Author Topic: Meet the ‘semi-rich’: Millions of high-income Americans may not feel wealthy but  (Read 27777 times)

ixtap

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Also, if we're going to compare our net worth to others, I think it makes more sense to do it by age than by the population overall. If I'm interested in how I compare to others, I want it to reflect my peers, not somebody that's had 40+ more years on this planet to accumulate their wealth:
https://dqydj.com/net-worth-by-age-calculator-united-states/
I'm old, so I thought I'd try this one. I got 59%. Huh? Then I realized I'd missed a zero. Oops. 93%. I can't be arsed to calculate our actual NW, so even that number is a bit low.

Here's the relevance of my comment on this thread. Having "multiple two-comma money" (inside joke) or rather, a number > 2 in front of the first comma, gives us an incredibly exhuberant feeling of buoyancy. Nothing is a problem when you can just throw a relatively de minimis amount of money at it. We did not expect that and it's pretty fucking amazing.

Neither DH or I have four year degrees. We were never high wage earners. This shit works, man, it really works!

Do you choose to include equity? I do, even though we don't own. Forgetting a zero sends me down to 52%.

LBYM is powerful and extremely accessible to the middle class and above. We have had people tell us we are lucky to have the options we have. Well, I am generally the first to point out that luck played a role, but we made a lot of choices that got us here as well. However, like building healthy habits (which I suck at maintaining, so I do understand how hard change is!), people don't want to hear about that side of things.

ChpBstrd

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IDK if the article is 100% representative of MMM cult members, but there are some similarities.

Many of us know we are achieving wealth because we're frugal, and not all of us are/were particularly hard-working, which is a little bit different concept than meritocracy - frugalocracy? The point of FIRE is to NOT be hard working.

We MMMers have our own, different virtue signals - see the threads about bragging on your beater car, the DIY section, the mortgage payoff threads, Share Your Badassity, etc.

Most of us also probably have a slightly different attitude toward people who have failed at the financial aspect of their lives and yet are not disabled or oppressed. We (accurately I think) see such people working their asses off and not getting any wealthier in the process because of high consumption. This does not lead us to have any more sympathy than the meritocrats have. In fact we go so far as to send face punches, and consider their lack of financial security to be a lifestyle choice.

We have an underlying resentment for the hyper-consumers who must keep up with the Joneses, because in addition to being ecological disasters, they persuade middle class and poor people to make bad choices and live miserable paycheck-to-paycheck existences. This includes many if not most of the "semi-rich". On the flip side, we sympathize with truly lazy people, regardless of socioeconomic status, because they are making choices that buy themselves more control of their time. Such attitudes are aimed squarely at the targets of that article.

Most of us don't identify with the anti-capitalist far left either, because it's damn hard to save up so much cash that one can live half a lifetime burning down that pile without earning anything and without leaving your children destitute. We are hacking capitalism to our advantage, and we awkwardly acknowledge that much of our riches are earned off the hyper-consumption / self-impoverishment of others. It's a paradox we live with, and we tell ourselves those people are making their choices and we're making ours. We get to passively profit off of their losses because we are willing to live without luxury cars, designer clothes, and plastic bullshit from Target. This is a direct branch of meritocracy, and it's how we excuse our participation in the life-destroying system epitomized by the strip mall, the drive through, and the gated McMansion development. We also point out that the system would go on without our participation, and decide we did not cause such a system to persist.

Beyond these themes, I think MMM cultists are more likely to feel gratitude for our great lot in life, these great opportunities to arbitrage a way to make other people work for our benefit the entire 2nd half of our lives, and the role that luck plays. Compared to the high-pressure jobs the "semi-rich" are working, our frugality-based path to wealth is relatively simple, relatively painless, and strengthens us instead of wearing us down.

I'm in the 95th percentile for my age. I know I'm doing well. I'm grateful to be here on my path. I know there is no other definition for "rich" than to be in the 95th percentile, in the United States, healthy, and with all the luxuries of 21st century life at my fingertips. I just ate a blueberry from my refrigerator that was flown hundreds of miles to me after being picked by someone else and ordered on the internet because I didn't want to have to walk around a store. My single blueberry exceeded the opulence of ancient Rome's greatest feasts by an order of magnitude, and yet it is an unremarkable moment for someone of my wealth. I don't think I fully earned it.

boarder42

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I think the gratitude that people feel here likely leads to more giving back throughout life as well through our time b/c we have so much to give and thru money b/c we all know that 4% SWR is crazy safe and we could just build dynastic family wealth that lives a few generations or we could give most of it away.

maizefolk

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There are some defining characteristics of today’s American upper-middle class, per Stewart’s telling. They are hyper-focused on getting their kids into great schools and themselves into great jobs, at which they’re willing to work super-long hours. ... They believe in meritocracy, that they’ve gained their positions in society by talent and hard work. ...

They’re also terrified. ... They recognize that American society is increasingly one of have-nots, and they’re determined not to be one of them."


Even with the big run up in the markets over the last couple of years I don't qualify as a member of the 9.9% in my own right. But this quote definitely sums up the would view I was raised with.

That there was a growing gap in the world between the haves and the have nots, the number of haves was shrinking every year, and so you had to work hard, get educated, and then keep working hard so that you'd be able to be stay in the shrinking circle of the not-financially insecure.

Nose to the grindstone.

Extramedium

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6-percenter here, much less for income, of course.  I can't find it now, but rememberer seeing a similar calculator for your percentile measure worldwide, rather than simply comparing against other Americans.  I was definitely well within 1% for that.

I think the only reason to do this is to try to relax about money a bit, to keep things in perspective.  And to be appreciative of good fortune.  Like noting how good it is to be alive right now in this age of indoor plumbing, vaccinations (of any kind, not trying to get political), antibiotics, a reliable electricity grid, paved roads, and (more or less) the least violent time in human history.  On top of all that, I have a wealth most others in the world can't understand.  That's pretty great, and it'd be a shame to have something really great but not aware that it's special.

As far as a meritocracy, there are lots of really poor people who work much harder for longer hours than anyone at my work place.  I've had some of those jobs earlier in my life.  They're no less deserving than I am; it just didn't work out that way.  If you want to think about fairness and getting what you deserve, think about pediatric burn wards for a minute.  I have much more than I deserve, like those tragic kids but in the other direction.  Fate isn't fair at all.

Dicey

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Hell yes I include equity. Our unmortgeged primary is "worth" $1.7M, which is batshit crazy. There is an argument that you shouldn't, because you have to live somewhere, but we own three rentals, any of which we'd be happy to live in. We are also getting a substantial inheritance, but we're not sure when or exactly how much. It doesn't seem real to me and we're FI without it, so I'm not counting that yet.

Paper Chaser

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There are some defining characteristics of today’s American upper-middle class, per Stewart’s telling. They are hyper-focused on getting their kids into great schools and themselves into great jobs, at which they’re willing to work super-long hours. ... They believe in meritocracy, that they’ve gained their positions in society by talent and hard work. ...

They’re also terrified. ... They recognize that American society is increasingly one of have-nots, and they’re determined not to be one of them."


Even with the big run up in the markets over the last couple of years I don't qualify as a member of the 9.9% in my own right. But this quote definitely sums up the would view I was raised with.

That there was a growing gap in the world between the haves and the have nots, the number of haves was shrinking every year, and so you had to work hard, get educated, and then keep working hard so that you'd be able to be stay in the shrinking circle of the not-financially insecure.

Nose to the grindstone.

Same. That was the part that I related to the most

Metalcat

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“They’re rich, but they don’t feel like it — they’re always looking at someone else who’s richer.”

It seems to me that this statement applies almost all the way down the scale, at least in the wealthy West. Even people of “moderate” means live lives of comfort and luxury unheard of in the fairly recent past.  Air conditioning, on demand entertainment, access to the sum total of human knowledge from a device in your pocket, etc.  People pine for good old days that never really existed when they whine and moan about how hard things are today.  Some people certainly do have hard lives, but that category doesn’t start at the 85th percentile of wealth in the United States of America.

This concept can even be seen in a netflix episode of billionaires explained where mark cuban starts to talk about how he's not that rich(think bezos rich) then calls himself a dumbass and laughs about it b/c he's filthy rich.

this episode also tells people how to become rich - dont work hard - invest your capital - hopefully it raised some eyebrows for spendypants in the world and they found all the great PF FIRE advice online.

Every 9 figure net worth person I've ever met describes themselves as that way because they're such small fish compared to the billionaires, but they're rich enough to be in the same ecosystem as them.

So to them, they're the middle class kids at school, the billionaires are the rich kids, and the 8 figure losers hanging out pretending like they've got real money are the kids on food stamps.
« Last Edit: November 10, 2021, 05:13:27 AM by Malcat »

dcheesi

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“They’re rich, but they don’t feel like it — they’re always looking at someone else who’s richer.”

It seems to me that this statement applies almost all the way down the scale, at least in the wealthy West. Even people of “moderate” means live lives of comfort and luxury unheard of in the fairly recent past.  Air conditioning, on demand entertainment, access to the sum total of human knowledge from a device in your pocket, etc.  People pine for good old days that never really existed when they whine and moan about how hard things are today.  Some people certainly do have hard lives, but that category doesn’t start at the 85th percentile of wealth in the United States of America.

This concept can even be seen in a netflix episode of billionaires explained where mark cuban starts to talk about how he's not that rich(think bezos rich) then calls himself a dumbass and laughs about it b/c he's filthy rich.

this episode also tells people how to become rich - dont work hard - invest your capital - hopefully it raised some eyebrows for spendypants in the world and they found all the great PF FIRE advice online.

Every 9 figure net worth person I've ever met describes themselves as that way because they're such small fish compared to the billionaires, but they're rich enough to be in the same ecosystem as them.

So to them, they're the middle class kids at school, the billionaires are the rich kids, and the 8 figure losers hanging out pretending like they've got real money are the kids on food stamps.
This also jibes with an explanation I've heard for why many working-class folks hate white-collar "elites" but seem to love eccentric billionaires (or even hundred-millionaires, lol). They interact with the professional class (the 9.9%) on a regular basis (either in their professional capacities or as community members), which breeds class/wealth resentment, whereas the billionaires are so far removed from their everyday experience that they might as well be mythological figures.

DadJokes

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There probably aren't a lot of parallels between the semi-rich/9.9% and those of us in MMM, other than net worth. However, not all people pursuing FI are like us here at MMM. The FI subreddit, r/financialindependence, has a lot of frequent posters that do mirror the sentiments in that article. I don't spend much time on Bogleheads, but I imagine that they are a good example of those articles as well.

Steeze

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There are some defining characteristics of today’s American upper-middle class, per Stewart’s telling. They are hyper-focused on getting their kids into great schools and themselves into great jobs, at which they’re willing to work super-long hours. ... They believe in meritocracy, that they’ve gained their positions in society by talent and hard work. ...

They’re also terrified. ... They recognize that American society is increasingly one of have-nots, and they’re determined not to be one of them."


Even with the big run up in the markets over the last couple of years I don't qualify as a member of the 9.9% in my own right. But this quote definitely sums up the would view I was raised with.

That there was a growing gap in the world between the haves and the have nots, the number of haves was shrinking every year, and so you had to work hard, get educated, and then keep working hard so that you'd be able to be stay in the shrinking circle of the not-financially insecure.

Nose to the grindstone.

(removed)
« Last Edit: December 01, 2021, 06:22:11 AM by Steeze »

TempusFugit

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I just fundamentally disagree with this idea that “American society is increasingly one of have-nots”

That’s just such a negative way to look at it.   It is a pernicious myth that people are somehow worse off today.  What’s really happening is that we are now (mostly) a society of “haves and have-mores” and human nature is really bad at contentment when we see anyone else that has more than we do.

Our society as a whole has lost its grip on reality in so many arenas.  We should be dropping to our knees every day and thanking God that we are so blessed to live in this time and place.  We have lost our sense of gratitude for what our previous generations have built and bequeathed to us, and that applies to way more than just the top 9.9%. 

StarBright

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I just fundamentally disagree with this idea that “American society is increasingly one of have-nots”

That’s just such a negative way to look at it.   It is a pernicious myth that people are somehow worse off today.  What’s really happening is that we are now (mostly) a society of “haves and have-mores” and human nature is really bad at contentment when we see anyone else that has more than we do.

Our society as a whole has lost its grip on reality in so many arenas.  We should be dropping to our knees every day and thanking God that we are so blessed to live in this time and place.  We have lost our sense of gratitude for what our previous generations have built and bequeathed to us, and that applies to way more than just the top 9.9%.

I think it is the precarity and luck of it.

At this point it is looking like we'll end up as "haves", but the 2008/09 recession had us burning through our emergency fund to pay for COBRA when jobs were lost, and then just as we were mostly back on our feet, subsequent medical emergencies in 2012 and 2013 had us hitting our Max Out of Pocket two years in a row. Our bank accounts were down to zero and one more emergency would have thrown us into a debt cycle. We lucked out and didn't have any more emergencies. So lucky us - our hardwork will make us "haves" eventually.

But when you compare American society to other first world countries . . . the bottom four quintiles in other countries seem to have it better. So why is it wrong to look to those countries and then point out that many Americans are worse off than we were 50 years ago?

What good are air conditioning and world class medical institutions if you can't afford them?

Edit to add - I'll agree if you are just looking clothing/entertainment/food costs in the US then it looks like we are in a golden age of affordability. But if your main concerns are housing/healthcare/child related it can be a very different picture if you aren't in the top 20%.
« Last Edit: November 10, 2021, 09:41:04 AM by StarBright »

DadJokes

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But when you compare American society to other first world countries . . . the bottom four quintiles in other countries seem to have it better. So why is it wrong to look to those countries and then point out that many Americans are worse off than we were 50 years ago?

Because that's simply not true. Even if the bottom four quintiles in other countries are better off than they would be in the US, that doesn't somehow make the bottom four quintiles in the US worse than they were 50 years ago. It would just mean that the US hasn't improved at the same rate as those other countries for the lower earners.

Paper Chaser

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I just fundamentally disagree with this idea that “American society is increasingly one of have-nots”

That’s just such a negative way to look at it.   It is a pernicious myth that people are somehow worse off today.  What’s really happening is that we are now (mostly) a society of “haves and have-mores” and human nature is really bad at contentment when we see anyone else that has more than we do.

Our society as a whole has lost its grip on reality in so many arenas.  We should be dropping to our knees every day and thanking God that we are so blessed to live in this time and place.  We have lost our sense of gratitude for what our previous generations have built and bequeathed to us, and that applies to way more than just the top 9.9%.

The GINI index (measure of economic inequality) is higher than it has been in the US for at least the last 30 years, and rivals what it was in the time of robber barons 100 years ago:

https://fred.stlouisfed.org/series/SIPOVGINIUSA



https://www.pewresearch.org/social-trends/2020/01/09/trends-in-income-and-wealth-inequality/



If we go back to the end of WWII, housing, education, insurance and medical costs have all grown increasingly expensive, while consumer goods have stayed pretty flat or even gotten cheaper:



So the consumerist junk that we buy is often cheaper (thanks globalization!), but the "life/liberty/happiness" stuff that one would use to actually climb the socioeconomic ladder is more expensive. Note that even the perfect MMMer that spends very little on frivolous consumption can't escape these price increases. What we end up with is a situation where we've got tons of channels on TV, and can order items to our door from around the world without leaving the comfort of our home (these are truly incredible!), but we can't afford to pay for medical bills or an education without a decade of life altering debt either.


This all adds up to hampered social mobility (the chances of a person earning more than their parents). Raj Chetty has done some pretty fascinating stuff about who is and is not socially mobile (even based on ZIP code), and the effects that it can have on quality of life, income, and even lifespan:
https://www.youtube.com/watch?v=u2U9-Wq2ub0
« Last Edit: November 10, 2021, 11:08:36 AM by Paper Chaser »

maizefolk

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Paper Chaser, you can make your posts with graphics a lot more readable by add a width parameter when you insert images. It sets the width to display the image in pixels. For example:

Code: [Select]
[img width=600]https://www.pewresearch.org/social-trends/wp-content/uploads/sites/3/2020/01/Screen-Shot-2020-01-08-at-5.06.47-PM.png[/img]


Paper Chaser

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Paper Chaser, you can make your posts with graphics a lot more readable by add a width parameter when you insert images. It sets the width to display the image in pixels. For example:

Code: [Select]
[img width=600]https://www.pewresearch.org/social-trends/wp-content/uploads/sites/3/2020/01/Screen-Shot-2020-01-08-at-5.06.47-PM.png[/img]



joe189man

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i have never felt rich or upper middle class till the last year or two. We are now in the ~85% for net worth but this year are 95%+ for household income, which blows me a way.

https://dqydj.com/household-income-percentile-calculator/

i say this because earlier this year we had two student loans, a car loan, and two kids in day care at $30k plus a year. i drive an 11 year old mazda 3 and will continue to for several years. Now after some crazy hard work and luck for DW all of that debt is gone, one kiddo is in kindergarten and we can save thousands a month.

i still don't feel wealthy when i see others around me with new cars, golf club memberships, and more expensive homes (we live in an expensive CO zip code). But i am coming to grips with the fact that we are semi rich. Feels weird and icky to type, i guess i need to examine my relationship with money.

soulpatchmike

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I am confused at how this chart shows income inequality is increasing?

Isn't it showing that everyone is doing better and class mobility is a reality? 
30% of middle-income earners moved to become upper-income earners and 10% of lower-income earners moved to become middle-income earners in this 48 year period. If that is not the American dream, I don't know what is.

What would the desired view of this chart be with an 'ideal' income distribution?

Paper Chaser

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I am confused at how this chart shows income inequality is increasing?

Isn't it showing that everyone is doing better and class mobility is a reality? 
30% of middle-income earners moved to become upper-income earners and 10% of lower-income earners moved to become middle-income earners in this 48 year period. If that is not the American dream, I don't know what is.

What would the desired view of this chart be with an 'ideal' income distribution?

Income inequality is simply the measure between the top and the bottom. It's possible for inequality to increase, even if everybody's income rise (if the highest earners grow faster than the lowest).

I see two things in that image:
- In the chart on the left I see that the upper income group is gaining wealth faster than lower or middle. In 1970, the upper income was 2.17X the median and 6.3x the lower income. By 2018 the upper income was 2.4x the median and 7.1x the lower income
- The chart on the right shows me that we're finding ourselves in a situation that's increasingly "haves" vs "have nots"with the number of people in the middle shrinking over time. Which was one of the concepts or beliefs common in "the 9.9%" discussed in the articles.
« Last Edit: November 10, 2021, 11:56:13 AM by Paper Chaser »

ChpBstrd

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If we go back to the end of WWII, housing, education, insurance and medical costs have all grown increasingly expensive, while consumer goods have stayed pretty flat or even gotten cheaper:



So the consumerist junk that we buy is often cheaper (thanks globalization!), but the "life/liberty/happiness" stuff that one would use to actually climb the socioeconomic ladder is more expensive. Note that even the perfect MMMer that spends very little on frivolous consumption can't escape these price increases. What we end up with is a situation where we've got tons of channels on TV, and can order items to our door from around the world without leaving the comfort of our home (these are truly incredible!), but we can't afford to pay for medical bills or an education without a decade of life altering debt either.


This all adds up to hampered social mobility (the chances of a person earning more than their parents). Raj Chetty has done some pretty fascinating stuff about who is and is not socially mobile (even based on ZIP code), and the effects that it can have on quality of life, income, and even lifespan:
https://www.youtube.com/watch?v=u2U9-Wq2ub0

These are some good points with some deeper insights. All the things one can buy that matter to social mobility, being educated, accomplishing life goals, having a family, all the ingredients of the good life, etc. have gotten much more expensive. Meanwhile, purchases that waste our time, isolate us from others, don't retain value, and do not lead to opportunities - like TVs, toys, and cellphone service - have gotten cheaper. Differential inflation is nudging us toward buying more life-destroying things and relatively fewer life-building things.

Maybe this is why people have so much more cool stuff nowadays than people had in 1970, and yet are more miserable. Maybe this is why the middle class is declining, because we're putting relatively more of our effort into obtaining the things with falling prices rather than the actually useful things that have exploded in price. 

The majority of people do not care about wealth/income inequality. "Good for the rich people but I'm not jealous", they say. But this chart really emphasizes how the "cost of living" has only kept up with wages to the extent that imported junk and time dumpsters like cell phones have become cheaper. If cell phones, computers, and LED TVs had not been invented and imported nearly duty-free for decades, and we still had basically the same consumer technology as people had decades ago, then the decline of the middle class would be more apparent. We only feel rich because we have a 65' OLED 5k TV, a doorbell with a webcam, a car with a navigation screen, a touch-screen refrigerator, and a cell phone with a meme keyboard, when we're also struggling to pay for our own families' healthcare, housing, or educations in a world of social isolation and gadget-based status signaling.

StarBright

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But when you compare American society to other first world countries . . . the bottom four quintiles in other countries seem to have it better. So why is it wrong to look to those countries and then point out that many Americans are worse off than we were 50 years ago?

Because that's simply not true. Even if the bottom four quintiles in other countries are better off than they would be in the US, that doesn't somehow make the bottom four quintiles in the US worse than they were 50 years ago. It would just mean that the US hasn't improved at the same rate as those other countries for the lower earners.

Good point on the bolded and I agree with you. I guess the rate of America's awesomness slowed compared to other nations?

But I am also referring to things like the increasing rate of bankruptcies in the US (2/3-ish of which are medical) since 1980 or the falling birthrate because of lots of reasons related to how expensive/stressful/unsupported having children is in the US in 2021 and other delayed or skipped milestones of adulthood.

Like I said previously - if you are concerned with consumer goods and haven't had to worry about your insurance denying you coverage, or haven't had to weigh childcare vs. job vs. insurance, it looks pretty good. But the things that make a real difference to class (The "Haves") (your health, your education, your home) are getting increasingly out of reach for many Americans.

« Last Edit: November 10, 2021, 12:14:41 PM by StarBright »

maizefolk

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- The chart on the right shows me that we're finding ourselves in a situation that's increasingly "haves" vs "have nots"with the number of people in the middle shrinking over time. Which was one of the concepts or beliefs common in "the 9.9%" discussed in the articles.

I think the fundamental disagreement might be whether "have nots" are defined in absolute terms (people do or don't have a certain standard of living) or relative terms (how their standard of living compares to the richest people in the same society).

When people don't agree on that -- and logically the same words can mean either concept and I can put together a good argument for either standard being the one that matters more -- downstream arguments about how society is changing and whether it is for the better or worse tend to be frustrating and fruitless.

Villanelle

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I think we can be *both* cognizant of and grateful for the fact that we were born in a place with running water (usually, but not always safe), general access to electricity, and basic (YMMV) safety... while also being not-okay with the fact that we are in a place that has a growing chasm between the top and the bottom.

I feel like, "yeah, but we are better off than much of the world" is a bullshit argument, cast out to shut down conversation about income inequality in the US.  (And perhaps other places as well.)  All Musk or Bezos have to do is say, "yeah, person in the US working 3 jobs to keep roof over head and food on table, you need to be grateful you aren't truly starving and dealing with rampaging warlords and malaria and walking 3 miles to get water.  So quit yer' whining!".  And suddenly that person is supposed to feel ashamed for thinking it's our system is not okay, because it is better than some other systems.  And they are supposed to feel like asses for being ungrateful for their probably-safe running water, instead of looking around them and thinking that maybe our system needs some tweaking.   

By and large and on a very macro level, anyone born in the US is fairly fortunate.  But that doesn't mean our system isn't very messed up, and set up so that some people can hoard more and more, at the expense of the people who have less and less. 

ChpBstrd

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I think a key question we should be asking is:

Did the decline in the middle class, and the difficulty affording education, housing, and healthcare, occur because our society was reconfigured to increase the wealth of the wealthiest?

If we say no, then inequality is irrelevant, except perhaps for the distribution of political power.
If we say yes, then we have to show that:
     -tax cuts resulted in colleges raising their tuitions on middle class kids or a lack of adequate preparation in schools,
     -mortgage subsidies helped the rich build home equity more than it helped the lower/middle classes,
     -tax cuts, patent laws, Medicare/Medicaid reimbursement rate cuts, etc. resulted in higher costs of healthcare,
     -a lack of antitrust enforcement affected prices for healthcare and educational items,
     -laws that disadvantaged unions resulted in lower wages for workers and higher returns for investors,
etc.

DadJokes

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I think a key question we should be asking is:

Did the decline in the middle class, and the difficulty affording education, housing, and healthcare, occur because our society was reconfigured to increase the wealth of the wealthiest?

Have we established that the middle class has declined at all?

For my household size, income, and location, I'm middle class (along with 55% of other adults in my region, apparently). I don't feel like I'm worse off than previous generations. I don't think early retirement was an option for previous generations.

soulpatchmike

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By and large and on a very macro level, anyone born in the US is fairly fortunate.  But that doesn't mean our system isn't very messed up, and set up so that some people can hoard more and more, at the expense of the people who have less and less.
Help me understand this.   According to the charts provided, the middle class is shrinking into the upper class and the lower class is shrinking into the middle class, what expenses are the smaller lower and middle classes paying?

Who loses when cell phones(hand held computers) become financially accessible to essentially everyone in America? Who is losing when access to nearly any product you want is 3 clicks away delivered to your door in between 2 hours and 2 days depending on where you live?

As companies grow and become healthy they employ more people, sell more goods, buy more raw materials all things that make the world spin.  No one is putting a gun to a consumers head to make them use Facebook, Apple, Amazon, Netflix or Google.  How and what are the lower class losing due to the product of these monster companies?

Is it that the consumer should have a larger right to consume than the producer has to produce?

Michael in ABQ

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I think we can all agree that the poor are not worse off now than 100 years ago. So the cause of income inequality is that the rich have gotten richer, not that the poor have gotten poorer. The bottom has moved up some but the top has moved up much more. So what?

Did Bill Gates steal money from my pocket to become wealthy? No, I voluntarily game him money for a product his company created that provided a benefit to me. He helped create a new industry and a company that provided benefits to a significant chunk of the world. Same with Jeff Bezos, Elon Musk, or most other billionaires. Their wealth is almost all unrealized gains from equity in a large company. The reason those companies are so valuable is they provide valuable goods and services to a large group of people. The more people you serve, the more you're rewarded. You could be the best doctor in the world but you can only treat a few hundred patients. If you invent a medication that can treat millions of patients you are going to reap much larger rewards.

There are some rent seekers who are simply taking part of the pie, but most of the very wealthy are growing that pie larger. It's not a zero sum game.

TempusFugit

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As Maizefolk highlighted upthread, it's an important distinction whether we are just talking about the delta between the lower and upper classes or do we mean the absolute standard of living compared to the past generations. In either case, I think the truth is much better than we are led to believe.  There have been lots of changes in how these things are measured over the decades and failure to account for those changes can result in some scary graphs.

Personally, I think that this bogeyman of income inequality is just garbage both in substance and in importance.  There are numerous analyses that conclude that it is no "worse" than it has been since the 1970s once you account for all the various government subsidies that already exist so that you are comparing actual financial resources available to lower and middle class people rather than just their top line paychecks. 

https://www.wsj.com/articles/incredible-shrinking-income-inequality-11616517284

https://www.cato.org/policy-analysis/exploring-wealth-inequality#wealth-inequality-has-increased-modestly

https://johnhcochrane.blogspot.com/2021/04/inequality-mirage.html

A line from the post above sums it up nicely, I think:  "If you think inequality is a problem, then you think the world is better off if Bill Gates is $1000 poorer and you are $10 poorer."

However, my point upthread was not related to this alleged income inequality but rather the basic standards of living that almost all of us in the rich West enjoy today compared to even just 50 years ago.  The middle class today is absolutely better off than the middle class of 1970.  We may be less content than our counterparts were back then, but that's not because of the underlying economics of it. 

It is true that there are barriers to prosperity that are faced by the lower classes and we should always be looking for ways to remove them.
 


2sk22

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This also jibes with an explanation I've heard for why many working-class folks hate white-collar "elites" but seem to love eccentric billionaires (or even hundred-millionaires, lol). They interact with the professional class (the 9.9%) on a regular basis (either in their professional capacities or as community members), which breeds class/wealth resentment, whereas the billionaires are so far removed from their everyday experience that they might as well be mythological figures.

This was the thesis of Barbara and John Ehrenreich in their 1977 book on the Professional and Managerial Class. See this for example

Quote
This group of middle class professionals is distinguished from other social classes by their training and education, typically business qualifications and university degrees, with occupations including academics, teachers, social workers, engineers, managers, nurses, and middle-level administrators

Now that I think about it, this book may have anticipated this article by several decades.


dcheesi

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By and large and on a very macro level, anyone born in the US is fairly fortunate.  But that doesn't mean our system isn't very messed up, and set up so that some people can hoard more and more, at the expense of the people who have less and less.
Help me understand this.   According to the charts provided, the middle class is shrinking into the upper class and the lower class is shrinking into the middle class, what expenses are the smaller lower and middle classes paying?

Who loses when cell phones(hand held computers) become financially accessible to essentially everyone in America? Who is losing when access to nearly any product you want is 3 clicks away delivered to your door in between 2 hours and 2 days depending on where you live?

As companies grow and become healthy they employ more people, sell more goods, buy more raw materials all things that make the world spin.  No one is putting a gun to a consumers head to make them use Facebook, Apple, Amazon, Netflix or Google.  How and what are the lower class losing due to the product of these monster companies?

Is it that the consumer should have a larger right to consume than the producer has to produce?
All the cellphone apps in the world won't matter much to you if you're homeless.

Yes, creature comforts are more affordable, but the essentials have in many cases gotten more expensive. Housing and food insecurity still happen (a lot), even in the midst of all these modern wonders.

And it's worth pointing out that in many cases, people can't simply fall back to an older standard of living; building codes, etc. mean that if you can't afford a modern(ish) home, then your alternative isn't a quaint '30s shanty --it's living on the street.

ixtap

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All the cellphone apps in the world won't matter much to you if you're homeless.

Yes, creature comforts are more affordable, but the essentials have in many cases gotten more expensive. Housing and food insecurity still happen (a lot), even in the midst of all these modern wonders.

And it's worth pointing out that in many cases, people can't simply fall back to an older standard of living; building codes, etc. mean that if you can't afford a modern(ish) home, then your alternative isn't a quaint '30s shanty --it's living on the street.

I think poverty is just as hard as ever, albeit more survivable. However, you would be surprised how much effort a homeless person will put into maintaining their cell phone and plan above what we would normally list as the essentials, as it is their most valuable resource.

dcheesi

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All the cellphone apps in the world won't matter much to you if you're homeless.

Yes, creature comforts are more affordable, but the essentials have in many cases gotten more expensive. Housing and food insecurity still happen (a lot), even in the midst of all these modern wonders.

And it's worth pointing out that in many cases, people can't simply fall back to an older standard of living; building codes, etc. mean that if you can't afford a modern(ish) home, then your alternative isn't a quaint '30s shanty --it's living on the street.

I think poverty is just as hard as ever, albeit more survivable. However, you would be surprised how much effort a homeless person will put into maintaining their cell phone and plan above what we would normally list as the essentials, as it is their most valuable resource.
Yeah, bad example, since cells are lifelines as well as entertainment devices. Just riffing on the quoted post.

Abe

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I wonder if a metric that evaluates job insecurity, rather than earnings or stuff owned or sqft of house would be useful. In most regards all of the latter has increased, but most people suffering in our country suffer due to insecurity. This is independent of the amount of stuff one has, since that doesn’t seem to bring happiness as much as life stability does.

As a thought experiment imagine a measure that includes 1 / median years voluntarily worked at a job + mode of the number of jobs needed to maintain above poverty level:.

Ie if the answer to this was 1/15 years + 1 job in the 70s (completely pulling those numbers out of thin air) and now it is 1/5 years + 2 jobs, that’s a step back regardless of stuff owned.

Morning Glory

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There are some defining characteristics of today’s American upper-middle class, per Stewart’s telling. They are hyper-focused on getting their kids into great schools and themselves into great jobs, at which they’re willing to work super-long hours. ... They believe in meritocracy, that they’ve gained their positions in society by talent and hard work. ...

They’re also terrified. ... They recognize that American society is increasingly one of have-nots, and they’re determined not to be one of them."


Even with the big run up in the markets over the last couple of years I don't qualify as a member of the 9.9% in my own right. But this quote definitely sums up the would view I was raised with.

That there was a growing gap in the world between the haves and the have nots, the number of haves was shrinking every year, and so you had to work hard, get educated, and then keep working hard so that you'd be able to be stay in the shrinking circle of the not-financially insecure.

Nose to the grindstone.

I'm sorry you were raised that way. They sound like a bunch of snobs who don't care about their children's mental health at all. My networth is almost in that category and the article made me cringe. I hope I'm not contributing to inequality but other than just giving away money I'm not sure how to stop it. At least by saving most of my income I've maybe stopped money flowing up to the capitalists. Or maybe it still does, because I buy shares.

LaineyAZ

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I wonder if a metric that evaluates job insecurity, rather than earnings or stuff owned or sqft of house would be useful. In most regards all of the latter has increased, but most people suffering in our country suffer due to insecurity. This is independent of the amount of stuff one has, since that doesn’t seem to bring happiness as much as life stability does.

As a thought experiment imagine a measure that includes 1 / median years voluntarily worked at a job + mode of the number of jobs needed to maintain above poverty level:.

Ie if the answer to this was 1/15 years + 1 job in the 70s (completely pulling those numbers out of thin air) and now it is 1/5 years + 2 jobs, that’s a step back regardless of stuff owned.

I think this is an important point.  As a young child and teen I remember most of the families in my working-class neighborhood had a single-earner supporting the entire household.  This included ownership of a modest 3 bed/1bath house and at least one car.  That changed dramatically in the '70s and '80s when most families now had 2 working parents just to maintain the same standard of living. 

The decline of unions, the inflation rate, the mass layoffs (e.g., General Electric, Scott Paper, etc.) made everyone realize you needed a minimum of two wage earners per household so that the family unit could better survive any of these economic earthquakes.

But even into the '80s and early '90s, one could still get a job with a pension and benefits.  Today it's contract work/gig work/side hustles in addition to a primary source of income.  Basic needs have increased dramatically in cost:  Housing; Medical care; Child care; and Higher education. 

The number of young people saying they don't expect they'll ever be able to afford children and/or own their own home has increased substantially.  I live in a solid middle-class neighborhood where the local church now offers a free food basket twice a week.  There are homeless setting up their tents near the freeways.  There are Goodwills and pop-up Halloween stores that took over commercial space from bankrupt furniture or department stores.   

I'll stop here but it's clear the experience of so many good, educated, hard-working people is not the American Dream they were expecting. 
No wonder everyone is jittery.   

« Last Edit: November 11, 2021, 06:48:27 AM by LaineyAZ »

BDWW

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My personal belief is that "real" wealth has declined for a significant portion of the population.
It's already been pointed out that critically important things like housing and healthcare have outpaced inflation*.  Because the official inflation numbers are dragged down by the cheap less critical stuff like toys, clothes and electronics, they can claim 2-3% total inflation.

*I think the biggest hole in most definitions of inflation is that they don't take productivity/automation/off-shoring/efficiency into account.  I've been trying to wrap my head around this idea for awhile(perhaps some of you can help flesh it out, or poke holes), but it seems to me that "real-relative" inflation for the average American isn't captured.

Let me try and lay out a crude example of my thinking.

Say it cost 1 lb of iron to produce 10 widgets that each sell for $1 dollar.   The next year the system/factory is made more efficient and the factory can produce 11 widgets with 1lb of iron, and the inflated cost is $1.03. We say inflation is only 3%, but in reality the your dollar purchases an even smaller percentage of the economic output than the inflation number suggests. 

I think it's this that is ultimately driving the widening gulfs in wealth. Absolute wealth can be increasing, but if the relative wealth gap increases at a much higher rate, you end up with haves, have-nots and resentment.

All this is just to say that, I've always felt the inflation narrative from the government/federal reserve feels a bit "wrong". I don't think the inflation-adjusted "wages vs goods" story paints a very complete economic picture.

Paper Chaser

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However, my point upthread was not related to this alleged income inequality but rather the basic standards of living that almost all of us in the rich West enjoy today compared to even just 50 years ago.  The middle class today is absolutely better off than the middle class of 1970.  We may be less content than our counterparts were back then, but that's not because of the underlying economics of it. 

It is true that there are barriers to prosperity that are faced by the lower classes and we should always be looking for ways to remove them.

I think if you judge standard of living by a level of comfort, or possessions, then people in all classes today are likely better off than they were 50 years ago.
I think there's more to overall quality of life than just maintaining a "standard of living" though. We're also talking about the ability to chart one's own life and improve that standard of living. That's the thing that I think is getting progressively harder. At least in my personal experience. I'll use my family as an example to show where I'm coming from:

My grandfather was a middle manager at GM in the 60s. It was a good job, but not amazing. With nothing but a high school diploma was able to comfortably support a family of 7(!) on his income alone. They had a nice home in a nice neighborhood with doctors, lawyers, etc as neighbors. All 5 kids had their college educations paid for (mostly small, expensive liberal arts schools). He got divorced twice and still had enough to retire to FL and fish on his boat every day. No way that scenario is possible today on a middle manager's salary.

My wife's grandfather was also the sole bread winner for a family of 7(!) with nothing but a high school diploma. He was a truck driver. They had a more modest home in a more modest neighborhood than my grandparents, and the kids didn't go to college but they spent their weekends at one of their 2 lake houses (!) fishing and waterskiing behind one of their multiple boats (!). He retired comfortably with a nice pension. 3 homes, multiple boats, for a family of 7 on a single truck driver's salary? It wasn't glamorous back then, but I don't see that really even being feasible today.

If we look at the next generation (my parents and inlaws), only 1 of the 4 parents had a college education. No high earners in the bunch, but with 2 incomes they were able to carve out enough of a living to own typical homes, raise small families (2 kids each), get new vehicles every few years and have enough left over to play with race cars, boats, etc on the weekends. They're now mid-60s and still working. Retirement will be heavily dependent on social security with a mix of self funding. I think people working 2 basic factory jobs, or as a mechanic and teacher today would struggle to provide the same things in the same situation.

That brings us to my wife and I. Both have healthy incomes (not exactly impressive compared to many here, but we do alright in the scheme of things). We're both college educated (state schools). We both worked full time while in school to avoid tons of student loan debt. We have a single child. I think we're doing better than either of our sets of parents, but it's required a lot more sacrifice to make that happen, and we started out with advantages of being white, and coming from stable, blue collar, lower middle class types of homes growing up.

The general trend for the last 60-70 years seems to me that each generation has had to work a bit harder and/or sacrifice a bit more than the prior one did in order to live a comfortable life. 1) dual income 2) college education 3)smaller family (started later in life) 4) fewer toys etc. This was clear to me pretty early on, and has impacted my choices profoundly. I'm not trying to play the victim here at all. I don't want to take other people's money, and it's not lost on me just how bountiful my blessings are. But this view has been a driver for me to make the choices I've made, sacrifice how I have, and pursue the MMM way so that it's easier for me to have that stability as well as increase the chances that my kid will have similar or better opportunities. I'm comfortable with the argument that this view is incorrect. If I'm right, then we'll be in position to help my kid's chances of success. If I'm wrong and things aren't getting progressively more difficult for each generation, then we all end up with more money that can be shared with people we care about to make their lives better. I don't see a downside to either outcome.
« Last Edit: November 11, 2021, 03:54:09 AM by Paper Chaser »

dcheesi

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However, my point upthread was not related to this alleged income inequality but rather the basic standards of living that almost all of us in the rich West enjoy today compared to even just 50 years ago.  The middle class today is absolutely better off than the middle class of 1970.  We may be less content than our counterparts were back then, but that's not because of the underlying economics of it. 

It is true that there are barriers to prosperity that are faced by the lower classes and we should always be looking for ways to remove them.

I think if you judge standard of living by a level of comfort, or possessions, then people in all classes today are likely better off than they were 50 years ago.
I think there's more to overall quality of life than just maintaining a "standard of living" though. We're also talking about the ability to chart one's own life and improve that standard of living. That's the thing that I think is getting progressively harder. At least in my personal experience. I'll use my family as an example to show where I'm coming from:

My grandfather was a middle manager at GM in the 60s. It was a good job, but not amazing. With nothing but a high school diploma was able to comfortably support a family of 7(!) on his income alone. They had a nice home in a nice neighborhood with doctors, lawyers, etc as neighbors. All 5 kids had their college educations paid for (mostly small, expensive liberal arts schools). He got divorced twice and still had enough to retire to FL and fish on his boat every day. No way that scenario is possible today on a middle manager's salary.

My wife's grandfather was also the sole bread winner for a family of 7(!) with nothing but a high school diploma. He was a truck driver. They had a more modest home in a more modest neighborhood than my grandparents, and the kids didn't go to college but they spent their weekends at one of their 2 lake houses (!) fishing and waterskiing behind one of their multiple boats (!). He retired comfortably with a nice pension. 3 homes, multiple boats, for a family of 7 on a single truck driver's salary? It wasn't glamorous back then, but I don't see that really even being feasible today.

If we look at the next generation (my parents and inlaws), only 1 of the 4 parents had a college education. No high earners in the bunch, but with 2 incomes they were able to carve out enough of a living to own typical homes, raise small families (2 kids each), get new vehicles every few years and have enough left over to play with race cars, boats, etc on the weekends. They're now mid-60s and still working. Retirement will be heavily dependent on social security with a mix of self funding. I think people working 2 basic factory jobs, or as a mechanic and teacher today would struggle to provide the same things in the same situation.

That brings us to my wife and I. Both have healthy incomes (not exactly impressive compared to many here, but we do alright in the scheme of things). We're both college educated (state schools). We both worked full time while in school to avoid tons of student loan debt. We have a single child. I think we're doing better than either of our sets of parents, but it's required a lot more sacrifice to make that happen, and we started out with advantages of being white, and coming from stable, blue collar, lower middle class types of homes growing up.

The general trend for the last 60-70 years seems to me that each generation has had to work a bit harder and/or sacrifice a bit more than the prior one did in order to live a comfortable life. 1) dual income 2) college education 3)smaller family (started later in life) 4) fewer toys etc. This was clear to me pretty early on, and has impacted my choices profoundly. I'm not trying to play the victim here at all. I don't want to take other people's money, and it's not lost on me just how bountiful my blessings are. But this view has been a driver for me to make the choices I've made, sacrifice how I have, and pursue the MMM way so that it's easier for me to have that stability as well as increase the chances that my kid will have similar or better opportunities. I'm comfortable with the argument that this view is incorrect. If I'm right, then we'll be in position to help my kid's chances of success. If I'm wrong and things aren't getting progressively more difficult for each generation, then we all end up with more money that can be shared with people we care about to make their lives better. I don't see a downside to either outcome.
Totally agree with all of this.

As a tangent, your mention of lake houses and such makes me wonder how much the price of that particular "luxury" is related to inequality, and how much is related to a fundamental scarcity issue: acres of available land vs. total population? Maybe lake houses, etc., aren't as affordable simply because there are more people vying for the same plots?

Obviously inequality might still play a factor here (e.g., if billionaires are buying a lake house in every possible destination, just because they can). But I wonder if this is just one of those places where substitution of "goods" is appropriate to consider? I can't afford a lake house, but I can afford to outfit a home theater that simply wasn't feasible in your parents' day (and probably didn't even exist commercially in your grandparents' day?).

Note that this is fundamentally different from the issue of primary housing, where no such substitution is possible. Same goes for food (beyond minor substitutions that are already theoretically captured in the "market basket" for inflation purposes).

« Last Edit: November 11, 2021, 07:51:24 AM by dcheesi »

maizefolk

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As a tangent, your mention of lake houses and such makes me wonder how much the price of that particular "luxury" is related to inequality, and how much is related to a fundamental scarcity issue: acres of available land vs. total population? Maybe lake houses, etc., aren't as affordable simply because there are more people vying for the same plots?

Obviously inequality might still play a factor here (e.g., if billionaires are buying a lake house in every possible destination, just because they can). But I wonder if this is just one of those places where substitution of "goods" is appropriate to consider? I can't afford a lake house, but I can afford to outfit a home theater that simply wasn't feasible in your parents' day (and probably didn't even exist commercially in your grandparents' day?).

Note that this is fundamentally different from the issue of primary housing, where no such substitution is possible. Same goes for food (beyond minor substitutions that are already theoretically captured in the "market basket" for inflation purposes).

Yup, there are two fundamentally different types of things people can buy with money, those with a fixed supply and those we can make more of if there is more demand.

The price of things with a fixed supply that rich people like to buy (lakeside houses in desirable locations, collector cars, historical artwork) has exploded in recent decades, far faster than inflation because are the more rich people who want them and those rich people individually have way more money.  For the price of these particular things, the large increase in wealth inequality has absolutely driven up prices. To the point that now I constantly hear ads on podcasts for how I can "invest" in artwork because it has higher returns than the stock market (because that's not going to end poorly, no).

The thing is, there is essentially nothing with an absolutely fixed supply that people need to live or even to live a happy life. Housing: we can make more of it by spending more money. Education: same.* Food: same (up to a point but we're not close to that point yet). Healthcare: same. For those, the reasons behind price increases, if price increases have happened, are more complex and potentially more easily addressable.

*Education at a prestigious institution on the other hand does appear to be a largely fixed good. There is no reason Harvard couldn't grow its enrollment significantly, but it chooses not to.

roomtempmayo

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So the consumerist junk that we buy is often cheaper (thanks globalization!), but the "life/liberty/happiness" stuff that one would use to actually climb the socioeconomic ladder is more expensive. Note that even the perfect MMMer that spends very little on frivolous consumption can't escape these price increases. What we end up with is a situation where we've got tons of channels on TV, and can order items to our door from around the world without leaving the comfort of our home (these are truly incredible!), but we can't afford to pay for medical bills or an education without a decade of life altering debt either.


Lots of good stuff there, @Paper Chaser .

The point of magnification I'll add is that Tim Wu has written quite a bit about how the scaling and integration of large businesses have sucked up lots of entrepreneurial opportunities over the past couple decades. 

For example, perhaps if we'd had a pandemic in 1960, local entrepreneurs would have bought vans and started small grocery delivery businesses in every city around the country.  We'd have tens or hundreds of thousands of small businesses created because the need would have been great and the barriers to entry would have been extremely low.  You wouldn't have needed any particular education or other qualification, all you would have needed were a drivers license, a telephone, and a van to own a piece of the action.  But we all know how that worked differently in 2020.  Major supermarket chains, especially including Amazon/Whole Foods, dominated that space in the blink of an eye using apps and smartphones.  The entrepreneurial opportunity for a guy with a strong work ethic and a high school diploma to own a piece of it was very nearly zero.  The action was sucked up by large corporations which have a whole set of barriers to entry, most importantly education and geography.  So you have a giant upheaval that should shake loose some opportunity for new entrants, but the economy is structured in such a way now that it doesn't.

The point is that even as education has become increasingly expensive, it has also become a necessity to access the economic opportunities that used to have few or no barriers to entry.  And that dynamic has created a whole swath of the American public that's functionally excluded from opportunities that would have been accessible to their parents or grandparents with a similar skillset (or lack thereof).

roomtempmayo

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I just fundamentally disagree with this idea that “American society is increasingly one of have-It is a pernicious myth that people are somehow worse off today. 

It is absolutely the case that large areas of the United States, especially the deindustrialized midwest, the Rust Belt, and much of small town rural America, are worse off today than they were 30, 40, or 50 years ago.

- Average hourly wages adjusted for inflation are lower.
- Average household incomes are lower.
- Divorce rates are higher.
- Rates of substance abuse and addiction are higher.
- The percentage of children who make more money than their parents is declining.
- The percentage of children who get more education than their parents is declining.
- Live expectancy is now declining.

The Raj Chetty link that @Paper Chaser posted above maps these dynamics.  Chetty takes these measures down to the Census tract level on his website.

Even if all that matters are absolute rather than relative gains in society, much of the country is seeing absolute declines on just about every measure that people typically equate with a good life, or with life at all.

Paper Chaser

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Yup, there are two fundamentally different types of things people can buy with money, those with a fixed supply and those we can make more of if there is more demand.

The price of things with a fixed supply that rich people like to buy (lakeside houses in desirable locations, collector cars, historical artwork) has exploded in recent decades, far faster than inflation because are the more rich people who want them and those rich people individually have way more money.  For the price of these particular things, the large increase in wealth inequality has absolutely driven up prices.

Good stuff. It made me realize something about the chart I posted before.


All of the things on that chart that have gotten cheaper and more accessible are things that depreciate over time, while the things that get more expensive tend to directly appreciate or gain value over time through increased earnings, decreased losses, etc. It's more expensive than ever to buy assets, and it's easier than ever to buy liabilities, even if they're fun liabilities.

StarBright

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https://www.cato.org/policy-analysis/exploring-wealth-inequality#wealth-inequality-has-increased-modestly


For what it is worth, that Cato link is sourcing mostly journalists or other think tanks (Cato, Heritage) and very little looks to be based on research reviewed by actual economists. And some of the journalists' data has since been corrected.

sailinlight

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Lots of good stuff there, @Paper Chaser .

The point of magnification I'll add is that Tim Wu has written quite a bit about how the scaling and integration of large businesses have sucked up lots of entrepreneurial opportunities over the past couple decades. 

For example, perhaps if we'd had a pandemic in 1960, local entrepreneurs would have bought vans and started small grocery delivery businesses in every city around the country.  We'd have tens or hundreds of thousands of small businesses created because the need would have been great and the barriers to entry would have been extremely low.  You wouldn't have needed any particular education or other qualification, all you would have needed were a drivers license, a telephone, and a van to own a piece of the action.  But we all know how that worked differently in 2020.  Major supermarket chains, especially including Amazon/Whole Foods, dominated that space in the blink of an eye using apps and smartphones.  The entrepreneurial opportunity for a guy with a strong work ethic and a high school diploma to own a piece of it was very nearly zero.  The action was sucked up by large corporations which have a whole set of barriers to entry, most importantly education and geography.  So you have a giant upheaval that should shake loose some opportunity for new entrants, but the economy is structured in such a way now that it doesn't.

The point is that even as education has become increasingly expensive, it has also become a necessity to access the economic opportunities that used to have few or no barriers to entry.  And that dynamic has created a whole swath of the American public that's functionally excluded from opportunities that would have been accessible to their parents or grandparents with a similar skillset (or lack thereof).
Just as one datapoint, many people in my small town did exactly that. They put up signs all over town saying they would take orders to collect things you wanted at different stores all over town and deliver them to you on your porch for people who were afraid to leave their homes and interact with other people. Most of the stores around town don't offere delivery, only the large chains, and lots of elderly people who are most at risk from Covid like to frequent smaller shops that can't offer that service.

maizefolk

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Good stuff. It made me realize something about the chart I posted before.


All of the things on that chart that have gotten cheaper and more accessible are things that depreciate over time, while the things that get more expensive tend to directly appreciate or gain value over time through increased earnings, decreased losses, etc. It's more expensive than ever to buy assets, and it's easier than ever to buy liabilities, even if they're fun liabilities.

Could you walk through your reasoning a bit more for these? I agree with your classification of Toys and TVs and (present weird inflation in the price of used cars aside) Cars. And looking above the line, housing (if purchasing vs renting) does tend to get more valuable over time.

But I can tell you from experience college textbooks drop in value quite rapidly. Healthcare and college credits have no resale value. The value of a college degree in terms of increased earning power has been constant or decreasing in terms of inflation adjusted dollars and decreasing as a percent of overall median income.



I'm not sure I'd put childcare into the "gets more valuable over time" category either but you may be looking at it differently than me.

To me the big distinction, college textbooks aside, is that stuff which has remained labor intensive (healthcare, education, childcare) has gotten expensive faster than inflation, and things which are automated or scaleable have gotten more expensive slower than inflation or declined in absolute terms. Which is exactly what Baumol's cost disease would predict in a society where the productivity per person hour is growing rapidly in some areas while remaining constant in others.

Paper Chaser

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Could you walk through your reasoning a bit more for these? I agree with your classification of Toys and TVs and (present weird inflation in the price of used cars aside) Cars. And looking above the line, housing (if purchasing vs renting) does tend to get more valuable over time.

Really, your post and the chart just combined to kind of "click" in the nether regions of my brain enough to dust off the old "Rich Dad/Poor Dad" quote about wealthy people buying assets vs middle and low income demographics buying liabilities (potentially thinking they're assets). I focused on the things that have gotten cheaper on the chart more than the one's that have gotten more expensive and didn't put a ton of thought into it other than that.

I think the right college degree (and it's associated text books) is still a strong investment in future earnings. That does not mean any degree is of course. More care must be taken now than 30 years ago when choosing a degree path if college is a consideration.
I think childcare only makes sense if it enables you to go make more than the cost of childcare somewhere else. I also count it as education (and potentially higher future earnings) for the child. It's probably a stretch.
Health insurance isn't going to be a positive for anybody's net worth, but it protects it by preventing disastrous consequences. Not an investment, but necessary protection I'd say.
« Last Edit: November 11, 2021, 12:31:03 PM by Paper Chaser »

Paper Chaser

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https://www.cato.org/policy-analysis/exploring-wealth-inequality#wealth-inequality-has-increased-modestly


For what it is worth, that Cato link is sourcing mostly journalists or other think tanks (Cato, Heritage) and very little looks to be based on research reviewed by actual economists. And some of the journalists' data has since been corrected.

The Cato institute was also founded (and funded) by one of the Koch brothers. I'm suspicious when an organization that claims to have no ties to any political party or ideology is funded by a known conservative backing billionaire. When that same group basically says "Hey, inequality isn't that big of a deal guys" I take it with a pretty huge grain of salt.

iris lily

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https://www.cato.org/policy-analysis/exploring-wealth-inequality#wealth-inequality-has-increased-modestly


For what it is worth, that Cato link is sourcing mostly journalists or other think tanks (Cato, Heritage) and very little looks to be based on research reviewed by actual economists. And some of the journalists' data has since been corrected.

The Cato institute was also founded (and funded) by one of the Koch brothers. I'm suspicious when an organization that claims to have no ties to any political party or ideology is funded by a known conservative backing billionaire. When that same group basically says "Hey, inequality isn't that big of a deal guys" I take it with a pretty huge grain of salt.

Cato is a well established libertarian think tank. I’m surprised that anyone thinks it’s anything other than that. It produces studies that are Respected in many circles, it’s not a fringe lunatic place.

And when it comes to economic theory, can someone please point me to THE authoritative source that everyone agrees is THE answer to all things economic? I would love to know what that one is.

« Last Edit: November 26, 2021, 01:27:44 PM by iris lily »

TempusFugit

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https://www.cato.org/policy-analysis/exploring-wealth-inequality#wealth-inequality-has-increased-modestly


For what it is worth, that Cato link is sourcing mostly journalists or other think tanks (Cato, Heritage) and very little looks to be based on research reviewed by actual economists. And some of the journalists' data has since been corrected.

The Cato institute was also founded (and funded) by one of the Koch brothers. I'm suspicious when an organization that claims to have no ties to any political party or ideology is funded by a known conservative backing billionaire. When that same group basically says "Hey, inequality isn't that big of a deal guys" I take it with a pretty huge grain of salt.

Cato is a well established libertarian think tank. I’m surprised that anyone thinks it’s anything other than that. It produces studies that are Respected in many circles, it’s not a fringe lunatic place.

And when it comes to economic theory, can someone please point me to THE authoritative source that everyone agrees is THE answer to all things economic? I would love to know what that one is.

Haha. Yeah that’s usually whichever one confirms my own viewpoint, right?  I don’t want to read any analysis that might be (however tenuously) linked to icky people who disagree with me.