he won by 36% among non-college-educated white people. These are also people who believe that minorities have it better than white people.

Then, "How Aristocracies Fall". It was the Great Depression and World War II that did in the US aristocracy of the Gilded Age and the Roaring Twenties.

Even further back, the slave states had an aristocracy of slaveowners, an aristocracy that paid other free citizens to support them and fight for them. They were deposed by the US Civil War, a war that killed more Americans than any other war.

In The Great Leveler, the historian Walter Scheidel makes a disturbingly good case that inequality has reliably ended only in catastrophic violence: wars, revolutions, the collapse of states, or plagues and other disasters.

There have been a few exceptions, but not many. "The best revolutions do not start at the bottom; they are the work of the upper-middle class."

It will take a lot of activism to end Gilded Age II, and it will be especially challenging to do so without some very nasty strife.

 

[Trausti]

Paging Charles Murray . . .

 

[steve_bank]

The idea of a wide middle class of a high percentage of population is a pot WWII idea, it is an experiment.

 

[Rhea]

That was a very good article. Lots of depth, lots of detail.

 

[barbos]

Lawyers and doctors had a good run but they are about to get kicked out by AI.
Finance and management involves a lot of corruption, AI will need to work on that.