by Ryan Streeter on May 12, 2016. Follow Ryan on Twitter.
As the middle class has shrunk, Pew points out, the lower and upper classes in America have grown in size and significance. In some metros, the middle class is dwindling primarily because families are falling out of it and into the lower class…But in other places, the shrinking middle class is actually a sign of economic gains, as more people who were once middle class have joined the ranks at the top.
The latter point is one we don’t hear as much about in our public debates, namely that one reason the middle class is getting smaller is that a significant number of formerly middle class families and/or their children are getting wealthier. It’s at least as significant as the other problem whereby people fall out of the middle class into the lower ranks:
In total, 172 of [the] 229 metros [in the study] saw a growing share of households in the upper-income tier. About as many — 160 — saw a growing share at the bottom. And 108 experienced both: The middle class shrank as the ranks of both the poor and the rich grew.
In some cases the two trends appear to be directly related. For instance, look at the green (upper income) and blue (middle income) lines in this infographic:
Understanding the reasons for the growth in the upper tier seems just as important as understanding the forces shaping the lower tier. The trend is more widespread than the infographic might suggest. You see the same blue-green trends above in cities such as Minneapolis, Midland, TX, and New Orleans, not just the super-charged areas in and around New York, DC, and San Francisco. Presumably, household formation together with growing percentages of metro economies favoring specialized and higher forms of education are a big part of this. But getting into the gritty details region by region would help us understand more about that thesis, and how correct it is in varying places.
Regardless of how many Americans say they’re middle class, the number actually living in middle class neighborhoods has plummeted
by Ryan Streeter on April 28, 2016. Follow Ryan on Twitter.
This new study by Sean Reardon and Kendra Bischoff builds on the theme in this post and expands our perspective on what is perhaps one of the most important and complicated socioeconomic issues of our time: growing segregation in America by income.
This graph shows how wealth and poverty are concentrating more and more at the expense of the middle class:
The authors write:
The results presented in this report show that from 2007 to 2012 income segregation continued on the long upward trajectory that began in 1980. During the 2007‐2012 period—which spans the start of the Great Recession and the early years of recovery—middle‐class, mixed‐income neighborhoods became less common as more and more neighborhoods of concentrated poverty and concentrated affluence developed. These are not new trends, but the increase in segregation in the last five years exacerbates the increase of economically polarized communities that has occurred over the last four decades.
This table adds some detail:
by Ryan Streeter on April 21, 2016. Follow Ryan on Twitter.
In his latest installment on the “bubble quiz,” Charles Murray shows again that people who are disconnected from the mainstream congregate around each other in a significant way.
He writes of the graph below:
The correlation between the bubble score and the combined [Socio-Economic Score] index is .43. For the social sciences, that’s high. For example, the correlation between educational attainment and income is usually around .4. The strongest single predictor of job productivity is an IQ score, and that correlation averages about .4 across studies. If someone took the effort to refine the items on the Bubble Quiz, and added a dozen additional questions, it should be possible to jack up the correlation with the combined SES index to around .5, the average correlation of a child’s IQ with the midpoint of parental IQ.
by Ryan Streeter on March 26, 2016. Follow Ryan on Twitter.
The Economist has an interesting piece out on the bigness of American firms.
A very profitable American firm has an 80% chance of being that way ten years later. In the 1990s the odds were only about 50%. Some companies are capable of sustained excellence, but most would expect to see their profits competed away. Today, incumbents find it easier to make hay for longer.
The source of this trend? A lack of competition, the authors claim, rooted in the rigged-gamesmanship of big firms and regulators.
Our analysis of census data suggests that two-thirds of the economy’s 900-odd industries have become more concentrated since 1997…A $10 trillion wave of mergers since 2008 has raised levels of concentration further…Getting bigger is not the only way to squish competitors. As the mesh of regulation has got denser since the 2007-08 financial crisis, the task of navigating bureaucratic waters has become more central to firms’ success. Lobbying spending has risen by a third in the past decade, to $3 billion. A mastery of patent rules has become essential in health care and technology, America’s two most profitable industries. And new regulations do not just fence big banks in: they keep rivals out.
And then there’s the disconnect between politicians’ proposals and what’s really going on:
Most of the remedies dangled by politicians to solve America’s economic woes would make things worse. Higher taxes would deter investment. Jumps in minimum wages would discourage hiring. Protectionism would give yet more shelter to dominant firms. Better to unleash a wave of competition.
by Ryan Streeter on February 16, 2016. Follow Ryan on Twitter.
Following on the theme of my last post, here is Brookings’ Gary Burtless on another aspect of the Social Security conundrum:
In new research with my colleagues Barry Bosworth and Kan Zhang, I have examined trends in real incomes and inequality among the nation’s elderly and compared them with the same trends in working-age families. We show that inequality has increased among both the elderly and nonelderly, but it has increased much faster among families headed by prime-age and younger adults than among families headed by someone past age 62. More to the point, real money incomes have increased much faster among middle- and low-income aged families compared with middle- and low-income working-age families.
“The basic conflict posed by the budget is not between rich and poor but between workers and retirees”
by Ryan Streeter on February 16, 2016. Follow Ryan on Twitter.
Robert Samuelson has faithfully tried to focus attention on the U.S. budget deficit and its main culprits – entitlement programs – for a long time. He wishes our politicians had the candor to speak honestly and openly in public about the problem. He writes:
The basic conflict posed by the budget is not between rich and poor but between workers and retirees. Present policy favors retirees over workers — the past over the present and future — because, politically, tampering with benefits is off-limits. The rest of government absorbs the fiscal consequences of an aging population.
But our politicians can’t speak candidly about this. Why?
Candor would compel clarity. Why do we have budget deficits? The main reason is a fundamental mismatch between what the public wants from government and what it is willing to pay in taxes.
The result, then, is less capacity for fixing things politicians bemoan and usually blame the opposite party for – such as aging roads and bridges, less money for R&D, and inadequate safety net programs – when their unwillingness to face the music on the budget is the more likely cause of inaction. The status quo is unsustainable in the long run:
Current policy is for most discretionary programs to do more with less — a formula for ultimate failure. The squeeze in any one year is small; the cumulative effect is huge.
by Ryan Streeter on January 25, 2016. Follow Ryan on Twitter.
Tim Carney’s essay today on angry voters is one of the best assessments of the Trump-Sanders phenomenon I’ve read. He writes:
After the two parties divvy up or fight over [racial minorities, religious conservatives, suburban families and college students], there remain the leftovers: mostly working-class whites who aren’t part of the religious Right — no college degree and typically these days not inside major cities.
That’s Trump’s market, and here’s his act: populism that includes protectionism and immigration restriction, with doses of nationalism and nostalgia. The wonder isn’t that Trump was able to attract so much attention and support with this message to this market. The wonder is that both parties left this market untapped for so long.
And Sanders “has found his own ignored slice of the electorate: along with the true-blue progressives put off by ruling-class, corporatist millionaires like Clinton are the blue-collar whites who resemble the old-school populists of centuries past.”
They are at odds with the Democratic establishment.
Sanders’ brand of socialism turns off the most powerful parts of the Democratic Party. The Chuck Schumer and Hillary Clinton wing of the party, Wall Street and K Street Democrats, dismiss Sandersism as obsessed with ideological purity. Who needs single-payer healthcare when we have subsidies for Big Pharma and private insurers? Why break up the big banks when you can instead put them on a leash with some subsidies and some protective regulations?
Read the whole thing. Carney has done a nice job blending on-the-ground reporting from Trump and Sanders rallies with survey and trend data.
Both parties’ ruling elites have been showing for months now just how out of tune they are with vast swaths of the electorate. When I said late last summer that the summer of 2015 would be remembered as the summer of Trump and Sanders because they had tapped into popular unrest, I think most of us figured other candidates would figure out what was going on and do the same. It’s amazing how incapable most of them – and the people advising them – have proved to be in this regard.
by Ryan Streeter on January 15, 2016. Follow Ryan on Twitter.
This report kind of got swept under the rug this past week with all the State of the Union and GOP debate hype, but it’s worth a read. These data are pretty astounding:
More than six years after the economic expansion began, 93% of counties in the U.S. have failed to fully recover from the blow they suffered during the recession.
Nationwide, 214 counties, or 7% of 3,069, had recovered last year to prerecession levels on four indicators: total employment, the unemployment rate, size of the economy and home values, a study from the National Association of Counties released Tuesday found.
More than half of the states – 27 to be exact – did not have a single county that has recovered.
Of the 214 counties that had recovered, about a third were in Texas.
Many Americans really do feel like they are stuck in place, or that things have even gotten worse for them compared to a decade ago. If your salary is the same as it was ten years ago and your home worth less than in 2007, it’s pretty hard to listen to the political class talk about how the economy is moving in the right direction.
Texas cities dominate the “boom town” ranking that Joel Kotkin and Mark Schill published yesterday. Each of Texas’s largest four cities is in the top ten. The ranking is based on eight equally rated indicators such as income growth, domestic migration, and percentage of people under 45 with a college education.
Kotkin and Schill write:
Austin, Houston, Dallas-Ft. Worth and San Antonio are very different places, but they all have enjoyed double-digit job growth from 2010 through 2014, well above the national average of 8.1%. They also all have posted income growth well above the national average.
But the biggest divergence from the pack may be demographics. The Texas cities have become major people magnets, with huge growth in their populations of young, educated millennials and households with children. The clear star of the show is No. 1-ranked Austin, which has become the nation’s superlative economy over the past decade.
Austin leads the pack in terms of population growth, up 13.2% between 2010 and 2014, in large part driven by the strongest rate of net domestic in-migration of the 53 largest metropolitan areas over the same span: 16.4 per 1,000 residents. The educated proportion of its population between 25 and 44 is 43.7%, well ahead of the national average of 33.6%.
by Ryan Streeter on January 4, 2016. Follow Ryan on Twitter.
In keeping with the theme in this post, Joel Kotkin writes in TDB:
People don’t trust the very institutions that would be charged with carrying out their policies. Levels of trust for the dominant institutions like the federal government, Congress, the courts, big banks, media, and the academy are at historically low levels.
Roughly half of all Americans…now consider the federal government “an immediate threat to the rights and freedoms of ordinary citizens.” In 2003 only 30 percent of Americans felt that way…Critically this blowback is not among conservatives or exurbanites. Much of the strongest opposition to the federal and state planning regimes are in areas such as California’s Marin County, north of San Francisco, where residents have objected to densification schemes that, they maintain, would undermine the “the small-town, semi-rural, and rural character of their neighborhoods”—the very qualities that attracted them there in the first place.
Kotkin calls for an alternative Tocquevillian response, which should be equally appealing to conservatives and progressives who have run into the buzzsaw of one-size-fits-all federal policies:
Simply put, there is no huge appetite for ever expanding federal power among the majority of the populace. What is missing, outside of nihilistic opposition to all government, is a strong movement advocating for more authority in the hands of local communities, families, and volunteer organization.
There is a lot to mine in this idea that has been largely absent in all of the late 2015 commentary on American dystopia.