Richard Reeves suggests that rather than thinking about the 1% vs. the 99% it would be more productive to think about three groups—the affluent, the “squeezed”, and the entrenched poor:
At the very least, recent economic and social trends suggest a trifurcation rather than bifurcation of society, with two consequent divides. At the top, we can see an elite doing well in a labor market offering big returns to human capital. This is perhaps not the just the top 1% (much though politics might be easier if that were so) but, say, the top decile, or 10%, of the income distribution.
This stratum is not only prospering economically. For the people on this top rung, education levels are high and rising. Families are planned, marriages strong, neighborhoods safe and rich in social capital, networks plentiful, BMIs low and savings rates high.
Below this affluent class is a broad swath sometimes dubbed the ‘squeezed middle.’ This group have decent labor market participation rates, but wages that are rising slowly. In many cases, two wages are needed to support the family. They own a home, but are not otherwise wealthy. Savings exist for emergencies or one-off expenditures, but run out fast if the households has a serious downward shock to income. Private schooling is rarely an option, financially. (This is a group that might benefit from one of the schemes of wage insurances currently being discussed, most recently by Prof Miles Corak).
At the bottom of the social scale are those whose poverty is entrenched. Labor market attachment is weak, with many people in long-term unemployment. Teen pregnancy is still heard of, unlike in most communities today. Poverty is felt in most domains of life – crime, health, education, parenting, drug addiction and housing. The growing economic segregation of neighborhoods further isolates this group from chances of work, better schooling or valuable social networks. Upward intergenerational mobility rates are low.
Color me “squeezed”, marginally attached to the labor force as I am now. I think there might actually be four groups—I’d divide the poor into “entrenched poverty” and “imported poverty”. See here for some statistics on the demographics of poverty in the United States. About a third of the poor are black; a majority of the increase in the poor since 1972 are Hispanic.
I’m not really clear on the theory for importing more poverty into the United States when we already have poverty that’s becoming increasingly entrenched.