Inequality and the New Aristocracy

Running into this article the other day, I was startled to find how many of my own intellectual hobby horses it touched upon. Arnold Kling and Nich Schulz are economists, and their topic is in equality in the modern economy. They cite Google co-founder (and billionaire) Sergey Brin as an example of many of the forces they believe are driving inequality and list the following major forces:

Technology: Brin’s wealth comes from the famous search engine he pioneered with cofounder Larry Page. Their company is a mere ten years old. And yet in the blink of an eye, he has become one of the richest men in the world.

Winners-take-most markets: Certain mass-market fields tend to simulate tournaments in that they produce just a few big winners along with many losers. These include technology/software, as in the case of Google, but also entertainment (Céline Dion), book publishing (Stephen King), athletics (Tiger Woods), and even some parts of academia, finance, law, and politics (as the impressive post-presidential earnings of George H. W. Bush and Bill Clinton demonstrate).

Family structure: Both of Brin’s parents were highly educated mathematicians. This increased the likelihood that Brin, too, would be well educated. He studied computer science at the University of Maryland and was in graduate school at Stanford when the Internet business he had built lured him away.

Immigration: Brin was born in Russia, and his family moved to the United States when he was six. He and other foreign-born executives such as Andy Grove of Intel have built wealth at the top of the income distribution. At the same time, a large influx of hard-working but low-skilled immigrants has enlarged the bottom of the income distribution, at least until they achieve the assimilation that historically has required a couple of generations.

There are, I think, a pretty good list of the factors that lead to inequality in the modern economy. Particularly incisive too, I thought, was a distinction they make between kinds of inequality:

Income inequality in the United States consists of two gaps. The first gap is an upper-lower gap, between those with a college education and those without. The second is an upper-upper gap, between those with high incomes and those with extraordinarily high incomes.

The upper-lower gap reflects changes in the structure of the economy. New technologies place a premium on cognitive ability. Harvard University economists Claudia Goldin and Lawrence Katz have dubbed this “skill-biased technological change.” In today’s economy, more value added comes from knowledge work, and relatively less comes from unskilled labor.

The widening gap between the incomes for college graduates and those for workers who never attend college raises a question. Why doesn’t the supply of college graduates increase? Indeed, despite the benefits that come with higher education, the rate of high school graduation is actually falling, according to the American Bar Foundation’s Paul A. LaFontaine and Nobel laureate James Heckman of the University of Chicago.

It’s a little simplistic to use college education as a stand-in for skilled versus unskilled workers, but you get the point. What I do think is quite important, though, is the three-way distinction drawn between lower, upper and upper-upper. The upper-upper group is honestly very, very small. And since one only gets that rich by owning or running companies (directly or via investments) the fact that the upper-upper group is so rich doesn’t strike me as worrisome. They may make a good bloody shirt to wave for those wanting to stir up class envy, but they are not “keeping us down” in any economic sense.

The upper group is not keeping the lower one down either, but it is a more troubling barrier because it is in some ways less porous. There are still plenty of jobs to be had that rely primarily on direct manual labor (skilled or unskilled) but as productivity increases, the number of people required to do the work goes down. This has been happening in the manufacturing sector over the last half century:

And happened in agriculture in the first half:

[Source]

Compounding this is the danger for those going into highly manual work of this kind, is the danger that if one’s industry dries up when one is middle aged, it is a lot more difficult to switch to one of the more productive “knowledge worker” industries in middle age. One is more likely to be sucked down into low wage service industry work, which is less amenable to being eliminated through productivity gains — but tends not to be valued very highly.

The predictor of where one will fall in this income spectrum is, they write, family structure much more than class, ethnicity or nation of origin:

The Manhattan Institute’s Kay Hymowitz, in her book Marriage and Caste in America, has documented that for upper-income Americans marital stability has recovered from the disruptions of the 1970s. But for lower-income Americans the problem remains. Since 1980, the proportion of never-married mothers among college graduates has stabilized near 3 percent, while the proportion among high school graduates has risen from 3 percent to 10 percent, and the proportion among high school dropouts has doubled to nearly 15 percent. These figures are important because, as Hymowitz points out, “Virtually all—92 percent—of children whose families make over $75,000 are living with both parents. On the other end of the income scale, the situation is reversed: only about 20 percent of kids in families earning under $15,000 live with both parents.”

Their next argument is, however, a bit of a reach:

A trend is underway in America for marriage to be increasingly “assortative.” That means children of well-educated parents tend to marry one another and the children of less educated parents tend to marry one another. This was less the case a few generations ago. For example, sociologists Christine Schwartz of the University of Wisconsin and Robert Mare of UCLA found that beginning in the early 1970s there was a striking “decline in the odds that those with very low levels of education marry up.” And they found that between 1940 and the late 1970s the likelihood that someone with only a high-school diploma would marry someone with a college degree dropped by over 40 percent.

What they’re not taking into account here, I think, is that there was a major change in social conventions between the 40s and the 70s. In 1940, it was not at all required that an upper class young woman go to college, though she certainly might. By 1970, it was an absolute assumption that members of the upper class would send their daughters to college. So I doubt that we’re seeing increased like-to-like marriage here so much as that a college education has become more universally the marker of a certain social and economic class.

It’s true that once a family tree moves into the upper tiers they are unlikely to send many members back down again, but the reason is, I think, cultural rather than class-based in the sense in which “class” was used in the past. As the society of the US and other developed nations becomes ever more affluent, it becomes necessary to work in very high productivity, high skilled occupations in order to “keep up”. And as research increasingly shows, one of the determining factors for education and the ability to deal with knowledge intensive work is the extent to which one is read to and otherwise placed in a learning-friendly environment during one’s first four years of life. Thus, people who do “knowledge work” have a much increased propensity to raise children capable of doing the same.

The good news in regards to this kind of class barrier is that it’s eminently bridgeable. Any parent with the determination to do so can raise his or her children to be readers and learners (and workers of sums and figures). But it’s a much more difficult task for those who lack that background themselves, and thus come to it late. In that sense, the truism that education is today’s civil rights issues is… true.

14 Responses to Inequality and the New Aristocracy

  • Gerard E. says:

    So really bright people from egghead families tend to succeed. Maybe not on Sergey Brin’s level, but still likely for success. Say this is something the Church could emphasize in defense of the families. As I work each day in one of America’s toughest neighborhoods, I see sad evidence of this fact. In fact, much of this data would look remarkably similar two hundred or so years ago in transition from agrarian to industrial-based economies. Meaning- the other information and commentary tends toward boo hoo hoo we don’t like change. Deal with it. Coming atcha faster and harder than before. You can thank Brin and his fellow Internet innovators for that fact. Will even surpass what our all wise and loving congresspersons have cooked up for us in the Porkapalooza bill. A major gift we can provide for our younguns is to train for change. It is impossible to imagine what their world will be like two decades hence. Just as our current stuff was impossible to thunk up twenty five years ago. But some factors never change. The role of the family. The need to nurture and train youngsters in a stable, loving home environment- with hugs and boundaries in equal measure. Sweat not this stuff. The Church has seen worse. The world will eventually catch up to us. Even bright people on the Sergey Brin level.

  • Jessie says:

    I think a major problem in our world today is our near worship of “productivity” and “growth”. We have made man a slave to our machines, which increase productivity at the expense of making workers redundant. The ability to produce more widgets, faster is not a gain to society if it increases unemployment or makes men into mere “machine minders”.

    E.F. Schumacher said it best when he said “If that which has been shaped by technology, and continues to be so shaped, looks sick, it might be wise to have a look at technology itself. If technology is felt to be becoming more and more inhuman, we might do well to consider whether it is possible to have something better – a technology with a human face.” What he called “intermediate technology”.

    We fail in living our faith when we allow and encourage the growth of huge companies and complex technology that creates few “winners” and many “losers”. I think you are wrong in thinking that the barriers to economic “success” can be overcome with determination. Those who don’t read by fourth grade are never fluent. And you really can’t pass on what you have never had. Those who feel they cannot succeed will rarely redouble their efforts. Most will rightly perceive that the deck is stacked against them and instead rage against the injustice that has made them useless. Which is exactly what our economy has done to those who are not inclined to the work of the mind.

    Cheaper goods in ever more quantities is not a solution but rather a problem as it has made millions of honest hard working people redundant and useless without hope for good employment. Those in the bottom tier of work are treated worse than children, looked down on, treated with suspicion. Their work is soul deadening and mind numbingly repetitive. Their bodies are destroyed and to top it all off, they have to listen to their economic “betters” tell them that their failure is their own fault. If they only had enough “determination” they could succeed.
    Sorry for the rant, I’ll stop now.

  • Jessie,

    I’m sympathetic to what you’re saying in broad terms, since as a traditionalist sort of conservative I’m strongly disposed to look fondly on the ways of the past and be suspicious of that which is “modern”. At the same time, though, I think it’s important to be realistic about the sorts of realities that we get past by increasing productivity and becoming “slaves to machines”.

    What I’d question, though, is whether increased productivity necessarily means being enslaved by machines, or rather being freed from servile work. In the American folk tale of John Henry and the steam driver, John Henry is a symbol of humanity striving against having a machine take his job — yet in the long run isn’t driving a steam driver generally an occupation more contributing to human thriving than swinging a sledge hammer by hand?

    Automating a factory further can result in eliminating jobs, but in a deeper sense: is standing in a factory all day where those people should really be in the first place?

    So while I don’t think that ever cheaper and ever more goods in and of themselves are a “solution” in life, I’d tend to see increased productivity as a good thing nearly all of the time, since it frees us up to engage in increasingly skilled work rather than servile work.

    The challenge, as I would see it, is in trying to make sure that people are able to thrive in that increasingly complex environment. As you say, people who don’t learn to read and learn well early in life can find themselves trailing permanently. That’s an area in which I see few easy answers, as all the research I’ve seen suggests that the most key time is very, very early in development: often birth to four years old. I see little ability for larger social institutions than the family to influence that period, and that increases the danger of people whose parents were not educated not being educated themselves either.

  • Jessie says:

    Why should the choice be between standing in a factory all day or being left behind in the “complex” environment. If we eliminated the outlandish automation, then we could have men employed in a factory doing real work in producing real things and not just repetitive machine minding. The choice is not between machines and men, the choice is between using machines to replace men and using them to enhance man’s creative abilities.

    I would further argue that a steam driver would be not be a positive contributor to humanity if it meant that one person now had a nicer job at the expense of the dignity of many men now left hopeless with no employment prospects and thus little left to offer their families. First, such men are not likely to step up and BE family men. Men humiliated by an inhumane economic environment are not going to be good family men and will thus most likely contribute to a poor social environment. And in fact, we see this played out in economically “blighted” areas.

  • S.B. says:

    I’ve long thought that the reason winner-take-all occupations would be increasing inequality (compared to the past) is at least in part just because our country is bigger and richer. Being the best basketball player in 1950 is very different from being the best basketball player today, simply because today there are more people who have more money to spend on you. Whereas janitors don’t have the same opportunity to sell their services to more and richer people.

  • j. christian says:

    Jessie,

    What you’re describing is often called the “lump of labor” fallacy. Man vs. machine is a false opposition, as is the idea that there are only so many jobs to go around. The mistake is in thinking that no new jobs are created by productivity gains. The problem is the education differential, as Darwin points out. People who don’t have enough education or job skills, especially when they lose their career field in middle age, are in a difficult position to switch careers.

  • Jessie says:

    j. chrisitian, I wasn’t pitting man against machine. I was pointing out that when we stop using tools to enhance the work that men do and start using machines to replace the men themselves, than we have begun moving down a path that leads us to start treating men as machines. Indeed, we are no longer called citizens but our leaders now call us consumers.

    Saying we will re-educate those now redundant men to flip burgers, make lattes, and sell more stuff is not really a solution. And it further dehumanizes those real people who are really unemployable due to ever increasing worship of technology and gigantism. They are not just numbers and we can’t just wave an educational wand at them and, voila, they are now skilled in another career they did not choose but we are sure is just as rewarding.

    Those graphs show that the people needed to actually produce real items is decreasing. So what are all those people doing now? They are pushing wealth around in the health and education fields. But those fields don’t actually produce wealth, they merely facilitate its transfer. How many CNAs do we need (and they have crappy jobs for lousy pay) How many underpaid “para educationist” do we need?

    I don’t think it is a good for us to ever forcefully reduce the number of people who are allowed to work in actually making things and growing food. Its especially wrong to not debate the appropriate level of technology and just assume that more must be better because it has gotten us to where we are. Because where we are is not necessarily good. Machines are tools and they should serve our greater good, we should never be sacrificed to the machines.

  • blackadderiv says:

    Jessie,

    “[U]sing tools to enhance the work that men do” and “using machines to replace the men themselves” are just two different ways to describe the same phenomenon. When I type these words into a keyboard instead of having them written down by scribes and carried to you by messengers, I am using tools to enhance the work I do, but I am also using machines as a replacement for men who would otherwise have to do those tasks (if they were to be done at all).

  • Jessie says:

    Blackadderiv,

    Yes that is true, but you missed the main thrust of my comment. There is a difference between the evolution of tools making certain jobs unnecessary and the goal of eliminating workers in order to decrease “labor costs”. I am glad for my modern household tools and they eliminate the need for servants, but they have merely made the homemakers job easier, not redundant. Likewise, we have technology that has made your writing easier, but you are still needed to do the writing. But that said, you cannot ignore that many jobs have not been made easier but eliminated or made soul deadening by machines. Machinist have been replaced, weavers have been replaced, farmers have been replaced, craftsmen of all stripes have been replaced and our society is less for it.

    And of course, my main point has not been addressed, and it is simply this; that we need to have a debate about the appropriateness of different levels of technology and how they affect us.

  • Jessie says:

    From the article quoted above: “Given the other forces driving inequality, there may be less that government can do than one might hope. Research from Heckman suggests that education is a relatively feeble remedy for the effects of family background (although Heckman believes that early intervention, in preschool or even before, shows promise).

    In order to make a dramatic impact on inequality, government would have to do something about the fundamental causes: technology and marriage patterns. However, putting a brake on technological progress seems hardly feasible or desirable. And forcing people to select mates at random rather than on the basis of similar backgrounds and tastes seems similarly unlikely. As much as inequality may be a problem, no real solution is in sight.”

  • There is a difference between the evolution of tools making certain jobs unnecessary and the goal of eliminating workers in order to decrease “labor costs”. I am glad for my modern household tools and they eliminate the need for servants, but they have merely made the homemakers job easier, not redundant.

    There might be a difference in one’s personal intent, I guess I’m unclear, though, whether there’s necessarily a difference in the visible action or process.

    I would hope that people weren’t thinking, “We’ll buy that modern washing machine and dryer and dish washer, and then we’ll fire old Mrs. Smith who always did our housekeeping for us. Good thing that’ll save us 5% a year.” Indeed, perhaps many household which bought “conveniences” did so in order to make the lives of the “the help” easier. But somewhere along the way the vast numbers of people who were “in service” in 1900 dwindled away. I suspect part of it is that people came to expect more out of their livelihoods than being “in service” could provide. And also as a new generation of people moved out on their own, they found that they could afford the conveniences that allowed them to do their own housework much more easily than hiring help, and so young families never hired servants.

    Whatever the millions of individual motivations that added up to the trend: the career of being “in service” is pretty much no longer available, and while I enjoy watching Upstairs Downstairs as much as the next bloke, I’d tend to think that’s a good thing.

    Similarly, the forklift allows a company to move things around a warehouse much faster than they could have with teamsters carrying things by hand. And it allows people to work later in life at their warehouse jobs without suffering the disabling injuries that would put most hard laborers out of work by 40. But at the same time, it allows a company to ship much larger volume with fewer people. Which at some point means less jobs for hard laborers.

    So while I do agree that we have a human and moral duty to those who work with us and for us to, I think the tendency towards productivity is not only overall a good thing, but probably also pretty much an inevitable factor that we need to work with rather than against.

  • Matt McDonald says:

    Jessie,

    In order to make a dramatic impact on inequality, government would have to do something about the fundamental causes: technology and marriage patterns. However, putting a brake on technological progress seems hardly feasible or desirable. And forcing people to select mates at random rather than on the basis of similar backgrounds and tastes seems similarly unlikely. As much as inequality may be a problem, no real solution is in sight.”

    The inequality is not based on marriage patterns or technology. Every study shows that it is almost entirely based on moral choices – principally out of wedlock births. The only thing that government could do to help resolve this is to get out of the business of enabling it.

    I notice that in providing examples of how technology has eliminated the need for menial work (scribes and servants) the posters suggested that they would not need these workers… I submit that most of us unless to the manor born would actually be doing these jobs if it weren’t for technology, not hiring others to do so….

    There are so many issues with our society that are at the root cause of injustice. With the proliferation of double income families, we nearly double the workforce. This drives down wages making it difficult for a single wage earner to support his family.

  • Jeremy says:

    I think the tendency towards productivity is not only overall a good thing, but probably also pretty much an inevitable factor that we need to work with rather than against.

    I don’t think the argument is that productivity is a bad thing, just that we don’t have a lot of thought about when there is to much. At some point, the increase in productivity fails to bring any real help, and actually may cause harm. Much of the negative environmental conditions can be directly attributed to the side effects of productivity gains.

    A good analogy would be medicine. Medical advances have been staggering and wonderful. Medical advances are not wonderful when the violate the Hippocratic oath. Medical advances are not wonderful when they break people rather than heal them. Medical advances are not wonderful when they are used in the service of eugenics to create a race of ‘super-men’. Could society benefit in some ways if we lifted these restrictions – yes. Would society as a whole benefit – no.

    A good tool is a good tool, and productivity does help humanity. However, tools scaled to monstrous proportions with the intent that people be molded to fit the machine, rather than the machine to the people should be as abhorrent as eugenics.

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