Class Dismissed
To the Editor:
Bruce Bartlett has written a useful and mostly accurate assessment of the evidence concerning intergenerational income mobility in America [“Class Struggle in America?,” July-August]. But there remain several issues that he treats inaccurately or does not discuss.
Contrary to what he writes, the research documented in the book Unequal Chances: Family Background and Economic Success (which I co-edited) does not support either of two points he attributes to the New York Times’s recent series on class in America. First, the idea that “although individuals may appear to demonstrate income mobility over the course of their lives, eventually they end up in the same . . . income class as their parents” is quite far from the truth, and I do not know of any competent researcher who would assert it. In fact, children of families in the middle of the national income distribution are almost equally likely to end up in any income decile; for them, there is virtually no inheritance of economic position.
Second, Unequal Chances makes no claim that “whatever the degree of mobility in American society, it is no greater now than it has been in the past.” Rather, it presents strong evidence that the degree of mobility has been severely underestimated in past studies, which did not have the benefit of detailed data that have become available in the past decade.
To give a flavor of the actual numbers (taken from the Panel Study of Income Dynamics, consisting of a representative sample of 6,273 white and black families observed over 32 years and in two generations), the correlation between parents’ and children’s income is a modest .42, but the child of a family in the top decile has a 22.9 percent chance of remaining there while the child of a family in the bottom decile has only a 1.3 percent chance of moving to the top. Similarly, the child of a family in the bottom decile has a 31.2 percent chance of remaining there while the child of a family in the top decile has only a 2.4 percent chance of moving to the bottom.
My point is simply this: even a fairly high degree of mobility on average is compatible with extreme inequality between the relatively poor and the relatively well-off. This is a serious social problem. It is not fair that the accident of one’s birth family entails a fifteen-fold difference in one’s probability of attaining success. In a decent society, individuals are not so severely handicapped by the vagaries of birth.
Mr. Bartlett disagrees. “What is truly important for a society,” he writes, “is how people in general perceive their circumstances”—as opposed, presumably, to what those circumstances really are. But the way middle- and upper-class people feel about their circumstances cannot be averaged in with the objective circumstances of the poor.
It is time that conservatives took the plight of the poor seriously, and proposed effective measures to reduce our society’s extreme disparity in rates of success. The assertion by conservatives that poverty is caused by welfare is in part true, but only in part. Appropriate redistributive policies can promote self-reliance and can isolate the minority of families that are truly incapable of caring for themselves. The absence of a dialogue on the Right focused on this problem only reinforces the stereotype that conservatives are hard-hearted and uncaring.
Herbert Gintis
Santa Fe Institute
Santa Fe, New Mexico
To the Editor:
Bruce Bartlett rejects the idea that the rich have gotten richer while the poor have gotten poorer, using income and polling data to validate his argument. He points out that due to widespread home ownership and the vast run-up in real- estate assets, “aggregate wealth has become much more evenly distributed” in America. This is correct, but therein lies the problem.
The wealth effect from the current boom/bubble in real estate is what keeps our spend-without-saving economy muddling along. We are spending 80 percent of the world’s savings and borrowing $2 billion every day from savers outside the U.S. to keep our standard of living at the top of the heap.
Incredibly, Mr. Bartlett comments that if we “base our calculations” about living standards “on expenditures rather than savings,” then “living standards are much more equal among rich and poor.” I always thought that what made someone rich was the size of his bank account, not the number of cars or cell phones in his possession. Is someone who has a million dollars in the bank but lives in a modest home worse off than his counterpart living in a four-carport mansion with a million dollars in credit-card debt? With over $37 trillion in total debt and rising, we are heading for a serious economic decline, with the poor likely to bear the brunt of the fallout.
Consumers are taking out home-equity loans, sometimes with interest-only payments, and using the proceeds to purchase more consumables. If we get to a point where the housing bubble bursts, the middle class and the poor, many of whom have borrowed to the hilt, will find themselves in a deep financial crater. The gap between the rich who are not leveraged and all others will become enormous, and the disequilibrium could lead to social unrest and dissatisfaction among a great majority of the population.
I am as much opposed to high tax rates as is Mr. Bartlett, but if we are going to lower taxes across the board, fiscal policy-makers should encourage a diminution of government spending and foster a policy that encourages the less well off to pay down their debt loads rather than the opposite.
Fred Ehrman
New York City
To the Editor:
Bruce Bartlett claims that “it is clear that Americans continue to believe in the Horatio Alger model, according to which everyone, no matter how humble his beginnings, has a chance to make it big.” But this model for upward mobility in today’s America is flawed. Vast advances in technology have not translated into wealth for every individual. The cost of living in many of our metropolitan areas has soared, making it difficult for the middle class and for new immigrants to climb the economic and social ladder. From New York to San Diego, real-estate prices continually reach new highs, making it hard for first-time buyers to purchase a home.
Mr. Bartlett’s assertion that the wealthy will provide “the capital that will eventually raise productivity and wages across the economy” is largely untrue. The new phenomenon of outsourcing, and the flight of our manufacturing industry to Asia and Latin America, has had negative consequences for American workers. Wages in this country have remained stagnant for the past five years, and the minimum wage still hovers at an embarrassing $5.15 an hour. Gallup tells us that only 3 percent of Americans describe the economy as “excellent,” and only 33 percent describe it as “good.” The wealthy invest in globalization, not in America. Upward mobility seems like an unreachable dream for many people.
Nick Gatsoulis
Astoria, New York
To the Editor:
Bruce Bartlett presents impressive data to refute the New York Times’s assertions in its “Class Matters” series. If I have any criticism of his article, it is that he does not sufficiently focus on the illogic inherent in the Times’s reporting in order to expose the fallacy of its reporters’ conclusions.
Perhaps the most egregious example occurred in the article titled “When Richer Weds Poorer, Money Isn’t the Only Difference.” This article highlights the marriage of Cate Woolner, a relatively wealthy woman, and Dan Croteau, identified as a member of the lower middle class. Woolner had met Croteau and asked him out for coffee provided he was “not involved with someone, not a Republican, and not an alien life form.” (How the Times goes about finding these “representative” subjects could make a fascinating article in itself.)
Both spouses have children from previous marriages, but the article depicts Woolner’s sons as having many opportunities that Croteau’s daughters do not have. One of her sons took “a couple of semesters away [from college] to study in India and to attend massage school while working in a deli near home.” He “fantasizes about opening a brewery-cum-performance-space, traveling through South America, or operating a sunset massage cruise in the Caribbean.” In general, the sons are “easygoing young men, neither of whom has any clear idea what he wants to do in life.” In contrast, one of Croteau’s daughters “is in graduate school in educational administration at the University of Vermont” while the other “is working three jobs while in her second year of law school at American University.”
The article unintentionally makes clear that the supposedly disadvantaged daughters are in a far better position to improve themselves economically and in other aspects of their lives than the relatively privileged but unfocused sons. The daughters are excellent examples of the upward mobility that is possible in American society, yet the reporter repeatedly portrays them as somehow trapped by their class.
Paul Rothstein
Falls Church, Virginia
Bruce Bartlett writes:
I am pleased to see Herbert Gintis point out that income mobility has tended to be underestimated in past studies. His statement that a high degree of income mobility is perfectly compatible with a high degree of income inequality is, of course, correct. But, as Anthony Shorrocks and others have shown, there is a huge difference between an unequal society in which there is no mobility and one in which there is a high degree of mobility. As Shorrocks puts it, “the existence of mobility causes inequality to decline.”
Mr. Gintis also argues that conservatives should take the plight of the poor more seriously. I heartily agree. But the issue of inequality and the plight of the poor are not the same thing, though they are often assumed to be. Policies that would improve the lot of the poor by increasing the rate of economic growth, for example, are often opposed by people like Mr. Gintis because the rich would benefit too much, thereby increasing inequality even as the poor are made better off. I think an effective strategy of helping the poor would concentrate on their absolute level of well-being and not worry about their relative position. I do not think the poor are helped in any way by policies that simply punish the rich for being rich. You cannot eat Gini coefficients.
Fred Ehrman concedes I am right in saying that the vast increase in housing wealth has disproportionately benefited the middle class, thereby improving the distribution of wealth. Yet he dismisses the point with an irrelevant discussion of national saving. He also dismisses my point about standards of living being based on levels of consumption rather than income. Somehow, he seems to think that how people actually live is meaningless to their well-being.
What seems to matter to him is how they theoretically should be living based on their income. But this is fallacious for several reasons. Many of those in the bottom income quintile have little income but live quite well. This includes the elderly, many of whom live in homes that are completely paid for; those just starting out in life, with no job but bright prospects; and those who have suffered a temporary income loss and are either borrowing or drawing down savings to maintain their living standards. Such people are not poor in any meaningful sense. But Mr. Ehrman assures us that they are.
Nick Gatsoulis says that saving and investment are irrelevant to productivity. He is entitled to his opinion. But a contrary view will be found in every economics textbook ever published. He further states that the gains from growth do not accrue to everyone. Of course that is true. But it does not follow that we should be unconcerned about growth. Clearly, it is the essential precondition for betterment of the human condition. The fact that all will not necessarily share in the bounty or to the same degree is a poor reason to deny all the rest an improvement in their living standards. Moreover, where are we going to get the resources to aid the poor through governmental programs if we do not have a high level of growth?
I thank Paul Rothstein for further exposing the illogic of the New York Times series on class.
