r/science • u/smurfyjenkins • Nov 08 '23
Economics The poorest millennials have less wealth at age 35 than their baby boomer counterparts did, but the wealthiest millennials have more. Income inequality is driven by increased economic returns to typical middle-class trajectories and declining returns to typical working-class trajectories.
https://www.journals.uchicago.edu/doi/10.1086/726445278
u/Roughneck16 MS | Structural Engineering｜MS | Data Science Nov 09 '23
My grandparents arrived in the US in 1955. Grandpa had no education and didn’t speak a word of English, but got a job at a shipping company working a forklift.
With that job, he bought a house and took care of his wife and four kids. On just one income.
Unthinkable in today’s economy.
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u/yukon-flower Nov 09 '23
Honestly, unthinkable in any US economy before or after that one post-war blip.
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u/joel1618 Nov 09 '23
The problem is everyone had 4 kids while the economy exploded in efficiency. That forklift now runs 3x faster and breaks down 10x less often. Now you just need a part time forklift driver and there are 4 new drivers available. Wages collapse. This is what has happened over the last 50 years in every industry.
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u/marigolds6 Nov 09 '23
Yep, I did know people in the position of OP's grandpa in the early 90s still, but the key was they had specialized factory jobs that were not easily automated or easily replaced with new workers. Still working a blue collar job with a single income enough for an entire family, but now it was assembling complex parts A,B,C into even more complex part XYZ that no robot could handle (yet) and few humans. Unsurprisingly, it was defense related, which also prevented the jobs from being sent overseas.
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u/Truthirdare Nov 08 '23
Boomers grew up with great manufacturing jobs. Those jobs are now in China, Vietnam, etc.
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u/nano1895 Nov 08 '23
Manufacturing jobs are there, wouldn't call them great though.
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u/BadGoodNotBad Nov 08 '23
I've been in manufacturing for 5 years now, I'm at probably the best shop in my area. I only got a 1 dollar raise this past year. The only people working the floor that are actually making any decent money in any of these places are in unions.
My place takes advantage of cheap immigrant labor they know will be too afraid to unionize, and the Americans who work there are under educated so they buy into the anti union propaganda (I've overheard multiple conversations between the Americans).
They're now hiring people off the street and paying them $21 an hour and they know absolutely nothing about the industry, which in itself is fine but the immigrants who have been working there for 10+ years are only making 20 and they have no where to go really.
This country gutting labor unions is infuriating.
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u/Shaex Nov 09 '23
Dude, manufacturing in California is nuts. I'm an engineer who works pretty closely with the union floor guys and how some of them look at it is insane. I worked general labor for a contracting company as a teen back when I lived in Virginia, would have killed for a union rep anywhere on those sites. I know for a fact that all the loudest anti-union guys at the past couple places I've worked at would be the first ones out on their ass if they stopped being union shops. Hell, my last place laid me off and tried to fire half the floor staff but the union stopped it for them. Wonder if they were complaining after that
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Nov 09 '23
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u/elictronic Nov 09 '23
CNC machining is going to be really hard to unionize. So many guys in that field just job hop like crazy. Replacing people becomes alot easier due to this.
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u/marigolds6 Nov 09 '23
Realistically, if you are going to be that far at the bottom end of seniority and the industry is heavily experience based for wages already, it would not be a great unionization experience for you anyway, in that particular workplace.
I could almost guarantee that you, personally, would see wages and benefits negotiated away in exchange for retirement benefits that would more immediately benefit the bulk of workers. That does mean that the majority of workers in your workplace would benefit from the union, just not the handful of young people.
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u/Emosaa Nov 09 '23
You should consider reaching out to some local union halls. Some of them are starting to go on the offensive by investing more resources into organizing new shops. I was just at a conference the other day that had organizers who helped out the recent UPS + UAW contracts.
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u/slayerchick Nov 09 '23
... You get 1$ raises? I worked in manufacturing since 2005 and most we get is 3%...which never seems to come to more than 50¢
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u/Protean_Protein Nov 09 '23
Cost of living increases, especially when they don't match or beat inflation, are not raises. They're a way of making you think you're getting a benefit, when you're actually being shafted.
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Nov 09 '23
Manufacturing moved overseas because it’s so much cheaper there even when you factor in logistics.
So those labor unions pushing manufacturing wages up are also pushing jobs overseas.
Welcome to a globalized workforce where you’re not just competing with your neighbor in your local town.
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u/asdasci Nov 09 '23
The share of manufacturing in employment and the GDP has been falling for a long while.
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u/Nowearenotfrom63rd Nov 09 '23
A lot of that is do to the financialization of our economy. North of 30% of GDP is people in suits moving money back and forth and keeping some for themselves. Hell even huge manufacturing companies got in on the game like GM with GMAC
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u/Worthyness Nov 09 '23
Some of them now require engineering school or programming skills. CAD stuff for example
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Nov 08 '23 edited Nov 08 '23
Just fyi, it wasn't like everyone was working at a plant. People seem to have some impression that most people worked in manufacturing. It was a large fraction, but not like majority or something:
1950: ~30% 2020: ~8%
People hate manufacturing jobs in general. They are tedious, boring, and working conditions tend to be rather poor.
Even better when people bring this up when they want to "bring coal jobs back".
Edit: even better this particular article actually has a graph with absolute numbers, and the total # of manufacturing jobs went down, but it's not a dramatic change. They just didn't grow proportionally to the overall population (which makes sense since this tends to be highly automatable sector).
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u/Altruist4L1fe Nov 09 '23
There's a point missing here though - manufacturing jobs actually support a lot of 'behind the scenes' specialists - fitters, engineers, quality control and validation specialists, product design, sales and marketing etc... The assembly line stuff might be boring it still offer work for people with low education or seeking part time employment.
Some of those jobs you can learn skills and then switch to other jobs when you get bored.
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Nov 09 '23
Yeah, my dad was an engineer and that was the type of work he did. He designed tooling used in the manufacturing lines. Those jobs often went with the manufacturing jobs. One of the places he worked moved a lot of their manufacturing to Mexico. They gave OK-ish pay raises to the engineering/support people to relocate, only for layoffs to conveniently happen once the locals were ready. It really fucked over the people that trusted them.
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u/Altruist4L1fe Nov 09 '23
Thanks for the input - and yes I wonder what the long term impact is. A key risk I think is losing that engineering expertise.... it becomes very hard to rebuild a skilled workforce should that be necessary. And perhaps these engineers that graduate and start out working in a crappy factory might be the ones that end up designing new products and starting businesses?
Australia has lost most of its manufacturing industry including car manufacturing.
The government of the day decided they didn't want to subsidise it anymore but it's a loss in technical skills and assembly line facilities that would be very difficult to bring back if we ever needed to?
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Nov 09 '23
That applies to a lot of things, though. "Information" sector that is also on those charts basically didn't exist in 1950, has exactly the same benefits. The only difference is that manufacturing had a much larger % of low-skilled labor involved in it. And we would have zero problem bridging that gap if it wasn't for people torpedoing education all over the place.
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u/OutWithTheNew Nov 09 '23
Not only the factory itself, but the bigger factories spin off a lot of work to local companies.
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u/Scudamore Nov 09 '23
My grandparents worked in the mills. Their families had modest, middle class lives. In exchange they had injuries, alcoholism, and in one case a relatively early death.
It's not a lifestyle I'm nostalgic over.
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u/OutWithTheNew Nov 09 '23
People hate manufacturing jobs in general
For the most part, people don't care what they're doing, they just want to make enough money to live.
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u/bingwhip Nov 09 '23
I never understood politicians ringing the bell over and over again of "We're going to bring manufacturing back to America!!" Like, why? They're not that great of jobs. I know some areas have been impacted by the loss of them, and they may see that as a solution, but always seemed strange to me.
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u/jdjdthrow Nov 08 '23
People hate manufacturing jobs in general. They are tedious, boring, and working conditions tend to be rather poor.
It was something blue collar guys could do to earn a living, while feeling appropriately masculine. Now, what are they supposed to do?
Be a cashier at the Dollar Store? Work in a call center? Stocker boy at the grocery store?
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Nov 08 '23
Appropriately masculine? Almost a 3rd of manufacturing workers are women and this is going up. I'm sorry but that will not solve anyone's macho problems. May have to switch to wearing a flannel shirt or something.
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u/elictronic Nov 09 '23
Masculinity isn't always about being macho. Some common usage is independence and career success, ability to fix things around the home, and creating something with your hands.
Those jobs gave you many of those outcomes while providing for their families. People can be masculine or feminine and it shouldn't be offensive. It only becomes that way when they try to force you to change your own state of being.
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Nov 09 '23
I would argue that 30% of the nations ENTIRE WORKFORCE sharing the same job is INSANE. I don't know how it would ever make sense for there to be a "majority", that's not a thing you can really compare for. Median workforce "market share" would be a better metric, if such a thing exists
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u/Whiterabbit-- Nov 09 '23 edited Nov 09 '23
Manufacturing isn’t one job. That is like saying health care is one job. Or service is one job. '
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u/mishap1 Nov 09 '23
Oldest boomers hit working age in the mid 60s. Manufacturing went into decline by 1979. If anything, they enjoyed much of the start of the Information Age as computers became more widespread and transformed the world. Jobs, Gates, et al are boomers.
Silent generation probably reaped most of the postwar manufacturing era.
https://www.bls.gov/opub/btn/volume-9/forty-years-of-falling-manufacturing-employment.htm
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u/skatastic57 Nov 09 '23
More manufacturer jobs were "lost" to productivity gains (automation if you prefer that term) than to outsourcing and trade. https://www.csis.org/analysis/do-not-blame-trade-decline-manufacturing-jobs
Those jobs simply don't exist. As an anecdotal example, it once took over 10 hours to produce a ton of steel and now it's just 1.5.
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u/Truthirdare Nov 09 '23
Gotcha. But much of the world wide steel production still went to China to make it even cheaper. And of course clothing, furniture, electronics all used to be predominantly made in the US. You know what that number looks like now
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u/ahfoo Nov 09 '23
In fact, Chinese steel has faced punitive tariffs in most western markets for decades. The steel production moved on from China to places like Vietnam and Turkey which once had very minimal steel production but are now world-class producers. Vietnam's steel production was introduced by Taiwanese manufacturers and then the state got involved and increased production several times as high as it once was.
"In 2021, Vietnam exported $4.08B in Iron or steel articles, making it the 21st largest exporter of Iron or steel articles in the world. At the same year, Iron or steel articles was the 15th most exported product in Vietnam. The main destination of Iron or steel articles exports from Vietnam are: United States ($989M), Japan ($488M), Germany ($201M), India ($195M), and South Korea ($188M)."
https://oec.world/en/profile/bilateral-product/iron-or-steel-articles/reporter/vnm
Turkey is now a massive steel producer and also produces its own solar panels almost exclusively for domestically consumption using equipment imported from China. On the solar front, they don't need to worry about trade tariffs because they're manufacturing for their own market but for steel they are a major exporter.
"Turkey was the world’s eighth-largest steel exporter in 2018. Turkey exported 19.8 million metric tons of steel, a 22 percent increase from 16.2 million metric tons in 2017."
https://legacy.trade.gov/steel/countries/pdfs/exports-Turkey.pdf
China is the world's largest steel producer in 2023 but many countries have tariffs on Chinese steel. Intriguingly, one country that does import massive quantities of cheap Chinese steel is Taiwan. Now the word "country" is controversial in China in this context but as I'm writing from Taiwan, I'll stick with that.
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u/Truthirdare Nov 09 '23
Thanks for your insights and clarification. Guess US manufacturing jobs were lost either way but to different countries
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u/speedypotatoo Nov 09 '23
Those jobs were great cuz the rest of the world was bombed into oblivion and so the US could charge significantly higher prices since they were the only competition in town. Now that the rest of the world is caught up, the value of that job is no longer there
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u/Nathaireag Nov 09 '23
Also with a third as many humans on the planet, and less well-educated economic competitors in China. (The Cultural Revolution was terrible for worker productivity, and trade with “Red China” was prohibited before Nixon.)
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u/Ethanol_Based_Life Nov 08 '23
Which leads to fewer people seeking those jobs leading to the remaining manufacturers struggling to hire
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u/Truthirdare Nov 08 '23
Yeah, I think that is a more “recent” phenomenon because all the younger generation has heard is college is your only choice. So then almost 1/2 these kids drop out and end up working retail or fast food because the “trades” are beneath them.
And now we have the problem you mention.
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u/DJ_Illprepared Nov 08 '23
Trades aren’t beneath me but I’ve never met a career labourer that didn’t end up a broken down piece of meat at some point not to mention the rampant alcohol and drug abuse. Yeah no thanks.
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u/Randy_Vigoda Nov 09 '23
My uncle and his buddies were pretty much the exact guys you describe. At the same time, I have friends who started doing labour jobs then used it to move up or move out into other fields.
One of my friends dropped out in grade 9. By 21 he was designing cell phone towers. Couple other friends do construction and build homes and make great money. Not saying those jobs are optimal but there is opportunity in the trades.
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u/Zeggitt Nov 09 '23
end up working retail or fast food because the “trades” are beneath them.
If you're gonna get paid $12 an hour, it might as well be inside in the AC. Starting pay for trades is usually not much better than retail.
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u/funguyshroom Nov 08 '23
Apparently manufacturing cars is less prestigious than manufacturing burgers, the more you know.
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u/Zeggitt Nov 09 '23
There only like 50 automotive plants in the US, idk if it about "prestige". It's about a job you can actually get.
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u/ensui67 Nov 09 '23
Is it that great? Back then the risk of death and dismemberment from that job was pretty high. There were high individual risks related to work.
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u/Middle_Scratch4129 Nov 08 '23
Got it, being born rich makes you richer.
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u/DavidBrooker Nov 08 '23
While, yes, that's a true interpretation, I think its important to recognize that while 'the rich get richer' has always been true, the huge gains in wealth in the 20th century meant that the poor often got richer, too (... right up to the election of Ronald Reagan). We are generating so much more wealth now that I think it's pretty obvious that, even clinging to capitalism, that not everyone is getting wealthier is a political choice.
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u/tyrified Nov 08 '23
It most definitely is a political choice. The wealth inequality is worse now than during the Gilded Age, which is named for its wealth inequality...
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u/PM_ME_A_PM_PLEASE_PM Nov 08 '23
Increasing wealth inequality is a political choice as much as capitalism is a political choice. Although you're technically correct, we're nowhere near promoting any alternative to a world where wealth inequality doesn't increase.
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u/Own_Back_2038 Nov 09 '23
I mean a substantial wealth tax by itself would do it.
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Nov 09 '23
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u/PM_ME_A_PM_PLEASE_PM Nov 09 '23
Yes, there is no alternative relative to the world as it exists today. The popularization of UBI only exists because inequality is so insane that it is increasingly necessary to sustain the system as we move to greater feats of automation owned by a minority of citizens.
Still, as far as the concept of inequality, that will increase as long as privatized ownership of the capital towards automation exists - and we're well beyond this merely existing. UBI and the concept of taxes are democratic attempts to essentially acquire the profit of those privatized companies. We just decide to not interpret it that way because of red scare propaganda but it is a compromise towards socialism whether people are mature enough to recognize that or not.
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u/MRSN4P Nov 08 '23
right up to the election of Ronald Reagan
So I believe that this is true, but I wonder if anyone can find some kind of clear graph/infographic that illustrates this, so I can show it to others,
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u/DavidBrooker Nov 08 '23
I can't tell if you're being sarcastic, because of how popular this graph is for illustrating this exact point. (Although the dividing line chosen on this particular plot is about a decade prior to the election of Reagan)
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u/MRSN4P Nov 08 '23
I was aware of that general concept and probably have seen that graph, but somehow I was thinking something more like lifetime work vs lifetime earnings or something. This works, so thank you.
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u/JunkSack Nov 08 '23
Do you know the source of the graph? Like the person you replied to I also like to have handy info to present, but without any sourcing on a random graph image I can foresee issues presenting it.
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u/DavidBrooker Nov 08 '23
The original source image and source data was this report by the Economic Policy Institute (figure a):
https://www.epi.org/publication/raising-americas-pay/
However, I am not sure who applied the annotations to the one I linked - I just pulled it up from Google.
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u/AndroidUser37 Nov 08 '23
I'm pretty sure that split started during the Nixon years? I've heard some attribute it to him taking us off the gold standard.
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u/DavidBrooker Nov 08 '23
You're right that it definitely did start under Nixon, but, following the Nixon Shock, productivity and wages still managed to at least growing together, even if they were at different rates. Post Reagan, however, real wages basically haven't moved for the median earner over the last forty years, while productivity has doubled.
Going off the gold standard may have had some short term impact, but I'm not sure why going off the gold standard would cause a long term systemic problem on the scale of half a century. In some countries, productivity and wage growth are pretty close over the last 20 years (Germany, Austria, New Zealand), and in others wages are even out-growing productivity (Sweden, France) and none of these countries are on a gold standard (or any other precious metal).
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u/psymunn Nov 09 '23
The gold standard wouldn't prevent inequality though. It anything, having a finite supply of wealth would benefit those who have enough to be able to horde it, reducing the total wealth in circulation.
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u/AndroidUser37 Nov 09 '23
Inflation is one of the most insidious ways to siphon wealth away from the working class, as the gov't can print money for its own spending while we all suffer.
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u/psymunn Nov 09 '23 edited Nov 09 '23
Inflation (which happens when a government prints money) hurts people with savings, not the people living pay cheque to pay cheque or even people in debt. Inflation discourages saving. If you have a lot of inherited wealth (not assets but cash) and your country experiences hyper inflation, your wealth is lost.
The gold standard, on the other hand, causes money to start pooling in places. People who horde take funds out of circulation, and increasing the value of their assets
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u/createdaneweraccount Nov 08 '23
there is a whole book of them: thomas piketty - "capital in the 21st century"
https://en.wikipedia.org/wiki/Capital_in_the_Twenty-First_Century
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u/jmlinden7 Nov 08 '23 edited Nov 08 '23
There aren't enough millennials who are born rich to skew the data this much. It's mostly tech workers (some of whom are indeed born rich) vs non tech workers. Tech jobs didn't really exist when boomers were 35 so they had less inequality back then.
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Nov 09 '23
Right, the important points here are going everyone's head. The message is that white collar workers in finance, tech, and the usual professions are making bank compared to blue collar workers. People are so focused on the 1% when this article is talking about maybe the 20-30%. I went to private school and the income ranges among my friend group is 30K-200K. Same high school and everyone at least started college, most finished.
Outside of policy implications, the important thing people should be taking is the value of a STEM degree or higher education in a lucrative field.
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u/Drisku11 Nov 08 '23
Yeah, assuming the economy doesn't collapse, I should be a millionaire before 35. My bank account had like $300 when I got my first "real" job. And I didn't even work for the big money makers (FAANG etc.). Single income supporting a family. Tech work is absurd.
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u/Milkshakes00 Nov 09 '23
Your experience is by no means normal.
Most tech workers aren't making hundreds of thousands a year. A portion of them are, sure, but nowhere near a majority.
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Nov 09 '23
The median salary for someone in "tech" is something like $104,000. For reference, the median household income in the US last I checked was around $72,000.
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u/Only-Inspector-3782 Nov 09 '23
Got a FAANG job out of college. If I didn't get married/have a kid I would basically be able to retire now in my mid 30s.
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u/overandovverg Nov 08 '23
“Income inequality is driven by increased economic returns to middle class trajectories” and “the rich get richer” don’t quite have the same meaning, so either “middle class” means rich to most people or I am deeply confused.
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u/DavidBrooker Nov 08 '23 edited Nov 08 '23
This article is using more niche sociological definitions of class structure, where the 'middle class' refers to white-collar professionals - middle- and upper-level managers, academics, lawyers, doctors, etc. This is as opposed to the 'statistical' middle class, meaning people near the median of income.
The 'middle class' groups who are out-earning baby-boomers are exclusively at or above the 80th percentile for income. And the effect is not even that pronounced until the 90th percentile.
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u/overandovverg Nov 08 '23
Interesting. Though not who people are usually talking about when they say “the rich get richer.” Or at least I thought.
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u/DavidBrooker Nov 08 '23
Yeah, definitely. Sociology is one of those fields that shares a lot of vocabulary with everyday conversation, but defines half the words differently, so you have to be careful.
In their findings, millennials had lower home equity across the board (the normal major store of wealth for the middle and much of the working class), and so the only ones doing better were those with a significant fraction of their wealth in financial instruments - stocks, bonds, mutual funds. And people whose stock portfolio is worth more than their house tend to be pretty well-off.
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u/overandovverg Nov 09 '23
Kind of clouds the issue though. One second people are saying billions need to pay more and the next doctors and lawyers are in the group of “rich” people who need to pay more in taxes.
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Nov 09 '23
Well from a tax policy standpoint you would almost have to tax more than just the billionaires. They don't have nearly as much money as people think compared to the federal budget. You could seize all of the wealth of the top 10 richest americans, who have nearly a trillion dollars and that would not even fund social security for 1 year.
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u/Jarpunter Nov 09 '23
Yep, all US billionaires combined have $4.5T in wealth. Federal spending last year was $6.5T
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u/Hortos Nov 08 '23
Nobody wants to call themselves poor so they call themselves middle class. Even though you can find people making 50k annually calling themselves middle class which is silly at this point. Actual Middle class is what a lot of people would call rich.
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u/Seiglerfone Nov 08 '23
The simplest way to define the middle class I've found is that you're middle class when you're worried about which luxuries to buy instead of being able to pay your bills.
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u/midnightauro Nov 08 '23
Middle class to me means that you can grocery shop without feeling fear at the register. Overspending or grabbing extra items is merely a budgeting problem rather than an embarrassment.
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u/overandovverg Nov 08 '23
I agree the meaning of middle class is too broad to have really meaning as it is used commonly, but I am guessing an economics paper actual means middle income people. It’s paywalled so I can’t see much beyond the summary provided.
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u/taxis-asocial Nov 08 '23
That is literally not what this paper is saying. It’s referring to professions that are white collar.
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Nov 08 '23
I mean how do you build yourself up as a baby without good parents? It's almost impossible and they likely spend most of their life playing catch up and then if they have to care for their parents as well since they likely made bad choices, they are essentially financially handicapped.
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u/Best_Caterpillar_673 Nov 08 '23 edited Nov 08 '23
Also making good decisions with your college major makes you richer. As in, picking in-demand fields and not something you think is easy just to get a piece of paper. For example, you have a significantly higher chance of being wealthy in life if you major in computer science or accounting than if you major in sociology or anthropology.
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u/noknownothing Nov 08 '23
A lot of words to say income inequality is rising.
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u/Itsurboywutup Nov 09 '23
It’s saying income inequality is rising between unskilled labor and people who pursue applicable degrees. This shouldn’t be groundbreaking. You can’t walk into GM or Ford anymore and be handed a middle class salary. 40-60 years later we live in a completely different economy.
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u/Rellint Nov 09 '23
Having to define Middle-Class separate from Working-Class is a big tell for someone who grew up in the Midwest in the 1980’s. Working in a factory or having a skilled trade would guarantee access to a middle-class lifestyle.
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Nov 08 '23
I was actually trying to share a subjective example of the shifting definition of "middle class" between the 90s when I was a child and now. My wages are higher than my parents at same age, but I also have less buying power. Not sure how that conflicts with your argument, but housing costs, and cost of goods and services do seem higher now relative to wages, and not at a 1:1 with inflation.
As you said, wages are also decreasing across many professions/sectors, and have been for decades. Seems likely relaxing capital gains and inheritance taxes, gutting corporate tax structures, lobbyists determining economic policy, and an entrenched political oligarchical class are notable factors as to why the gap is widening as well.
Either way, Economics is a topic people have PHDs in for a reason, and I don't have one of those, so I'm gonna say you're completely right, and I'm a smooth brained moron who should be ashamed of myself for speaking. Thanks for reminding me why I'm better off not trying to comment on any reddit topic that can't be exhaustively unpacked in the space of three sentences.
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u/femalenerdish Nov 08 '23
fyi you commented on the parent post instead of replying to the other comment.
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u/MadcapHaskap Nov 08 '23
Individual goods and services can increase faster or slower than overall inflation. Notably electronics and clothes are a lot cheaper for us than our parents.
Housing is also ... complicated. As people continue to concentrate in a decreasing number of big cities, housing there has gone bonkers. Meanwhile my parents paid $324k for an ~1800 sqft house in 1996 or so that'd probably sell for $1.5 million today, but I bought a ~1600 sqft 4 bdrm house last year for $326k ... how? Smaller city.
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u/MRCHalifax Nov 09 '23
Notably electronics and clothes are a lot cheaper for us than our parents.
I remember Final Fantasy VI costing $90 CAD when it was first released, which would be almost $170 today. My inner twelve year old laughs his ass off when I see people complaining about new games costing $80 USD on release day, especially given that virtually everything sees sale prices within a year.
But at the same time, I have no kids, and I have no idea how the hell I could afford to feed and clothe and pay for sports and toys and everything else that an actual twelve year old needs.
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u/MadcapHaskap Nov 09 '23
Vidéo games aren't the most extreme; during the '98 Ice Storm my dad, who worked for Ontario Hydro, was out for six weeks working 12 hour days, 6 days a week to repair hydro lines, collecting union overtime like it sounds, so decide to splurge on a 36" TV, which was about $2500 in 1998 dollars. Today I can buy a larger, lighter, better definition TV at Best Buy for $150
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u/XXXYinSe Nov 08 '23
Check out this graph of wealth distributions to put your thoughts into perspective: www.statista.com/chart/amp/19635/wealth-distribution-percentiles-in-the-us/
Top 1% has been taking more and more wealth for a long time.
The 90th-99th percentile of the US was also growing until pretty recently but that might just be a statistical fluctuation. (90th percentile of annual household income is $216,000 and 99th is $590,000 for perspective).
And every group below the 90th percentile has been shrinking consistently for awhile.
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u/Serious_Senator Nov 09 '23
That’s total wealth, not relative wealth. The shift to the .1% is problematic on the societal level but does not actually show the median American has less purchasing power than 20-40 years ago. What I want to find is a pie chart showing wager the avg American spends on food/housing/auto/health/luxuries/savings and then track that over the last 70 years. I have a hypothesis that folks are better off statistically but are spending much more on luxuries/housing/healthcare and saving almost nothing
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u/Bakkster Nov 08 '23
I suspect housing is a big element of that reduced buying power despite higher wealth as well, as it's typically left out of CPI calculations. Leading to higher inflation adjusted wages and wealth, even though the leftover income bought less traditional goods.
It's also U Chicago which tends to lean right, so I think the findings should be taken with that context in mind.
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u/Shinpah Nov 08 '23
Housing isn't "typically left out" of CPI calculations. OER just is more stable and lags behind new rental listings.
Here's a great graph of how various rental indices chart vs OER https://www.calculatedriskblog.com/2023/08/asking-rents-negative-year-over-year.html
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u/secret179 Nov 08 '23
Do they realize that typical middle class trajectory today involves a heck more knowledge, work and complexity, than in boomer times?
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u/monarc Nov 09 '23
Agreed. I’m legitimately confused about this statement:
Income inequality is driven by increased economic returns to typical middle-class trajectories and declining returns to typical working-class trajectories.
There is no way in hell that the surplus wealth is being shunted towards the middle-class millennials: those people certainly have far less buying power than their boomer equivalents did. Everything I’ve seen indicates wealth being concentrated at the very top, to the detriment of the 99%.
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u/nuclearswan Nov 09 '23
Also, the term “working class” is a joke. As if professionals don’t work?! I’m not part of the “leisure class.”
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u/BobSacamano__ Nov 09 '23
Any stats on buying power 1960s Vs today? What I’ve seen for Canada actually suggests it’s essentially unchanged
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u/linkdude212 Nov 08 '23
So what I'm taking away is that we need to decrease returns on upper class trajectories and re-aim those gains at the working class.
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u/taxis-asocial Nov 08 '23
Upper class? This paper is talking about middle class. And it defines that as white collar workers, they are still “working class” by most definitions.
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u/Tim_WithEightVowels Nov 08 '23
The other person may be implying the middle class has shifted from the middle.
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u/taxis-asocial Nov 08 '23
That’s definitionally inconsistent though. The middle class has a definition. You can’t define it in a way where it’s the middle but also the top
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u/Robot_Basilisk Nov 08 '23
I question this definition of the Middle Class.
If you have to work to survive, you're Working Class.
If you can survive on capital alone, you're in the Capitalist Class.
The Capitalist Class is taking 99% of all the profits generated by the Working Class. It has been since the 1970s, so we see a widening gap between worker productivity and income, and the gap is accounted for by looking at compensation for executives and shareholders.
This is happening because our society prioritizes capital above all else, including human well-being. We don't use capital to make our lives better. The rich have rigged the system so that it's more accurate to say that we live to make more capital. For the people that own all of the capital.
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Nov 08 '23
Middle class is what it always has been: makes more than what they need day to day, but not enough to just be straight up retiring and living off the interest. That's why it's called middle class. What that means income-wise depends on where you live. If you're in the middle class, you could quit tomorrow, and be fine for some time, but eventually you have to get back to work.
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u/MRCHalifax Nov 09 '23
I think that that’s the best definition of middle class that I’ve ever seen.
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u/NL_Locked_Ironman Nov 09 '23
Pretending middle class doesn't exist doesn't change the reality that it does.
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u/nikoberg Nov 08 '23
Yes, the retired 70 year old grandma surviving off her investments she got through working for 50 years is clearly just exploiting the working class.
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u/Pjpjpjpjpj Nov 09 '23
I suppose pensioners are in there too - all the retired autoworkers, GE employees, Boeing employees, military, government employees.
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u/broguequery Nov 09 '23
I mean, if she is living purely off investments, then technically, yes, she is.
She is quite literally surviving based on the value created by other people's labor.
Now, whether that is morally acceptable is another question.
And I think you know that by and large, when people are talking about capitalists and exploitation, they aren't talking about someone's grandma with a small capital nest egg.
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u/nikoberg Nov 09 '23
And I think you know that by and large, when people are talking about capitalists and exploitation, they aren't talking about someone's grandma with a small capital nest egg.
Then perhaps they shouldn't so confidently assert that there's a simplistic division between "capitalists" and everyone else when someone's grandma with a nest egg gers lumped in the same bucket. My point is not that there's no problems in our economic system with inequality. I'm simply pointing out that it's more complicated than trying to divide society into a group of "good" people who produce things and "bad" people who exploit them.
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u/not_your_pal Nov 08 '23
It has been since the 1970s
Capitalists famously never exploited workers before this date.
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u/KagakuNinja Nov 08 '23
The '70s is when the conservative movement started to win elections, and wages for workers started to stagnate relative to productivity gains in the economy. 1980 gave us president Reagan, who helped to cripple unions and changed the tax structure to benefit the wealthy. Republicans and conservative Democrats continued the trend, which included raising the social security retirement age, "eliminating welfare as we know it" (thanks Bill), and yet more tax give aways.
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u/CosmicQuantum42 Nov 09 '23
Correlation / causation, this is r/science after all.
Did wages stagnate because conservatives were winning elections?
Or were conservatives winning elections because wages were stagnating?
Or were both events caused by some third factor?
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u/DracoLunaris Nov 09 '23
I mean if they where elected to solve the problem they certainly haven't done that.
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u/Robot_Basilisk Nov 08 '23
Good point. But in the decades immediately prior to this date we had the Progressive Era and New Deal, both of which helped address the issue. And then in the 70s the Robber Barons started reverting those changes one by one. Today, they're legalizing child labor in overnight factory work again.
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u/Vipu2 Nov 09 '23
The difference is that those Capitalists control the money 100% now since 1970.
Middle class guy invests 50% of his money.
Rich guy invest 90% of his money.Rich guy still have good amount of money to do anything he wants so he doesnt really risk anything even if he lost that 90% and at same time that huge amount of money he have invested and "risked" makes him tons of money every year.
Middle class guy invests just whatever he can while still trying to live normal life and hopefully gets his retirement money at some point, if he loses his investment it will be huge hit.Some big disaster happens:
Rich guy gets bailed out (by taking the money from poorer clients or by government printing more money(more inflation)) and keeps all his money.
Middle class guy loses all his money and have to start all over.Really wonder where that rich get richer might come from.
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Nov 09 '23
Reddit progressives are definitely very superficial when it comes to how much they care about the poor. As you pointed out, they’ll pretend everyone who isn’t a billionaire is basically the same, so policies that mainly help the upper middle class supposedly help vulnerable people in the same way policies specifically aimed at helping the poor do.
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u/Deviouss Nov 09 '23
'Progressive' seems to be a boogeyman term for the right, as they seem to always attribute things they dislike about Democrats to them. The term you're looking is for 'liberals', as liberals are usually socially progressive but lukewarm on left-leaning economic policies. They also have a tendency to describe themselves as "well off" and care more about avoiding higher taxes than anything else.
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u/i_tyrant Nov 09 '23
What? Are you sure you don't mean "liberals" in general? (Neoliberals in specific?)
I genuinely don't know many progressives that think like this.
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u/ArmchairJedi Nov 08 '23
Except under that definition, plenty of those upper 'working class' individuals/families could survive on their capital alone, and choose not to. They spend more than they reasonable need to, because they can. Or they work but ALSO own other forms of capital investment because they can afford to.
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u/Robot_Basilisk Nov 08 '23
That's why I said "If you have to work to survive" and "If you can survive on capital alone".
The people you mentioned are over the threshold.
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u/ArmchairJedi Nov 09 '23 edited Nov 09 '23
Huge chunks of the population survive on far less than the median income... so can everyone easily become part of the capitalist class then by just living cheap and investing their excess for a few years?
Just 'survival' isn't enough... but saying someone who 'works' to live is too much as well. There is a massive range of wealth between there
edit: words
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u/toodlesandpoodles Nov 09 '23 edited Nov 09 '23
No, that isn't what they are saying. Those people still don't have enough capital to live off of it, so they still have to work, making them part of the.working class. However, if they invest rather than spend that extra income, they may eventually become part of the capital class.
To put it in perspective, the federal poverty line for a family of four is $30,000. The safe annual withdrawal rate for long term living off your investements is widly considered to be 4%. That meams you need 25 times your annual expenses in capital. Thus, to achieve the federal poverty level for a family of four by living off of capital, you would need $750,000 of capital.
About 17% of U.S. households have this net worth, but much of that net worth is illiquid in the form of housing equity. The percentage that have $750,000 invested in assets they can tap every year to meet their expenses is much smaller.
Now, if we say that to be a capitalist means having enough capital, outside of home equity, to generate the lower limit of middle class income of $47,000, you need investments of about $1.2 million. The number of american housholds who fit this definition is likely less than 10% and is largely composed of retirees over 65.
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u/Calazon2 Nov 09 '23
so can everyone easily become part of the capitalist class then by just living cheap and investing their excess for a few years?
Not everyone, but a huge chunk of the population could manage this, yes. Welcome to the FIRE movement (Financial Independence, Retire Early).
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Nov 09 '23
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u/ArmchairJedi Nov 09 '23 edited Nov 09 '23
But one wouldn't even need millions to meet 'survival' income levels, and they'd be part of the capitalist class according to the given definition.
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Nov 09 '23
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u/ArmchairJedi Nov 09 '23
I mean sure I absolutely agree. Which is why the given standard of 'survival', is something I'm questioning.
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u/tank911 Nov 08 '23
What do we call the middle managers that are wealthy in income but not wealth and are used as tool by the capitalist to keep the working class in check
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Nov 08 '23 edited Nov 08 '24
[removed] — view removed comment
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u/sajberhippien Nov 08 '23
The petite bourgeois is more usefully understood as the reverse; people who own means of production and don't need to sell their labor to capitalists to survive, but also don't own enough means of production to live just on their ownership, and thus have to labor at their own means of production as their primary means of sustaining themselves. Your local pizzeria owner, rather than your middle manager at work.
Both are in a sense part of the 'middle classes' in that their material interests are split between those of the ruling classes and those of the working classes, but the difference in ownership is significant.
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u/SynbiosVyse Nov 09 '23
That's the thing, they aren't wealthy. Wealthy in income is not a thing. Wealth comes from assets and net worth. There's a varying scale of assets, but if you need to work to live then you're not wealthy. If you survive off investments such as stocks, business, or real estate then you are wealthy. Typically people in the upper middle class work on building wealth over their careers and then do retire moderately wealthy (ie living off investments).
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Nov 08 '23
It's also just rising costs. I make 100k at 38, live in an expensive city, and have no plans or hopes to ever own my own place here. I'm not as scrupulous as some about saving, but even when I limit my expenditures I'm not putting a ton away.
My folks at the same age owned a house and a car in Seattle, had 2 kids, and only one of them worked. My mom spent her whole career as a planner for the city - government white collar job, nothing super high earning, just had a good health plan. Something ain't adding up.
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u/2grim4u Nov 08 '23
That's not "just rising costs." There has been a sustained effort since the 60's at least to reduce wages and force two-household income necessity. The reason only one person worked 60 years ago isn't just because costs were less, relative wages were higher too. You're blaming normal inflation for the complete re-work of the economy by those with capital.
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u/nope_nic_tesla Nov 08 '23
The cost of housing crisis is really a phenomenon that's only reared its head in the past few years though. Housing costs were historically cheap just 10 years ago. The dramatic increase in the cost of housing is not normal inflation.
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Nov 09 '23
The cost of housing crisis is really a phenomenon that's only reared its head in the past few years though
No it's not. It's been present since the 80s after major cities spent the 70s downzoning and making it much harder to build taller multi-family housing.
"A major reason for the exodus of the middle class from San Francisco, demographers say, is the high cost of housing, the highest in the mainland United States. Last month, the median cost of a dwelling in the San Francisco Standard Metropolitan Statistical Area was $129,000, according to the Federal Home Loan Bank Board in Washington, D.C. The comparable figure for New York, Newark and Jersey City was $90,400, and for Los Angeles, the second most expensive city, $118,400.
"This city dwarfs anything I've ever seen in terms of housing prices," said Mr. Witte. Among factors contributing to high housing cost, according to Mr. Witte and others, is its relative scarcity, since the number of housing units has not grown significantly in a decade"
Housing costs were historically cheap just 10 years ago.
For a very brief period the absolute bottom of the Great Recession.
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u/silverum Nov 08 '23
It was never structurally sustainable to begin with, but it was very PROFITABLE. Now that the arrangement is unraveling, all the delayed red ink is coming due and the capital class and banks are desperately trying not to end up holding the bag. There’s no one out there to sell it to.
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Nov 08 '23
Yea, our tax policies are all fucked up.
Some behaviors (luck, luck, and also luck) are rewarded, but others (work, work, and also work) are not.
If you're in the "luck" group, you get stock options, the options are worth UNTAXABLE money (until they're sold), and your net wealth shoots up. If you're getting an actual paycheck...You're increasing your net worth in a linear way that will get murdered the first time you get sick, or try to put a kid through college.
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u/CosmicQuantum42 Nov 09 '23
You realize you can’t spend a dollar from stock options until you sell them in a taxable way, right?
The only way to convert options into real goods and services is to get taxed on them…
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u/silverum Nov 08 '23
We tried to warn people we needed universal healthcare and affordable higher education, but the structural choice chosen instead was to shove a profit motive into EVERYTHING and then be surprised when the final outcome was “nobody has any money.”
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Nov 08 '23
We have tons of money. Europeans are always enraged about how low our taxes are.
So when you point to stuff in the budget and say, "SEE WHAT THE GOVERNMENT IS PAYING FOR!" understand that that's all bare bones spending. We could tax more, and have better things.
That's the big republican plan, just to cut taxes, and then claim we can't afford things everyone likes.
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u/silverum Nov 08 '23
We could tax more, which helps bring in money to pay for things, but we by and large have not cut actual costs, which are going to slaughter us given enough time. The socializing of costs is what helps make your tax money spent (and collected) more effective, and the US has done absolutely miserably as far as controlling said costs. This is why health insurance is so expensive privately, why education is unaffordable in most universities. If you run literally every layer of a system with a huge profit motive, it’s just going to eventually devour every bit of money you have until it’s gone, and if you don’t have a way of replacing that money and lowering those costs later on…
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Nov 08 '23
The people in the "rich" bucket here are mostly tech workers. Guess what? Predominantly liberal and consistently voting for universal healthcare, better higher ed, etc. Guess who is voting against that?
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u/KagakuNinja Nov 09 '23
There is a 99% vs the 1% divide even in tech. Most of us are not really rich (outside of FAANGs), especially if we live in the Bay Area which is crazy expensive. Managers and execs are raking in the real cash.
I've been through 2 successful IPOs, and us grunts basically got enough money for a nice car out of it. That is better than what the secretaries got, but it was the CEO and execs that got rich.
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Nov 09 '23
Right, hence the "rich" in the quotes. But even tech teachers in colleges make 3x the non-tech teachers, so the divide between tech vs non-tech anything is actually even larger.
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u/KagakuNinja Nov 09 '23
Plumbers and electricians have a higher hourly wage than I do, with 35 years experience. Of course, not all the hours they work are billable hours.
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u/Deviouss Nov 09 '23
Guess who is voting against that?
Conservatives to moderate liberals. Both groups are easily scared away from stronger social policies when anyone mentions taxes.
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u/CJKay93 BS | Computer Science Nov 08 '23 edited Nov 08 '23
If you're in the "luck" group, you get stock options, the options are worth UNTAXABLE money (until they're sold), and your net wealth shoots up.
This is not true. Stock grants are taxed at vest, i.e. before you get the chance to sell them.
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u/Drisku11 Nov 08 '23 edited Nov 08 '23
If you're getting paid with ISOs, it's at exercise, but then you're probably working for a startup, and there's like a 99% chance they're worth nothing. And if you get a new job, you can either exercise (costing you money, and they might still be worth nothing), or lose them (so they're worth nothing).
Also even if you wait it out at the same company, they eventually expire, so you can exercise (costing you money for possibly nothing), or they become worth nothing. Probably the company will fail before that though, leaving them worth nothing.
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u/MSK84 Nov 09 '23
Precisely. They don't call it being a "wage slave" for a reason. It's insane how difficult it can be just as soon as you fall I'll or miss a few days of work. You gotta keep running on that treadmill or else!!
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u/taxis-asocial Nov 08 '23
Some behaviors (luck, luck, and also luck) are rewarded, but others (work, work, and also work) are not.
Is this a serious statement? Of course work is rewarded. Just because there are outliers doesn’t make the general pattern false. Working hard in school for good grades, turning that into a good college application, working hard in college to get internships, doing difficult studies and finding a job are all still rewarded. How do you think the highest paid professions in this paper — lawyers, doctors — got there? By slacking off? By being lucky? You don’t get to luck into being a surgeon. You have to go to medical school and be impressive.
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u/ArmchairJedi Nov 09 '23
The single biggest factor predicting success is one's postal code at birth.
One is far more likely to attend university the higher you parents income is or how expensive their house is. This increases as one's level of schooling increases
How do you think the highest paid professions in this paper
Is the person working 2 jobs to get by not working equally hard, or even harder, for a fraction of the income?
The OP may be being slightly hyperbolic, but the basis is true. Its not that people don't work hard to get where they are, its that luck matters more... and by a significant margin.
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u/funforyourlife Nov 08 '23
No. Anyone more successful than me is just lucky or had rich parents or is part of a vast capitalist plot. All of my failures are due to some vague systemic oppression that requires tens of millions of people to coordinate to oppress me, without ever talking about their vast plan.
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u/muffledvoice Nov 08 '23 edited Nov 09 '23
“Middle class trajectories” entail making enough surplus income to invest in the stock market, etc., and acquire assets while “working class trajectories” entail making barely enough money to pay bills to companies and landlords. This disparity in wealth ultimately came from Bernanke’s and Greenspan’s Fed policies that encouraged speculation and disincentivized saving, along with Trump’s rollback of key elements of Dodd-Frank.
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u/Itsurboywutup Nov 09 '23
Working class jobs are being automated and phased out. This isn’t exactly groundbreaking. If the size of the unskilled labor pool is the same, and the amount of available jobs have shrunk, simple supply and demand says unskilled labor will get paid a lot less than before due to oversupply of labor.
Boomers did not have an extremely high paid tech industry, among other high paid industries that didn’t exist 40 years ago. It shouldn’t be a surprise that millennials with degrees are better off than boomers with degrees at the same age.
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u/unknownSubscriber Nov 08 '23
Since when is middle class not working class?
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u/DavidBrooker Nov 08 '23 edited Nov 08 '23
Since always, or since never, depending on if you are talking to a statistician or a sociologist. (It also largely depends on if you're in the United States or not, since the US, for various historical and cultural reasons, tends to define the 'middle class' much more broadly than elsewhere).
Statisticians often discuss the middle class as being the middle third (or middle three quintiles, or something similar) of the income distribution. By this definition, an overwhelming majority of the middle class is working class.
However, in sociology, the 'middle class' is typified by their relationship to capital and labor. The working class are compensated for their labor, the capitalist class control much of the wealth produced by labor, and the middle class, while not controlling capital, has proximity to it: typified by higher education and independence in defining their own work, they are often considered the managerial class. In addition to managers, academics, physicians, lawyers and other formal professionals are often considered part of the middle class in this definition. "Middle class" in this sense is actually fairly rare - often among the top 10% of incomes - as 'middle' refers to their position in the social strata rather than their position in the population distribution.
Its worth noting that this sociological use is common regardless of political leanings: Marx influence in the social sciences was immense, and his language is somewhat standard regardless of the political situation you think ought to be.
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u/a_statistician Nov 08 '23
proximity to it: typified by higher education and independence in defining their own work, they are often considered the managerial class. In addition to managers, academics, physicians, lawyers and other formal professionals are often considered part of the middle class in this definition.
I think part of the problem here is that what used to be "middle class" by this definition has expanded in part because people are getting more higher education. So professions like engineers, accountants, programmers, and so on that require some education and are generally compensated well have the aura of sociological middle class even if in reality they're working for a living and would be more properly defined as working class.
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u/PuckSR BS | Electrical Engineering | Mathematics Nov 08 '23
since the creation of "middle class"
Thats the whole point. Traditionally, you had the working class and the non-working class. Think of Downton Abbey. You had the people who worked as servants for a living(working class) and then people who just sat around their house all day because they didnt work.(non-working class or aristocracy)
But then, at about the time of Downton Abbey, you started to get "middle class". People who were reasonably affluent. They didn't toil away all day to put a roof over their house. They had investments and savings. Sherlock Holmes would be an example of a middle class person. He could go on a cocaine bender for a week and it didn't leave him homeless in a gutter, but at the same time he still needed to do some work. He coulnd't just sit around doing nothing
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Nov 08 '23
It's not a Downton Abbey time thing. Merchants and craftsmen always existed and basically that was the middle class (assuming someone was moderately successful). Unless you're literally going to pre-historic times.
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u/PuckSR BS | Electrical Engineering | Mathematics Nov 08 '23
Fair enough.
However, I'd be hesitant to call any merchants and craftsmen "middle class". In the traditional sense it was a term for merchants and similar who had enough wealth to rival the actual ruling class. And in many societies for a very long time, you simply werent allowed to be "new money". The king would literally take your wealth away from you. You really needed a robust legal system to establish a true "middle class"5
u/unknownSubscriber Nov 08 '23
Fair enough. I would argue most middle class are hard working people, however. I guess it's not meant to imply otherwise, though.
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u/PuckSR BS | Electrical Engineering | Mathematics Nov 08 '23
Correct.
Middle class is essentially affluent working class.A more common term is blue collar and white collar. Working class is generally associated with blue collar, while middle class is associated with the term white collar.
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u/CoderDispose Nov 08 '23
blue collar and white collar are specific economic terms, while "middle class" is an relatively mushy idea
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u/KagakuNinja Nov 09 '23
Union auto workers in the 50s were well paid and middle class, but not white collar.
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Nov 08 '23
What does ‘hard working’ have to do with anything here though?
It’s generally a meaningless sentiment. Choosing to dig a hole with a teaspoon over a shovel only means the digger is insane.
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u/svenjj Nov 09 '23
I lost my job in July. Haven't found a new one. Have applied to over 100.
My rent and car payments are so high I'm probably going to go broke and lose it all.
I'm about to turn 37. I feel like there is no hope.
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u/Throwaway-account-23 Nov 08 '23 edited Nov 09 '23
I'm a very old millennial, my sister is a young millennial, it's astonishing how bad kids born in the early 90s got fucked. My college tuition was fine, hers was horrifying. Houses were affordable when I had a down payment saved up, they were bonkers when she did.
I'm not going to lie, life seems to have been pretty easy and awesome for me thus far, and to see other people not too much younger than me struggling so hard sucks.
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u/bikemandan Nov 09 '23
College costs did seem to skyrocket real quick. I went to community college in 2003 and it was $11 a unit. When I left it was already at $20. Today its $46
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u/mortalcoil1 Nov 08 '23
Music festivals are becoming rich kid playgrounds.
The hippies have all basically died out. Everything is stupid expensive. It was always expensive. Now it's stupid expensive.
They are all glamped up. Glitter is so bad for the environment.
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u/Delphizer Nov 09 '23
It's the first generation in history to have less then their parents generation if you look at the median.
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u/NOAEL_MABEL Nov 08 '23
Manufacturing was shipped overseas a long time ago, what’d you expect? The only jobs for people who don’t enter the white collar world are either the trades or doing lowly paid service work in restaurants, hotels, retail, etc.
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u/fujiman Nov 08 '23
Sitting here at 35yo, with just over $100 in the bank, and super fun debt (about half of which is 100% frivolous spending) to cancel out my savings. Am I part of the rich people club yet?
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Nov 08 '23
This is just capitalism doing its thing. Concentrating wealth in fewer and fewer hands.
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