It Ain’t Just the 1% vs. the 99%

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.

8 comments… add one

  • ...

    You know why the elites are insisting on importing poverty, you just don’t want to believe it because it’s just so depressing.

  • PD Shaw

    I chortled a bit over the “BMIs low” as a factor in elitehood. Must be careful to avoid racism, but I think his framework is probably wrong if we discount race/ethnicity. The rich are more likely to be overweight than the poor, but the poor overweight are more likely to be severely overweight. Reeves might be revealing a California perspective here. (Interesting btw/ to note that in Dave’s demographic link how much more impoverished the West has become, while the rest of the county has been going the other direction)

    I think the “elite” category he is drawing is probably closer to the top quintile of household incomes. (Note that the average number of workers per household is highest in the top quintile: 2.0, and slopes downward to 0.4 in the bottom quintile) The question is how much is that extra income _needed_ to support the family, which probably differs substantially based upon housing costs.

  • I think his framework is probably wrong if we discount race/ethnicity

    I think the majority of his framework is race and ethnicity.

  • ...

    Schuler, I’ve got a topic for you (and Andy and PD Shaw, for that matter) to mull over. You’ve frequently mentioned that government is run in a manner reminiscent of 1950s corporate America. What changes would you implement if you were appointed dictator for a year to change that management and employment structure? You probably have addressed this at some point, but I don’t really recall it being something you cover as frequently.

  • PD Shaw

    More computers. Less public unions. No defined benefits plans.

  • Andy

    Ice,

    Where to begin with your question? Without writing a book, I’ll just focus on a few key points and limit my comments to the federal government:

    1. Fix the procurement/contracting process. Obamacare revealed what a lot of us knew for a long time – the federal government is not capable of competently managing large, complex projects. This inability makes changing everything else much more difficult. For example, the government has hundreds, possibly thousands, of legacy computer systems and databases. Updating and integrating these is just about impossible when the feds can’t manage a contract. Not to mention the huge amounts of wasted money – see the FBI’s “virtual case file” system or any major DoD contract over the last 2 decades.

    2. Fix the personnel system. Unions are a factor here, but one of many. Just as an example, when the job I was hired into originally came open, it took about 4 months to get it listed on the USAJOBS website. I was a “by name request” to fill this position, but the rules still require the position to be advertised along with going through the entire process. I applied for the job in October – I was officially offered the job the following June and I actually started working in October. So it took the federal government a year to hire me and the position was vacant for almost a year-and-a-half. I will probably leave this job in a little over a year as it’s likely we’ll move again – my agency cannot advertise the position until it is actually vacant, so they will have to plan for the position to be vacant for over a year, at minimum, after I leave. It’s un-fucking-acceptable but no one with any authority is interested in doing much about it.

    3. A lot of the bureaucracy and “red tape” in the federal government that hinders the hiring process is at work at all levels. Just understanding how to successfully work in the civil service is a challenge. There is actually a two-week course for new civil servants to learn about all the benefits, rules, etc. A two week fucking course. For another example, a couple months ago James Joyner posted over at OTB about his experience trying to get a computer account. I think it took a month. Turning what should be a simple-straightforward process into a complex mess is something the federal government is really, really good at. Another example, even though I am a salaried, GS, non-union employee, I still have to do a timecard. Actually, I have to do two timecards – one actually tied to the computer pay system (which only records hours), and another which is only used for auditing purposes to make sure a complex set of rules is followed regarding the different pay statuses I’m in.

    Fixing those problems would be a good start…

  • ...

    Thanks Andy & PD. Andy. Any ideas on how things should be changed?

  • Andy

    Ice,

    I think the systems need to be remade. I think we’re too far past the point where marginal changes will do much. For example, when Pres. Obama came into office, he made some executive changes to speed up the civil service hiring process. Those changes shaved off 2-3 months. Better, but not nearly good enough.

    I think what’s needed is reform on the scale of what occurred during the 1930’s and 1940’s.

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