It’s not just the 1%. The upper middle class is oppressing everyone else, too.

“What’d I do, officer?” – Me. “Breathing while ‘well-to-do.’ ” – The Income Police.

Busted! Or at least strongly accused. Or possibly run off the road by vigilantes. Whatever the case, the headline grabbed my attention.

The title read, “It’s not just the 1%. The upper middle class is oppressing everyone else, too,” for an article by Jamie Peck in The Guardian. I am aware of the widening “income” gap between the upper middle class and the middle class and various rationales for why this has been happening. I just hadn’t come across any attempts to pin it on a broader swath than just the 1%, or the more generic “the rich get richer and the poor get poorer.” I took the bait. I clicked.

The first thing I learned is that this is a short opinion piece about a larger opinion piece, the book Dream Hoarders by Richard Reeves (which I haven’t read, relying here on my best secondary source, Jamie Peck).

Reeves defines the upper middle class as those earning $120,000 a year or more (whew, that leaves me out. Never made that cut once. But, I wonder, is that for individuals or couples?). According to Reeves, not only is this group widening the gap in income with those below them, but they are also hoarding opportunities in a way that makes it difficult for any outsiders (or below-ers, I guess) to climb into it. No argument on the first claim, but that second one needs some scrutiny.

It seems the argument originates from Reeves’ (and Peck’s) assumption, paralleling the majority of the media and politicians, that life and the American economy (or any economy for that matter) is purely a Zero-Sum game. That there are only so many good jobs, spots in elite colleges, and tony area codes to go around. If someone else gets one, then you don’t.

The identified flaw, apparently, is not that there is direct classism, but rather that the upper middle class use their privileged state to give their children a head start (nice choice of words, there, I think) and set them up to succeed from the beginning, from well funded schools through to nice internships, “because of who they know.” (Peck adds, “only the upper crust can afford to do unpaid internships,” apparently forgetting that many a successful corporate executive or CEO began in the mailroom, some only after arriving as an immigrant with only a few dollars in their pockets. I sense that the word “initiative” is not in either of their vocabularies.)

“By the time they enter the job market, they have considerable advantages over everyone else. And then they inherit vast sums of wealth. All the while, they use the myth of meritocracy to justify their position.”

Wow. I feel as if I have been slapped in the face with a dead fish (one that, apparently, also took the click bait). A couple of quick thoughts:

  • “…they have considerable advantages…” Highly likely to be true. However, most of these advantages consist of a series of sequential events:
    1. They had certain skills and talents;
    2. Someone recognized these and challenged them to develop them;
    3. They chose to respond to the challenge;
    4. They demonstrated these developing skills, and received feedback from superiors;
    5. They received recommendations from people with proven skills in recognizing credible talent (i.e., not family members);
    6. They then moved into a competitive environment where they not only had to continue to demonstrate these skills (i.e., produce); but
    7. Then had to demonstrate the ability to further develop and execute new skills, levels of proficiency and good decision-making (i.e., adapt and grow).

From my experience, this sequence is like a chain – break the chain at any link and you go back and either start over or start earlier. Or you give up and don’t. It’s called Performance Gravity.

Those “high incomes” referred to? They are primarily attained when one reaches the seventh step, not when one starts somewhere in the first four steps.

  • “…And then they inherit vast sums of wealth.”Not likely to be true at all (perhaps this is another form of emotional clickbait to induce one to read further). Not only is this not true of the upper 20%, it is not true of the 1%, and may only be true of the 0.1%, at best. I’ll return to this later. The remark seems to imply that we are now subject to class overlords similar to the landed aristocracy of earlier centuries in Britain (and elsewhere). There is ample discussion of the minimal influence of the idea of inherited wealth in America in Thomas Piketty’s Capital in the Twenty-First Century.
  • “… they use the myth of meritocracy to justify their position.”Yes, there is always some form of “old boy club” involved in climbing up the career ladder, only today we call it “networking” and develop software and get-togethers to make sure we are connected. But even the “networking” follows the seven steps above to a high degree. In retrospect, I can say that more than 80% of my career moves occurred through a relationship with someone I knew (“networked” with) professionally. However, in all of those cases their impression of me was due to validating me through the “sequence of events” mentioned above. And in the other 20% of career moves, I had to validate the sequence myself.

Moving on to the article’s next paragraph,

“On a micro level, these behaviors are understandable. What parent wouldn’t do everything in their power to ensure the best possible life for their children? But carried out on a mass level, they lead to what Reeves characterizes as a “less competitive economy, as well as a less open society”.

Hmmm. Another feint followed by a slap. If I understand this correctly, what is expressed is that for each of us, as parents with children, this behavior is acceptable, a form of Survival of the Fittest, or One against the World. But if a whole lot of people, acting as individuals who independently develop and practice the same skills and behaviors “on a mass level”, then it is more or less a conspiracy and intentional oppression of those who have not developed the behavior. Interesting. It’s as if when two or more people gather together with similar behaviors, they become Takers perpetrating a Negative Sum Game on the rest of the world. I suspect there is also something missing here, but I will return to this below.

“While it might feel good to hate these people and/or convince them to hate themselves for hoarding all those dreams, that’s not ultimately going to solve anything.”

Ok, so I think I’ve been whipsawed from “understandable” and commendable behaviors (“What parent wouldn’t …”), to the unintended consequences of these behaviors (“… they lead … to a less competitive economy…”), to outright accusation of intentional oppression (“… convince them to hate themselves for hoarding all those dreams …”).

Now I’m beginning to detect a fly in the ointment. To whit,

“Rampant inequality is not the fault of a class of people doing exactly what anyone would do in their position but a political and economic system that incentivizes and enables them to do so. (Don’t hate the player, hate the game.) It follows that the solution is not individual and moralistic, but collective and political.”

And there she is, still wiggling. Consider this,

  • “Rampant inequality is not the fault of a class of people doing exactly what anyone would do in their position, …” (Oh, thank heavens. I was really beginning to think …)  Yes, there is inequality, but data suggest it is not as wide a gap as in other countries nor is it as polarized as presented. And one traditionally designates a “class” by birth characteristics, not by chosen accomplishment or earned characteristics. To do so creates a wider chasm between “them” and “us” (whoever “them” is). But since this sentence has been crafted in an absolute form, let me counter with one crafted from the other side of the coin, one with more than a hint of validity but scrupulously avoided because it is not PC, “Rampant inequality is also contributed to by another class of people not doing exactly what anyone would do in their position …” More on this below.
  • “… but a political and economic system that incentivizes and enables them to do so. (Don’t hate the player, hate the game.)” (Gee, it’s nice now to clarify that one shouldn’t hate the player after such an excellent job of fixing the blame on him up to this parenthetical remark.)  Yes, there is a political and economic system, in fact, possibly two. One, which is generally passive, provides a framework of freedom and opportunity for an individual to develop and become the best that they can be (“develop” here directly implies motivation and the exertion of energy. Like most competitive games, it requires learning the rules and how to play by them well. And ethically.). The other system, layered on top of the first, is an active system that either provides various forms of “help” that very often incentivize and enable the recipients not to do exactly what any motivated person would do in their position, or imposes forms of “obstruction” or “punishment” for those who do what any motivated person would do in their position, and succeed at it.
  • “It follows that the solution is not individual and moralistic, but collective and political.”  And that, of course, is the next logical conclusion once one has first decided that the individual plays no role (except when they are successful) and second, that the current 2nd political and economic system has not sufficiently corrected the issue. This is right out of the playbook written by Daniel Moynihan, which appears in The Central Liberal Truth,

“The central conservative truth is that it is culture, not politics, that determines the success of a society. The central liberal truth is that politics can change a culture and save it from itself.”

This is a perfect example of Either/Or thinking. Actually, the greater truth is that both views are right to an extent, and both approaches are needed to change a culture, starting with the individual.

Closing thoughts and other comments pushed to “More on this below”

One basic question that came to mind early on was, “What income sources were included in the $125,000 income cutoff used to define the Upper Middle Class?” Is it only earned income (income from labor, working any job), or does it also include unearned income (income from investments and other capital, for example). The question is actually critical. I will presume the data arise from US Census and tax data, which would mean it includes both.

At the same time the same data would show that a preponderance of the capital that produces unearned income is concentrated in the upper 50% of the population. This raises the next basic question, “Why?”

First, data indicate that 80% of the English speaking world does not feel comfortable with math at all, especially in their finances. Further, 2/3rds of English speaking people cannot explain compound interest (the process by which deposited money grows with time because interest is reinvested – the Time Value of Money).1 As a consequence, the majority of the population is at odds not only with managing their monthly finances, but planning for the future as well.

Thinking a bit more broadly, I also suspect the following would be easily shown:

  • All people are born with certain gifts, skills and talents (potential);
  • Some people have these gifts recognized by family members or others, who then attempt to stimulate and develop them as needed life skills (capabilities);
  • Still fewer of these people are motivated (choose) to respond to the challenge of developing these skills and putting them to use (opportunities) with an eye to the future (success);
  • Others are not motivated (do not choose) to respond and develop them, and pass that attitude on (unintended consequence).

So, what might be a different factor in “income” and/or “wealth” inequality than is typically recognized?

How about: Choice. And in particular, either seeking and choosing to respond to opportunities, or choosing not to respond and leaving that as one’s legacy.

Supporting that idea is the article, America’s new tobacco crisis: The rich stopped smoking, the poor didn’t. Everyone has access to the same information on the link to cancer and health, so why would the poor, with limited income, spend $8 a pack on a dangerous habit? It’s not as if they haven’t been exposed to the information, the notification by the Surgeon General. So there must be a strong element of Choice, modified by a sense of belonging to a familiar group (a “poverty clan”) and needing to follow in the group’s behaviors, that is: Regression to the Cultural Mean.

Another distorted phenomenon is participation in state lotteries and dealing with winning. Research has shown that the majority of people who participate in state lotteries are those who can least afford it: a majority of players are below the average income. The chance to win big to close that money gap is far easier to comprehend (and choose) than understanding the risks and the near non-existent chance of winning. To top it off, even if someone wins, there’s a 70% chance they will burn through all of their winnings within 5 years, regardless of the amount (into millions). Lotteries do not buy happiness, nor financial savvy. This is so common that companies exist that will buy back a lottery annuity to bail people out of the deeper financial difficulty they put themselves into through not being able to manage their new found wealth.

How about this recent article, “Wealth managers are the driving force behind global inequality, according to a sociologist of the ultra-rich.” This deals more with those who are not playing the game by the rules, in this case ethically paying one’s fair share of taxes. Tax evasion was studied in 18 countries and the results indicated that there is a section of society that hoards and effectively oppresses the rest of the world by forcing them to carry more than their fair share of the tax burden. Graphically, these are the results from the article,

One needs to look carefully at the graph, particularly the horizontal x-axis: it is not linear. “P0-10” means “from 0% to 10%.” The segments to the left are in deciles, that is, lowest 10%, then the next 10%, etc., for the first 9 tick-marks up to the 90th percentile. Then the percentiles change: 90%-95%; then 95%-99%; then 99%-99.5%. What is important is that it is only those above the 99.95% percentile (the upper 0.05%) who evade taxes above the macro average of everybody else. It isn’t the 20%, or even the 1% who are hoarding! It’s the 0.05%!

Or, how about “14-year-old Warren Buffett’s first tax return shows he was making bank even as a teen.” He paid $7 in taxes on $592.50 of income in 1944. Included in that income was $228 in interest and dividend income – in other words, as a teenager, in the lower deciles of “income” and “wealth” (i.e., if considered a single wage earner he would be below the poverty level), he already knew about unearned income and chose to pursue it!

Buffett also declares in his interview and press release, that “My 2015 return shows adjusted gross income of $11,563, 931. My deductions totaled $5,477,694, of which allowable charitable contributions were $3,469,179.  … The total charitable contributions I made during the year were $2,858,057,970, of which $2.85 billion were not taken as deductions and never will be.”

One can play ethically by the rules, do very well, and put more back into aiding society and the poor than most government programs end up doing. This is more the rule than the exception, unbeknownst to most.

And speaking of government programs, consider, “Despite money and effort, homelessness in SF as bad as ever.” Despite all the money spent directly addressing homelessness ($275 million in 2016), the problem is as bad as ever in San Francisco. Too much of treating what others think the issue is.

And then there’s this, “Coins thrown into plane engine by elderly passenger for ‘luck’.” Clearly she wasn’t “poor” as she had enough coinage to throw away (for ‘luck’).

What one has to consider is that being “poor” covers more than just insufficient income or wealth (they’re different!). Being poor can also realistically concern physical, mental, emotional, and even spiritual issues. After all, even though Jesus pilloried the Pharisees for failing to take care of the widows and the poor (and not just financially poor), he also said the poor would always be with us. Those unable to address their poverty should be taken care of. Those able to do something should be helped with actual needs, not wants.

Finally

In one sense I did enjoy the article and what parts of the book it used and referenced. It (and the must-read comments section) confirmed for me that much of what is already known, that poverty is not the result of rapacious financiers (or even a “class” of people) exploiting the poor,2 is inadequately understood or accepted. What we encounter is still built upon a foundation of Incomplete Information, that the thinking is too often Either/Or (combative, including incendiary journalism) rather than And/And (solution finding), that politics and society have superbly reinforced the General Negative Sum Attitude (“If I don’t have it, you must have taken it before I could, so I am entitled to get it back any way I can”), and that policies are too often based on Fixing the Blame. All the inevitable consequence of ignoring Gap Theory.

This must be the new American version of Saving Face.

Notes:

1 The Ascent of Money, Niall Ferguson, p 12-13.
2 The Ascent of Money, Niall Ferguson, p 15.

Advertisements

About Jim Edmonds

I am a husband, father, mentor, who once was a chemist turned physicist turned marketer turned executive turned missionary turned professor. And survived it all.
This entry was posted in 04: Games People Play, 06: Incomplete Information, 16: Culture, 17: Choice, Gap Theory and tagged , , , , , , , , , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s