There's too much emphasis on the top 1 percent of wage earners when looking at who controls wealth and power in the US, Richard Reeves of the Brookings Institute argues at this January 26, 2018 talk at UC Berkeley, co-sponsored by the Haas Institute and the Institute for Research on Labor and Employment.
Reeves said we should instead be focusing on the top 20 percent who have tremendous influence over policy and use that sway to pursue their personal interests to the detriment of the bottom 80 percent.
The talk was based off his recently published book, titled Dream Hoarders: How the American Middle Class is Leaving Everyone Else in the Dust, and drew rebuttals from two leading faculty at UC Berkeley: Cybelle Fox, Associate Professor of Sociology, and Paul Pierson, Professor of Political Science, both Haas Institute affiliated faculty.
Watch a recording of the talk above, which includes the sharp responses from Pierson and Fox, or read a transcript of it below.
Here was the teaser for the event:
We know about the one percent. The ultra-rich. The billionnaire class. But author Richard Reeves writes it’s the upper middle class that matters most. Those top 20 percent of earners are becoming more effective at passing wealth to their children, and – through zoning laws, schooling, occupational licensing, college application procedures, and the allocation of internships – more effective at keeping others from getting it. In his new book, Dream Hoarders: How the American Middle Class is Leaving Everyone Else in the Dust, Why That is a Problem, and What to Do About It, Richard Reeves argues that we can do much more to protect opportunity for all and prevent the United States from becoming the very class-based society that early Americans rebelled against.
The discussion will be moderated by Cybelle Fox of the UC Berkeley Sociology Department and Paul Pierson of the UC Berkeley Political Science Department.
This event is co-sponsored by the Haas Institute for a Fair and Inclusive Society and the Institute for Research on Labor and Employment (IRLE).
Please register to secure your spot.
Richard Reeves is a senior fellow at Brookings, where he focuses on social mobility, inequality, and family change. He’s worked as director of strategy for the UK’s Deputy Prime Minister and was named one of America’s top fifty thinkers by Politico.
Sandra Smith: It is my absolute pleasure to welcome to campus Richard Reeves, for the first talk of the spring series. Richard Reeves is a senior fellow in Economic Studies and co-director of the Center on Children and Families at the Brookings Institute. His research focuses on social mobility, inequality, and family change. Prior to joining Brookings in 2013, he was director of strategy to the UK’s Deputy Prime Minister.
Richard’s publications for Brookings include his latest book Dream Hoarders, which we're going to learn a lot about today in addition to I think about five other volumes that you produce for Brookings since 2013, and those books include Time for justice: Tackling race inequalities in health and housing also published in 2017, Ulysses goes to Washington: Public myopia and policy commitment devices 2015, Saving Horatio Alger: Equality, Opportunity, and the American Dream, Character and Opportunity 2014, and The Parenting Gap also in 2014. So just publish two books a year and you're good, right?
He is also a contributor to The Atlantic, National Affairs, Democracy Journal, the Wall Street Journal and the New York Times. In September 2017, Politico magazine named Richard one of the top 50 thinkers in the US for his work on class and inequality. He is a member of the Government of Canada's Ministerial Advisory Committee on Poverty, and also teaches at the McCourt School of Public Policy at Georgetown University.
After Richard gives his talk, we have two discussants from Berkeley communities, Cybelle Fox and Paul Pierson. Cybelle Fox is an associate professor in the Department of Sociology. Her research lies at the intersection of race and ethnicity, immigration and welfare state policy. Her first book, Three Worlds of Relief, is essentially a tour de force if there ever was one and has received numerous awards and prizes. I recommend highly as one of as any ... It's basically one of the best books that I've read in the last decade easily. Paul Pierson is the John Gross Professor of Political Science. Pierson's teaching and research includes the fields of American politics and public policy, comparative political economy, and social theory.
His most recent books are American Amnesia: How the War on Government Led Us to Forget What Made America Prosper, Off-Center: The Republican Revolution and the Erosion of American Democracy, Politics in Time: History, Institutions and Social Analysis, and The Transformation of American Politics: Activist Government and the Rise of Conservatism. How this works is that Richard will give a talk that will last about 35 minutes or so and then each of the discussants will speak for about 10 minutes before Richard responds and then we open it up for Q and A, and that should take us to about an hour and 45 minutes or so. We will begin with Richard's talk. Welcome.
Richard Reeves: Thank you so much for that very kind introduction Sandra and also for mentioning that they're not all books by the way, many of them are essays. That made me feel tired listening to that list. I think I was going to use the handheld, but I think I'll just stay here because I need to go through the slides as well. I may move a little bit later. Also, thank you very much for mentioning the Politico top 50 most influential thinkers list. I must say that in previous years, I've always thought that was a stupid list, totally subjective, untethered to any real impact or intellectual integrity but this year. You know what they say about prizes lists.
I was actually more than being on the list, most thrilled that one of the other people who was on the top 50, Sandy Darity whose work I hugely admire listed Dream Hoarders as one of his books of the year and candidly that meant at least as much to me as a list. It's obvious from my bio and actually listening to me now that some confessions are in order as I talk about American inequality and American dream. The first is that I'm not from around here, and I spent quite a bit of time apologizing for that when I moved to the US and I'm working on US inequality and mobility.
But I've actually come to believe that, and it is partly inspirational the book there's something to be said about a comparison between the class systems of the country that I left, the UK, and the country that I have come to, the United States. And actually I am now as of last October a US citizen. In fact, I became a US citizen the last day in my state. I live in Maryland where you had to become a citizen in order to register to vote in the presidential election, and I was determined to cast my vote. Actually in that year, I voted in two elections of import. By mail in the Brexit referendum on the EU and in person in the US presidential election.
It's a banner year for me politically. I have a French friend who said for God's sake don't take French citizenship. I didn't and Macron won. Actually one of the reasons I ended up writing this book, I've done a lot of work on social mobility, intergenerational mobility in the UK, and now increasingly in the US was a sort of reflection on the different ways in which the class systems in the two countries work. To in a sense come almost to the heart of my argument right at the beginning, I have come to believe that the class system of the US operates more ruthlessly efficiently than the class system of the United Kingdom. We think of class in the UK is a very class conscious society.
In fact, it's saturated with class consciousness. Almost every interaction is an exhausting attempt to figure out exactly where you are on the pecking order of the British class system based on what you wear, how you talk, which fork you use, how you cut your cheese. It's honestly exhausting, and I cut cheese incorrectly when I went to Oxford. Someone said he's nosed the brie. To this day, I have no idea what that means, but I do know it revealed me, not the right background. Something we don't cut the point off. Anyway, and actually I grew up in a working-class town just north of London. My parents are very upwardly mobile. They were middle-class.
I grew up in a middle-class family, but they had themselves risen from pretty poor backgrounds. My mother was so worried about our own prospects coming from a very strongly working-class, public high school and the town we lived in that our ascent up the British class ladder would be prevented by our inability to do certain things. Those things included speaking in a particular way. She constantly threatened us with elocution lessons. We renamed them electrocution in the way that adolescent boys think they're funny, and she followed through on this threat, she forced us to learn how to ballroom dance. For a miserable year of my adolescence, I spent every Saturday morning in an ill-fated attempt to learn how to waltz and cha cha and rumba and Foxtrot.
The reason why my mother did that was because she was convinced at some point in the future would be at some event, some business event, and we'd be asked to take the dance floor with our boss's wife or whatever. She watched a lot of television, my mother and that we would be unable to do so because we couldn't dance properly and that would be the end of our career or at least the end of our ascent. What lay behind there from a very sort of loving mother, and she shouldn't come across as a helicopter parent, just certainly wasn't, was this fear of what the class system was going to do to us.
It was a great relief that I escaped to the US and I spent my time in the UK railing against this idea of hereditary privilege, the idea of hereditary status. We do still have hereditary members of our upper house. We obviously still have a hereditary monarch. I'm still a subject of Her Majesty, the Queen as well as a citizen of the United States, and I must say it's great fun for Americans to look at the monarchy and watch the crown and Downtown Abbey. It's all great from a distance, isn't it? It's a bit less fun when you're actually a subject of a hereditary monarch and the fact that we so, we still have House of Lords and we have various members of the nobility and have an inherited status. When you become a US citizen, one of things I had to do was to sign a document.
Who's become a US citizen here by the way? Hands up who's going to be US citizen? Okay, so some of you know what I'm talking about. There's a particular bit on the form where you have to denounce and give up all titles of nobility and hereditary status from your previous nations. I don't know how painful that was for you. It's a relatively small list in my case, but the point holds that the reason you have to do that is because the idea of inherited status is profoundly un-American. Now I do not mean to suggest for a moment that the US has ever held itself to its own standard when it comes to a lack of hereditary status, but my point is that actually now and today, the way that status is inherited and passed on can only be seen really as the operation of a class system.
Rather than just thinking about inequality, I think we need to think about stratification, and we need to think about class. In fact, if you look at the history of sociology, actually very often that was, stratification was a sort of term that was preferred by many of those who studied inequality. But at some point, the economists took over, and it became inequality. It all became about Gini coefficients and deciles and Quintiles, and I'll be showing some of that myself. It seems to me that actually something's lost when we stop thinking about stratification, and the idea of enduring inequality to use Charles Tilly's famous phrase. That was one of the reflections that led me to write this book.
The other thing was something happened in January of 2015, which led me to think that I needed to write along these lines, and it started with this man as some yes a few young people in the room. Just in case this is Barack Obama, the 44th President United States and doesn't it feel like a long time ago. He suffered something of a political humiliation. Apparently it's relatively small, and I opened the book with this story, so some of you have read the story if you've read the book, but it was a real light bulb moment for me. I'll tell the story as they say in Hollywood based on true events. He's flying on Air Force One. He's flying from India to Saudi Arabia.
With him on Air Force One is Nancy Pelosi known to many people in this room. No doubt, Nancy Pelosi whilst flying on Air Force One gets a call from this man, Chris Van Hollen. Chris Van Hollen at times my congressman, he is now the junior senator at Fort Maryland. Chris calls Nancy and says, "Nancy the president has just proposed a tax reform that is a terrible idea, and we have to kill it. I don't know about your inbox or your mailbox, mine is filling up, and he has to drop this policy idea." She says, "As it happens I'm on Air Force One, I'll pop down and see the president." She goes down to the president, obviously sitting in his office as a knock at the door. "Hi, come in. Who is it?" "It's Nancy." "What's on your mind Nancy?"
I obviously wasn't there, so I'm having to speculate a little bit, and she said, "You've got to kill this tax idea." It was in his budget you see. It was in his tax reform. "You have to kill it, it's a terrible idea." He says, "I'll consult with my advisers, get back to you." Calls the White House the next day, the reform is dead. The reform was to change the status of 529 college savings accounts. Hands up who knows what a 529 college savings account is? Yes, so I'd expect many people in this room to know what they are. At that time, I actually didn't know what they were, so it was good for me because I've got them now, and we'll come on to that.
529 college savings plans most of you know, they are savings plans that allow you to save for up until this point post-secondary educational expenses and to do so with the money in those accounts growing free of capital gains tax. Also, it's exempt from gift taxes up to a certain point, so you can super load the money at the front end and get even more capital gain. Also in most states, there is a state income tax deduction too, not in California but in Maryland where I live. For example, my wife and I can save $10,000 a year towards our two children's 529 accounts and set all of that $10,000 against our state income tax liability. We're top rate taxpayers in Maryland so that save us about $500 a year once you take into account the federal clawback.
That's not bad for doing something you were going to do anyway or ought to be doing anyway. It's a pretty good rate of return and then of course if it's in there long enough, we all escape the capital gains that would otherwise have to pay on it. There is no evidence that it increases saving really. It simply moves it from one vehicle to another. It is necessarily regressive because it's really under people that are going to be liable for capital gains taxes that makes sense to save, and they are the only ones that have the money to do that anyway.
It's because of this regressivity which you can see here from some slightly out of date figures now, which could just show you the skew in the number of people. This is by income quartile now because that's the way that the treasury would put this stuff out, with the poorest quartile on the left and the richest on the right and the bar on the left tells you what percentage of people in that quarter have a 529 plan. The one on the right tells you of those who have a 529 plan, what is the average balance in terms of dollars. In fact, the survey is so small that that quartile on the left, the poorest quartile, that bar represents one person in the survey.
There's only one person in the bottom income, so one of my dear wishes would be to track that person to help and bless, bless them, but also wonder who's giving them tax advice because the chance is they are going to get capital gains is pretty low. Some mistakes actually match and so on, but the point is that anybody looking at something like this as a cue, it doesn't work, it's massively regressive. We're wasting $2 billion a year on the upper middle class who frankly don't need our help. Barack Obama proposed to replace going forward the 529 benefit with Opportunity Tax Credit, which would be much more progressive. Still largely not progressive enough, but certainly a whole sight better than what we have in 529 plans.
The idea was killed not by Republicans but by liberal Democrats, Nancy Pelosi, Chris Van Hollen, et cetera. At the time, the median incomes of the counties would roughly match their congressional districts aren't these by comparison to the national. You don't need me to tell you that people like Van Hollen and Pelosi relative liberal Democrats perhaps also represent highly educated and very affluent districts. It was their constituents that lost it over the prospect of this tax deduction being taken away, and I came to believe that that little apparently small moment revealed that there was a deeper problem in American political culture, and it was this.
That because of the myth of meritocracy and the veneer of classlessness, the camouflage of classlessness that successful rich Americans have been able to convince themselves that they were entitled to their tax deductions, and that presents a huge problem for anybody who wants to build a more progressive political platform. Paul Waldman in the Post made this point about it gone this 529 proposal went for the upper middle class. You cannot afford to anger these people, they know how to look after themselves.
We know from other work that actually these are the tax deductions and where they go and now we're going to use the bottom 40%, and the next 40% and the top 20% for my analysis. Just showing you where the values of these deductions go. 529s barely flicker by comparison to the $70 billion mortgage interest action and of course pensions and health and so on, and the various ways in which the very complex US tax code essentially gives money to people like me who don't need it and at a huge cost of complexity. We'll say just to come back to the 529 plans, for those who are following news will know that not only 529 survived, but they've just been expanded.
The recently passed Republican tax bill allows 529 funds to be used not only for post-secondary education, but for private K12 schooling. There will now be a stampede to 529 plans in all the states where you get a state income tax deduction because even if you don't think the money is going to be in there long enough to get you much of a capital gain, you sure as heck want to take the state income tax deduction for money that you're spending anyway because you're going to be spending it now. In New York, you only have to leave the money in there for 10 days. In Virginia, you don't even have to put it in. If you're already paying for private K12 education, and your accountant is not telling you to get 529 plans, if you don't have and then get a new accountant.
What we're seeing is this expansion and this sense of entitlement and what I come to believe is a form of hoarding of opportunity and wealth is what motivated the book. What I'm going to do now briefly just in the next 15 minutes or so, 20 minutes, no more than that is to just run through the argument of the book. Obviously, I can't cover all of it and we really welcome the debate afterwards. Just to give you a sense of the framework that I'm going to go through, this is a central augment. The upper-middle-class who I define as the top 20%, I'll come to that, are separating from the rest so that any course is enduring across generations. It's inherited inequality that we're seeing.
I make a brief distinction between relative and absolute mobility. I make the argument for downward mobility. This is the one that loses you dinner party invitations, let me tell you. There are very few people in favor of downward mobility it turns out and then I talk about the two mechanisms by which I think this enduring equality is taking place. One is through what I call market meritocracy largely through education and skills and the second through straightforward opportunity hoarding for a choice which is essentially rigging the market, and then lastly I'm going to come to the price I started which is solving the I'm not rich problem. Okay.
First one, upper middle class is separate. One of the other arguments I take aim at in the book is the idea that the problem of inequality is that 99% versus the 1%. I've come to believe that that is actually a very unhelpful way to frame you inequality problem because it allows a whole bunch of people off the hook. It's just the top 1%. Today that requires you to have a household income of well north of $400,000. Say $430,000 household income puts in the top 1%, and so actually it seems to be sensible to just say well we are the 99%. I think it's wrong empirically and dangerous politically, but to be fair, this is the chart that would make you think we are the 99%.
This shows you the real incomes of the top 1%, the 19% below them, the 40% below them and the 40% below them. Sure, look at how crammed up we all are at the bottom there. Assume as I am that I'm in the upper-middle class, I'm in the 19% below the top 1% which I am. I'm not the top 1% but I am in the top 20%. Look at me down there, bumping along with middle-class Americans. Turns out I am an ordinary middle-class American after all. There was me thinking a living professor, I'm pretty rich. Oh no, look, look at the chart, it's those people up there. It seems to me that actually class war is pretty alive and well in the US. It's just right at the top.
It's the people who've done really really well who are very upset at their college friends who've done super well, and so nothing makes us angrier than the people who are making really loads of money by comparison to us and we change our benchmark of course as to what constitutes success. Social scientists is you know in this room do their dirty work in various places. They choose their deflator, they choose their starting point or they use a particular left-hand axis. A left-hand axis on this chart has to go up to $2 million. It has inevitable effect of flattening the rest of the lines. Let's take the 1% out. This chart shows you the income income trends without the top 1%. There's a lot of movement in and out at the top 1% by the way, I'll leave that aside from there.
At some point is this that by changing the left-hand axis, now I only know is up to 200,000. What you can do the left-hand axis say, at least I start them at zero. Really, really dirty social scientists. Sometimes it's not here, something else, and sometimes that's acceptable, but the point I want to make here is was it's not as dramatic a chart, it can't, be because I'm just capturing so many more people. This is the fracture that I am troubled by in my book, and what it tells you is that there's been no change in the income distribution in the bottom 80% of the US society. It's not true to say that the gap between rich and poor has grown. The gap between the rich defined here as anything above the 80th percentile and everybody else has grown.
The income distribution of the bottom four-fifths is identical today to what it was in '79. It hasn't even moved up very much in real terms, but it's only hasn't moved in relation to each other. It's the people above that line have been pulling away and the more closer you get to the top, the more dramatically pulling away is for sure, but this is the real fracture I think that we should be focused on, and the obsessive attention to the top 1% distracts us from that fracture. Now I've put up money and I won't have time to go through much of this now, but I actually think that there's a clustering of advantages that goes together. This is not just about money and it can't be if I'm interested in class.
It's also about family structure and stability. There has been no retreat from marriage among the American upper-middle class. College graduates in the US are almost as likely to get married as their parents and slightly more likely to stay married. They also marry each other. We see a rise in what is very unromantically called assortative mating, marrying somebody like yourself. Because of this, huge rise a number of women who are college graduates too of course that's become that much easier to do. There's even some evidence that people are more likely now to marry across racial lines than they are to marry across class lines, and that of course has intergenerational consequences. Also in health, in wealth which I'll say a bit about life expectancy.
We're seeing really big, big increases in in equal in life expectancy we've actually some falls at the bottom, but the people at the top including even men at the top doing pretty well. Culture and social capital, the neighborhoods of the upper-middle class are actually pretty saturated in social capital, bonding social capital and so on. There's been a significant increase in income segregation by neighborhood. A slight drop in racial segregation in the US from a very high base and remaining at very high levels, but actually looks as the income segregation is increasing.
It's increasing particularly among families with children. Whenever people talk about segregation and income, as always make that distinction between everyone and those with children where it really kicks in is among families with children and I think the work of people like Sean Riordan shows that quite clearly. Now we'll talk about intergenerational mobility. A lot of things you do if you're interested in this pattern is to do what Raj Chetty just down the road does and produce something like this which is an intergenerational quintile transition matrix we make them all the time at Brookings. Our days fly by. We love them. I know it's showing you is how sticky is a distribution in a mobility utopia. Every one of these would be 20%.
It's actually quite a bit of mobility, but the purpose of the attention here is to focus on the ends. Well, most policy attention will focus on the perpetuation of poverty, what can we do to stop people being stuck in poverty, but it makes a nice change to every now and again to focus on the perpetuation of affluence, what's happening at the top. It might be that lots of good things are happening at the top that we don't want to worry about, but let's at least have a look, shall we? Wealth is even stickier, so you're seeing an even stronger association between wealth at the top and their chances of the child being in the top quintile of wealth, and actually can even do it for education.
This is a bit harder to do, but rather than using say a particular level of education, you can actually take the educational distribution and here we've used fathers to be clear for the parental one, but then girls and boys for the next generation. What you see is that educational status is even more strongly inherited than either income or wealth. If you have a father who's in the top quintile of the educational distribution, then you've got a 46% chance of being a top quintile of the educational distribution yourself. Education is very powerfully transmitted across generations. It's a tiny bit that relative and absolute mobility, but this may well come up in the questions anyway, absolutely, but it's important for the terminology of the debate.
Absolute mobility is a measure of whether or not you are better off in material terms than your parents were at the same age. Relative mobility is a measure which rung of the ladder are you on relative to where your parents were. In theory, you can have absolute mobility rate of 100%. Everyone can be better off than their parents, but relative mobility is necessarily a zero-sum game. This is zero-sum and you can only get 20% of the population into the top quintile. I'm actually not an economist by training, but even I know that's true. Absolute mobility of empathy barrel. Again, Raj's work and this data allows us to measure the absolute mobility.
This is a chart that's become quite famous which tells you the percentage of people who are better off than their parents at the same age based on what year they were born. For Americans born in 1940, 90% of them surpassed their parents' economic standard living. For those born in 1980s, 50% and so it's become a bit of a coin toss for that generation as to whether or not they're materially better often their parents were. One of the reasons for that is because of household composition but it's also because of stagnant income growth in the bottom 80%. Actually what Rajan's team did was an interesting experiment which is to actually say that was m obility 40 years ago and this mobility today.
That's the 90% and the 50% you just saw on those first two bars and then they ran an experiment say, "All right, well let's imagine that we've got yesterday's growth because one thing that's happening is we're growing less quickly and then say yesterday's equality." One of the reasons why people were born in their 40s why they better off than their parents, two reasons, one the economy was growing very strongly and two the proceeds of that growth were relatively evenly distributed. They hold one of those constant was changing the other and the basic message is the most of the drop in absolute mobility is a result of growing inequality rather than just low growth roughly two thirds of it is growing inequality and a third of it low growth, it's both.
Now how do they relate to each other or Steve Pearlstein is their Washington Post columnist has a nice way of talking about this. I stole it for my book says, "In a period of high absolute mobility, everyone's going on the highway, everyone's getting there." If someone overtakes you and you're all going miles 60 per hour, whatever, do you mind, probably not and if you do ,you've got other problems. Generally we're all getting there, we don't mind, do we? You lose a little bit of relative status but if if everyone's getting to where we want to get to, it doesn't it matter. That's relative mobility in a period of high absolute mobility, but imagine gridlock then someone comes up the outside lane and cuts in it, gets in front of you, you really don't like that.
Actually relative mobility becomes both harder but I'll be more important in a period of low growth, and it's closer to the situation that we're going to find ourselves in now. I wrote a piece in The Times called Stop Pretending You're Not Rich over the summer which was based on my inbox touched a nerve because it really does going to make this argument, and actually one of the responses I got from someone in Oak Park where it stuck with me is this idea that actually one of the reasons why people at the top are so worried about their children is because it's a long way down. It's true that the gap between the 90th and the 50th percentile is bigger in the US and elsewhere and getting bigger.
Also in the US of course, money matters more and so actually losing income status has a bigger effect on, for example, your access to health care and to something extent to education. It's not only that money inequality is higher in the US and growing, but it's that money inequality matters more in the US because money can be converted into opportunity goods in the US and in a way that is not true in other countries. Parents are right in some ways to think I don't want my kid down there on the 50th percentile, doesn't look all that great down there. Inequality and lack of mobility reinforce each other because the incentives to protect against downward mobility are sharper when inequality is both higher and more damaging and when you have to break the cycle in both places it seems to me.
I know briefly make the case of downward mobility as I said the least popular thing. Mike Miller said actually downward mobility might be a better measure of fairness then that would mobility. Someone actually asked Americans how much mobility we thought there should be. This was a couple of psychologists and he split them in two conservatives, and liberals said this is people who are born into the bottom 20%, where do you think I should end up and the Pew data on the right is the actual number. It's a bit different to chat ease, but principle is the same it turns out that everyone woody wants lots of upward mobility.
Look, they want there to be almost no association between being born poor and ending up poor they want poor people to basically end up across the income distribution, a wildly utopian idea. Well by definition then it must mean we'll have lots of mobility from the top down, but actually the psychologists ask them this question too, what's the ideal amount of downward mobility from the top. Look, to be fair, not everyone deals in quintiles and so you aren't sort of thinking that same, but it does sort of speak to the fact that there is an issue here which is that the zero-sum nets of it is true but no one's going to be in favor of themselves all the children being downwardly mobile. I understand that, that's perfectly natural.
How then do we perpetuate status? In two ways, the first way is through market meritocracy. I have to remind everybody that Michael Young wrote The Rise Of The Meritocracy as a warning about what would happen if a society came to believe that it was meritocratic. The number of things will happen. It will become more unequal because the winners are entitled to their winnings, they're meritorious. The losers start to feel despairing and angry because it's pretty hard to be poor in a society that keeps telling you that it's meritocratic after all, can only be your fault.
Thirdly, people get increasingly desperate to mate with people who are clever so they can breed clever people in the meritocracy and finally at the end of Young's book which is a novel, there is a violent revolution which overthrows the meritocratic of a middle class. It does in the US anyway the way that this class perpetuation I've talked about takes place is through human capital, it's through education. That's the key mechanism. It's not the only one but it's the key mechanism. Let's look at the role of education and in particular college education because it is Horace Mann said the great equalizer. In theory, yes, in practice, no.
Again, using the Chetty data because he has all our data, this shows you the relationship between the income of your parents and your chances are being enrolled in college between the ages 18 and 21. Now you know how social scientists sometimes put up a scatter plot and then they'll put a line of best fit through it aggression and you're squinting at it, and you're thinking well really. I saw one in the spirit level, there's one I'm recycling an inequality, I'm like really. Yeah, you can squeeze out an R from it that makes it look significant, but they don't need the line of best fit on this, do they? That's a little bit unhappiness making, isn't it? For a country that prides on being a meritocracy, it's unbelievable, but it's not.
Now of course you don't get mature students they're all the rest of it. The chances of going to college are so strongly determined by your parents' income background but it doesn't have this mobility effects we want to see. Then if you do go to college, which college do you go to. Well, that depends which class you're from. Bottom 40, community college, middle 40, almost half community college or non-selective, top 20, upper-middle class. I should have said the upper middle class now as the people of household incomes of above about $135,000 a year, so healthy 6-figure incomes, they look at where their kids go. Okay. If you want to see the US class system, look at its post-secondary institutions.
Bit less true in other countries sometimes, but that is where the US class system is illuminated and magnified. Look at from the other end of the spectrum, where do the students from those institutions come from, so this is now a percentage of those different colleges for. You can just see that the elites is absolutely dominated by the top 20%. The majority of their students are from the top 20%. Varies by institution as Jenny's work, UC Berkeley's on here. This is the percentage of the students enrolled undergraduates from the different income quintiles of different institutions and they've put a top 1% on there as well just to show you the very strong class composition of these institutions.
Actually the University of California systems are among the better performers in terms of the economic diversity, but it's all relative to compare yourself to Harvard. You can feel better about yourself. Lastly, what I call opportunity hoarding and I've adapted Charles Tilly's phrase here to talk about there the fact that not only are we getting that our kids into the market so far ahead of everybody else because of their education, we also cheat a little bit. I adapt Chile, need spend too much time on this, perhaps we'll come into it, but I give three examples of weight in which we don't just win in the market, we rigged the market.
We, being up a middle-class, exclusionary zoning, legacy admissions and internship. Exclusionary zoning, the way that land use is regulating us is a huge problem, quite topical here right now I see. How interesting to see the reaction from local leaders to the bill which will have transit, no density. I mean it's a pretty pure test a dream hoarding it seems to me. Maybe we'll get into that, but the way that land is regular, it's a big problem in the US and I think it's even bigger problem now than when I wrote the book. We know that housing is getting expensive by comparison to incomes. Why is that? Well, it might be because the amount of land use regulation that's being put in place. This is getting in shrikes, a particular way of describing it.
Obviously a lot of these who don't were motivated by racist purposes, but they've been read there now serving classist ones as well. The result of that is that many of our cities and I'm not going to pick on San Francisco here, I'm going to pick on Los Angeles because it was the one that was in the Council of Economic Advisers report. In 1960, Los Angeles was owned for 10 million people. It had two and half million people in it. Now it's zoned for 4.3 million people which is exactly the number of people that are in it. Those zoning has essentially shrunk to fit the population. It was right in 1960.
There's easily enough room for 10 million people in Los Angeles. What the heck is it being zoned for 4.3 for? Answer local zoning regulations and those are on the right side of that. We get a mortgage interest deduction to buy an expensive house. We then zone out middle income or poorer people to protect the value of that house. We then capture good quality public goods like public high schools, et cetera. Through a combination of federal state and local policies, we were able to rig the system in our favor and in our kids favor and then try and convince ourselves that it's all the result of meritocracy. Legacy admissions, I'm not going to say much about this, except really?
I mean they say that it doesn't a much difference, but these are the admissions rates for these. I say well they're cleverer anyway. Well okay, well don't give them preference then or give me the data so I can break it down. Oh, no, you won't give us the data. Why not? Okay. The only country in the world with hereditary principle operating in post-secondary admissions and interestingly in the 19th century was unthinkable in the US and common in the UK, by the middle of 20th century being wiped out in the UK and introduced in the US. Why? Because the Ivy Leagues are trying to keep the Jewish students out that was why I was introduced and yet here we are.
Internships have become a more important labor market institution. Half of them are unpaid. This is a survey of HR managers. This is how important things are, internships are high. Simply make the point if they're unpaid, it's hard for four kids to do them and many of them are allocated on the grace and favor basis. One of the first decision by the newly appointed ethics commissioner of Bill de Blasio's administration was to give a waiver to two students to get an internship in city hall. The two students in question were De Blasio son and daughter. He ran on inequality platform remember. The thing that shocked me about it was no one was shocked. He didn't pay any political price at all for rigging an internship for his son and daughter. It seems to me should have.
Last point, we won't go anywhere unless we convince people that they are rich. The problem is as this chart shows there's a little bit difficult to interfere whatever, but it's essentially telling you that what you classify as rich depends on how rich you are. If you have less than 30,000, then 100,000 sounds rich. If you've got a 100,000, you need 500,000 to be rich. We all just move the reference point up and the problem here is that the more entrenched inequality gets, especially if it's spatially and occupationally entrenched, our reference point for what counts as a rich will move quickly as well. If you’re only surrounded by people and work with people rules up a middle class, it is quite easy to convince yourself that if you're even if you're on the 90th percentile, $200,000 a year, well that doesn't sound like very much, isn’t it?
Because people who are richer and so this failure to look at inequality and ladders issue problem. When I was finishing the book, Bell saw Hill, my colleagues said, “You can't write a book like this without reading Hofstadter,” and Hofstadter seems to me to be more required reading by the day, especially as work on a paranoid style in American politics. This is what he said about progressive era which is but there's a moral indignation that lay behind it and it wasn't entirely directed against others. Whereas now, the moral indignation is always directed against others, isn't it? It's always either the superrich or the feckless poor or immigrants or something. It was never about us, isn’t it? It was in great and critical measure directed inward.
Contemporaries who spoke of it as an affair of the conscience, not misspoken. Now I don't know how true that is. I'm not a historian and there's a lot of other stuff going on, some bombings for example. I do not want to romanticize it, but nonetheless to the extent that it's even partly true, it seems to me that we want anything even resembling another progressive era then we need another affair of the conscience and that requires those of us who are in the upper middle class when we're talking about and think about inequality, not only to look up and to look down, but just occasionally to look in the mirror.
Sandra Smith: Thank you Richard for very engaging talk. If you thought that is engaging, we should really take out the book, which is an incredible read. We will be selling the book outside after … Well, I guess during and after the session, and after the session, Richard agreed to take some time to sign these books.
Richard Reeves: That’s only five minutes allotted.
Sandra Smith: Well, 15 minutes to everyone. Let us move on to the discussants. We’ll have Cybelle Fox first and then Paul Pierson.
Cybelle Fox: It’s a pleasure to be here talk the comments on Richard Reeves’ stimulating and thought-provoking book. Dream Hoarders is really a pleasure to read. The writing is crisp and clear and thoroughly engaging, and I really appreciate the attention you pay to questions about relative intergenerational mobility. I think with all the recent talk about rising economic inequality as crucial as that conversation is, I think it's easy to lose sight for the importance of mobility and how hard it is for those on the lowest rungs to climb up.
Now tackling relative mobility as important as you argue if you want to avoid the development of a rigid class structure in the United States, but it's also important for one issue that you don't discuss quite as much in the book racial inequality, because I think we're unlikely to eliminate racial inequality if we don't act also as having two questions of relative mobility. I also think that the attention you pay to the upper middle class is necessary and long overdue. The upper middle class has been able to insulate itself as you show from many of the pressures that the bottom 80% face. Partly through their income and wealth, partly through residential segregation, and all of this affords the upper middle class greater educational and occupational opportunities, greater security as well as better health and longevity.
I agree both to satisfy principles of fairness and to generate the revenue necessary to properly address barriers to mobility that the upper middle class is going to have to give up some of its privileges. This should include among other things some of the deductions embedded in the tax code which subsidizes their housing, healthcare, retirement, and children's education. Now what makes this hidden or submerged welfare state so unfair is that it showers the biggest subsidies on those who need them least and part of that what it makes it so pernicious is that because it's hidden in the tax code, it allows us to essentially remain in denial about this fact. Now so having said all that, I think you should go and buy the book and get it signed.
It's a wonderful book, but I'm here also to offer a few words of critique and I'm going to do so in five cards in hopes they're going to stimulate interesting conversation. Now my first point which is probably the most trivial concerns the glass floor metaphor where you talk about that upper middle class placing beneath their children’s feet, this glass floor to keep them from falling out of the favorite fifth. Now Florencia Torche, a sociologist at Stanford University recently released a report which I happened to check out on intergenerational mobility and in it she calculated the probability of downward mobility for individuals born in the United States right around 1960.
Now using data from the National Longitudinal survey of youth, she calculated their relative class position with their children using their parents’ income and then again when those children were adults using their own income, and she found that the probability of downward mobility upper middle class whites was over 60% and for blacks, it was nearly 70%. How strong is this glass floor exactly if the majority of upper-middle class children including whites but especially blacks fall through it? Now it's clearly hard to move up and out of the bottom 20% or even out of the bottom 50% especially if you're black, but it seems also true that the majority of those who grow up in the back working class families when their children won't be upper-middle class when they beach middle-age.
Now that doesn't mean of course that upper middle class families aren't passing on important advantages to their children including wealth and occupational status as you mentioned. It's clear from the data that you presented in the book that when those people in the top 21% fall, they tend not to fall very far down. This is economic matter. To be clear, this is not an argument to keep legacy admissions or privileges of unpaid internships or other opportunity according mechanisms. I'm more than happy to do away with those for good, but I think it might suggest that you need a different metaphor than the glass floor to properly or to better visualize what's really going on.
Second, I think that you sometimes in the book underestimate the structural problems in the labor market but not only limit mobility but make life so hard for those who are on the bottom rungs of the ladder. Now you say that what you're arguing for is “a meritocracy for grown-ups but not for children.” You want to give kids the chance to be competitive in the labor market but there's sort of moments where you seem far less concerned about those who don't farewell in competition, including their parents so long as they weren't disadvantaged by anti-competitive opportunity hoarding, and they've had a chance to develop their human capital.
My question is isn't really possible to keep children a chance to effectively compete when their parents are subject to the vagaries of a labor market which promises increasingly less stable or less stability, fewer benefits and low pay, when quality child care is out of reach, when access to health care is threatened, when their debts mounts and each year people are falling further and further behind. Now you spend time parsing sometimes where they're giving cello lessons to your child’s account, those opportunity hoarding, but it's not about clear to make how you create real opportunities for all children to succeed while leaving larger questions about the structure of the economy off the table.
Even if we could do that, even if we could create a meritocracy for grown-ups but not for children, why should we be satisfied with the system that only allows 20% of the population whoever they are so many lives allow them to thrive and flourish? Now third, there were times in the book where I thought understated the true nature or character of economic inequality, less so in the presentation today. When you said that “the top 1% is not them, it's us, the upper middle class having a good year,” it seems that you're evading the fact that most of the gains in income and wealth over the past 30, 40 years have been concentrated not just in the top 1% but in the top 0.1% or 0.01%. The average annual income of the richest 0.01% of households or one in 10,000 is now more than $30 million a year, while it was $4 million in 19754.
That's not just an upper middle-class family having a good year. That's a winner-take-all economy as Paul Pierson I might say. Now fourth, I think you're quick to dismiss the idea the United States would ever tackle inequality in the way that many countries in Europe have because the United States has a strong culture of individualism. In a section you title, and I imagine you imagining me while you're writing this. Sorry but individualism is as American as apple pie. You argue that individualism has been hardwired into the very idea of America from the beginning, but I think this argument ignores the fact that when I was born in 1974, the United States wasn't such an outlier when it came to inequality. It looked much like its European counterparts.
If individualism is such an essential component of American identity, how do you explain this period of shared prosperity, at least for white America that prevailed in the post-World War II period? Lastly, well I support many of your policy recommendations taken individually, has a comprehensive program. It feels woefully inadequate for the task at hand, whether that task is defined as increasing relative mobility or reducing soaring inequality. Now my first intuition about this came with your recommendation for greater access to birth control and home visitors for parents with newborns.
Now let's leave aside the paternalistic nature of those policies or the fact that fertility rates among young women, whether they're teens or early 20s are many quite low by historic standards, or the fact that by design a huge swath of society in this merit-based competitive world is destined to struggle to be able to afford to have families in the first place. Leaving all that aside, why not instead call for universal health insurance which could include both access to contraception and home visits for anyone who might choose them?
Now you might say that universal health insurance is politically unfeasible, but how feasible is it to rely on moral suasion to convince the upper-middle class to give up its privileges when the consequences of doing so can be so significant, perhaps even dire for some? Now I'm in favor of moving the best public teachers to the forest areas as you suggest, but as a cynic, I also fear that one like the results of doing so would be that the upper middle class would simply abandon the public school system all together and send their children to private schools as many of them already do. Now you see in the book that if there was more downward mobility, so this is part of an argument to focus on mobility rather than inequality.
You say if there was more downward mobility, perhaps the upper middle class would support regular redistribution to reduce inequality, but it seems equally plausible to me that if there was less inequality, the upper middle class might not be so concerned with hoarding opportunities. Now as my friends in political science have shown policies can also make citizens and if those tax deductions that favor those who need them least are replaced with the universal policies that benefit everyone, perhaps with some targeting for the least advantaged, then you might be able to build the cross class solidarity and coalition's necessary to sustain a tax and transfer system that effectively tackles poverty and inequality at promotes opportunity for all.
Thank you again for an incredibly stimulating book. Again, I strongly encourage everyone to buy it and I look forward to the discussion.
Paul Pierson: Those are two great presentations, and I wanted to start by just adding my admiration for the book and I was always taught this is called an Oxford sandwich where you start with a bunch of compliments, and then you have criticisms and then you end with a complement. I really mean it. It's a really tremendous. I thought about positions for a long time and yet I found myself learning a ton from reading it, and well-argued provocative, extremely accessible which I think is something we don't value enough. We have these kinds of conversations, what's wrong with making serious arguments in a way that a broad interested leadership can understand. Excuse me, that's in terms of we're trying to create a more equal society with more equal engagement among different kinds of groups, one thing we can do is better write in accessible way and this book is certainly written that way.
I do see my job is just sort of saying okay well what some of the things that we can talk about now and so I want to I want to offer a few places where I found myself saying yeah but and just put them on the table, and then we can see where the conversation goes. The first and here maybe not surprisingly, I wanted to hold on one of those points which is you do make a strong argument both in the presentation and in the book that really when we think about inequality, the right thing to do is to focus on the cleavage between the top 20% and the bottom 80%, not the Occupy Wall Street slogan, and it varies. For both in your presentation and in the book, you talked about it as the most importantly the cleavage.
You prefer to the obsession with the top 1% and suggest that really that's just about envy. I really think that's not right, but mostly what I would want to emphasize about this is I don't preface in either of those choice. I don't expect that you would think that we do either. I think we've been actually walking to down at that same time. I think that we can think about the cleavages between 20% and the 80% and we can think about what's going on at the top of 1% at the same time. I understand partly any author, right? You're trying to attract attention to an important problem, and so part of what you do that is say look, you guys are all thinking about that, let's think about this other thing stuff too.
We do not I think by any means one of the other side what's happening within the top 1% and how that's related to broader transformations in American society. Those changes are really, really big. They're really, really consequential, right? They were places where I think as you say, there are ways to present data that steer people in various directions and when we talk about that 1% and we talked about at where we talk about averages within a quintile including the 20%, it's easy to lose sight of how steep the climb is. The difference between so as you say two-thirds of the income gains in the top 20% went to the top 1%, right? That means on average 10 times as much as for the rest of that top quintile. Once you get inside the top 1%, you're still in the slip hills, right? You're looking up at a mountain, right?
Say that's the top 10 at 1%, you get inside the top at 1%, you're in the foothills looking at the mountain, right? That's the way it is all the way out and one can argue about what's the right balance and how we think about the fact that these things are going on simultaneously including the very important to those that you're talking about, but we definitely shouldn't lose sight about what's happening at the very top. Just one, I'm a political scientist, so one reason why I would say that is because I think it's hugely consequential t politics. There we go, we just passed a big pack step, a huge tax reform. In fact, they actually went out there, some of these upper middle-class tax cuts, right?
They raised a trillion dollars over 10 years from taking away some of the tax benefits of a lot of the people in this room, especially since were in California. They could have wanted everything you advocated in the last chapter with that money. They didn't do that, right? They gave it almost all people at the very top of the income distribution, right? In addition, they decided that they were going to run up a bunch of debt that's going to make it hard to finance the things they're talking about, so they can give me more to those people. Right. On those people ... Okay, second point and I'm totally shifting gears. All my points are pretty much unrelated to each other. Okay. Zoning is a form of opportunity.
I can do some crap on important issue, right? One thing that I ... The walk in either a few places in the book where I got a little frustrated where I thought like okay I don't have some quantification about how important these phenomenon are so like I don't really know how important legacies are, legacy admissions, I don't really know how important an internship hoarding is. I actually was convinced by the book that internships in particular may be is significantly more important than I realized that it was, but it was hard in a way like how big are these things. I think zoning is really, really big. Okay.
There are two in terms of shifting resources towards some folks and away from other folks in a way that tends to advantage that people who already have, but there are two different ways of framing I think what's going on with zoning, both of which are actually true but they're distinctive. Actually the framing I think in the book is a little bit different than the framing that you presented today, and so the two ways to frame it. The first way would be to say think about a Tony suburb, right? That makes it hard to build moderate income housing in it. We can keep its pools and its tax base just for rich. I don't know, wallet, something like that, right?
That I think is honorable the way that you tend to describe what's going on with exclusionary zoning in the book, but there's another way to think about as well not inconsistent that without the distinctive which is there are these big agglomeration economy that's developing in the US, right? More and more the high-end, high-paying economic activity is taking place in a handful of areas concentrated around these dynamic cities. We live in one of these areas, New York, Seattle, Los Angeles, you know the list.
Although there aren't issues having to do with say access with schooling and stuff like that, there's a huge amount of exclusionary zoning that goes on in areas like this. It's just impossible to build housing around here, and so people can't move to these areas, right? Or if they're on relatively low incomes, they're increasingly push either far, far out so they're spending all the time commuting or they just give up in the area altogether, right? I mean in both cases exclusionary zoning is a very important mechanism for producing this, but they're different, right?
One reason I think in some ways it relates to what's those saying about thinking about the broader structures of the economy, education and the development of these systems of merit is a really important part of that, we are shifting towards a knowledge economy in which you need to be able to get access to certain places in order to have access to good job markets, to good job markets, to job networks, to marriage markets, right? Actually most of these still super high educated clubs currently not getting married in college or necessarily people community college. It's often they go to these Gods in these places and that's where they get married, right?
I just think that's a really important aspect of opportunity warding this developing and distinguishing between the Tony suburb that makes it hard for you to build, so they can keep their property taxes to themselves and keep their schools to themselves. It's related to but distinct from what's going on in areas like the Bay Area or Seattle, places like that. That's the second issue. Third issue, so here I think like a lot of people and you very nicely suggest this in the book that when he's writing about the upper-middle class, he's writing to his readers.
Most of his readers are members of this group he calls the upper middle class, and so we like as he playfully suggests, Richard suggests like you're probably a little uncomfortable when I say this or that. It's true, I read this book as an analyst but I also was reading as a parent, right? I got two teenage kids, right? I mean in this world that you're talking about about opportunity for it, right? There's a question that comes up in the book. I'm actually going to bring it away from my personal parenting in a minute, but to thinking about some of the social structural issues, but this is questioning that runs through the text and I think quite usefully is it unethical to arm your kids for positional competition, right?
Is it unethical to arm your kids for positional competition, right? Where it's like there's only so many seats in the game of musical chairs, right? Do you help your kid go faster, right? To me, the classic example of this is SAT training which is a disgusting phenomenal, right? That's my epically disgusting phenomenal, but do you let your kid do that, right? Do you encourage your kid to do that? The way that I would think about it, so I think the answer in the book basically is it's not ethical. It's mostly not ethical to arm your kids for positional competition. My personal answer even though I agree totally with the basic thrust of the book and the argument book about this is it actually itself, right?
It's not for your kid to unilaterally disarm when all the other kids around them are training for all this stuff, right? Is that fair to your child? The way that I would think about it is what this is it's not a personal failing on the part of these parents like moral blindness. It's positional competition, it's a collective action problem, right? It's a collective action problem, right? We were pushed into positions of doing things that protect our rational self-interest even though we might prefer a better solution but it's one that can only be reached collectively. The proper response is a collective response, right?
It's a policy response that tries to limit and get rid of the worst effects of positional competition because positional competition is incredibly wasteful, so peaceful for all these people to be doing this SAT training in addition to be not fair to people who don't have those opportunities, right? That's the collective action, and it calls out for some collective response, right? I think that's true for a number of the issues that you talk about. It's why you need effective government and government that is actually interested in dealing with some of these problems rather than just struggling more resources to the already very, very process.
Then I'll just mention lastly because I was actually a little surprised by the way you treat this issue in the book. You mentioned it very quickly impassive, but it's not included in your list of policy suggestions at the end of the book, and that it seems to be the argument this book is a very strong argument for a class basic kind of action. I understand at least part of why you're resistant to that which is as this idea like let's draw a separation between a meritocratic competition later in life and a more and something that makes up the trusted limit these various kinds of hoarding and built in structural managing in early part of life.
I don't know, maybe you think by college it's time to take the training wheels off or how however you think about it, but the overall argument in the book that you suggests very strongly that if you take two kids, one is from a lower class background and one who's from an upper-class background who have the shame of meritocratic scores on like tests and grades and whatever else you might make other time that they're applying to college, almost certainly the lower-class kid is actually a lot more talented and has a lot more human potential than the upper class kid, right? Why not some classmate's affirmative action? What would be wrong with that?
Another reason for raising that question is because that's actually something where you wouldn't need the federal government to make that happen, right? It's something that states could think about something doing. It's something that private universities could think about doing if they cared about, if they want to try to advance a new set of norms, right? A few leading universities that they were really committed to it could make a real difference in this area in terms of making us rethink it, and frankly given the current political climate in Washington, options that look elsewhere in there and to that particular site for leadership on the really important issues of this book reaches, those are appealing options to me.
Sandra Smith: In creating the seminar series, one of the things that I wanted to do is bring in the top thinkers on issues of labour and employment to campus to have us think about these big ideas, grapple with them, but I also wanted to organize it in such a way that we could highlight that amazing minds on Berkeley's own campus and thought a lot about who to invite to be discussants. I think you'll agree that what we've gotten from Cybelle and Paul has been incredibly top-notch. This has been a really stimulating discussion. Richard is going to come up now and respond to Cybelle and Paul and then we're going to open it up for Q and A, so Richard.
Richard Reeves: First of all, I just want to thank Paul and Cybelle for their close reading of the book and their generosity. Whenever someone describes a work as accessible, you worry about their motivation. As Richard Thaler writes in his excellent book Misbehaving because I spend my time among economists. He says, "It is not just that economists don't value clear writing, they mistrust it" but I take it as an unvarnished and genuine compliment rather than the backhanded one, which academics sometimes mean by it, so I appreciate it. It does a lose today argument which is I think is the purpose of the book, and purpose of the book is not to be comprehensive, it is to cover ground that's been covered before.
It is not to get me tenure, it is to show up in an argument and to put that argument into the public domain. I think some of the shortcomings of it a reflection of some of those editorial decisions, but I think it's a really, really important point. I won't go through them I think one by one, but I will pick up a couple of them. I think Florencia's works about you mentioned is does show this downward mobility, but it also shows don't go too far and Bushisms' work shows that the closer you get to the top, the less downward mobility there is. The stickiness does go up, so that suggests that I could have written book about someone said to me why isn't about the top 10%. Okay, I'll take it.
In that sense honestly, I'm not going to die in a ditch for a particular percentile cutoff and clearly many of these things deepen as you get towards the top. I think I'll speak to your other point about ... I think actually it was Paul's point about how big a problem are things like legacies and internships. I think by comparison to land as you've suggested, they're tiny, they're trivial by comparison to the issues around land use regulation and the post-secondary education system in the realm. They're symbolic and I think legacy preferences and Paul Krugman made this point when I argued with him about this in New York. He actually looked at the numbers on legacies and it looks like it's a top five to most 10% problem, right?
This is not people right at the bottom of my clock wind. This is people towards the top, but it does seem to me if we can't persuade institutions that it'd be about that to get rid of a hereditary principal at the top, then the chances of a persuading to do more radical things like class-based affirmative action or come too strongly as very trivial. I've chosen it as a symbolic test in a way, the litmus test of how far we're willing to go because if we're not willing to get rid of that, we might as well give up the ghost of the idea of meritocracy all together.
It's also a test of the willingness of those at the very top of the distribution to give something up and precisely the way that Paul I think you talked about which I'll come to in this sort of collective action problem meritocracy for adults but not children. I'm glad that you quoted that, and I struggled a lot with this. By and large, I think the idea of best person for the job has been quite a good principle in the labor market, certainly helped us with some of the inequalities, which we've historically faced race and gender and so on.
I don't by any means suggest that it goes far enough, but I'm probably a little more reluctant I think perhaps than you asked about to give up that idea that the labor market when it's operating reasonably well, maybe a terrible system but better than all the others to paraphrase the idea about democracies. I'm quite reluctant in a way to give up that idea. Well, the problem is the preparation for it, it's the distribution of merit as defined by the market before. I do attempt to make that distinction. It doesn't mean that we shouldn't still have a good floor, that we shouldn't protect workers, and there I think it's not just think about money, but it seems like security and power.
I think of issues around scheduling, for example, uncertainty of working hours going forward, access to paid leave. These are many issues that I'm very strongly in favor of, but they're not my main focus here. Both of you made the top 1% or 0.1% or 0.001%. However, high you get up the mountain, there's always someone higher point. I think there's a lot of truth to that empirically, and I think that the political problems of that I would state more strongly now than I did in the book as we've seen what's happened. The tax bill is you say a great example of that.
I happen to know that the White House ordered a few copies of my book, so all I can suggest as they read the bit about 529, said great, let's do more of that, and then read the bits about how everyone's really angry the upper-middle class and said terrific, let's take money off them. Rather than using the money for the stuff that I wanted it to, they gave it to at the top 1%. They literally redistributed it in the wrong direction from what I was hoping for, and so I think actually I would lean more heavily now as I think both of you did on the political economy of the top 1% than I did when I was writing the book. I think I understated that.
I will say however though that for me, it was more the we are the 99% that really upset me, and I do still think the way that that disguises some of the fractures that occur lower down the income distribution has been a problem. Well if I take the point about the political move top 1%, I will continue to resist this idea that we are the 99% just because we fall outside the household incomes with more than 450,000 and that we're all middle-class because I think I continue to believe that's very unhelpful. As Cybelle's point about the policy prescriptions in the book, well woefully inadequate. I think that's a fair comment actually. It's a weak chapter.
Somebody said the book was really a moral argument for thinly disguised as a policy pamphlet. Well, Brookings published it. I had to put some policy stuff, but I agree and in fact, I reviewed Robert Putnam's book Our Kids. In the book, I said exactly the same thing, which is there's this huge massive problem and then a bunch of policies at the end which are hopeless. I said he was like a doctor diagnosing cancer and prescribing aspirin. He's just said exactly the same thing to me and I think it's fair. To some extent, those chapters are always quite difficult. One of the reasons I didn't go further and I'll come on to a couple of them, right? Universal health care, class man is because I didn't want that to be the story of the book.
I wanted the story the book to be a different way to think about inequality and in particular to try and draw attention to some of the forms of inequality, which I mentioned and to unsettle and make uncomfortable a class of people who I think need to be unsettled and made uncomfortable if we're to make any progress. That was a deliberate strategy to downplay and put some of the stuff in that wouldn't otherwise have been there. What else? Land, I'll take the point Paul about the agglomeration, and I think that is a huge issue and perhaps we'll get into that in the Q and A because it's topical and local and so on. Land is by definition one of the things that control of will make a huge difference the political economy of that.
If I was writing again, I would say way more about that, and I just think by comparison to the other things I mentioned, it's an order of magnitude much greater. Class-based affirmative action, yes and I think the arguments you make for that I would absolutely strongly support. I'd probably go even further and actually tilt in favor of the kid from a poor background, build in. If I don't need some work, I might have build in an assumption that actually they're smarter if they got even close to the same SAT score. All going further than that and say and I've suggested these in some of the writings I have done, which is to say let's say you have an institution say this one, right?
You've probably got a rough idea of what level of academic preparation someone would have to have to get in here. Well for everybody who meets that with an adjustment for their class background just run a lottery, just pull the names out of a hat. Maybe you take a 20% from the top if you want, but just do the rest by lottery. If you're trying to figure out what's the line, well figure out what's the lowest score you let in some of the richer kids with. This is particularly true with some of the Ivy Leagues and so on, but I would be in strongly favor that and perhaps we can talk about that too.
In fact, it gives me a chance to quote Bernard Williams thanks for lending me a copy of my own book, sure, about the very idea of the meritocracy being deeply unhelpful when it comes to things like college admissions, and I think it does extend into there. When I think about children, I'm including college student. I want the post-secondary education system to be anti-meritocratic in the sense that I don't want it to take the merit that it's currently being displayed through things like SAT scores or whatever and then filter on that basis because if you do that, then you're just going to replicate inequality. I think we need to lean against the idea of meritocracy in education.
I would then lean back in favor in a labor market, which is where partly where we part company. Bernard Williams who is a forester who taught here for a little while. He was one my favorite philosophers. He actually had this great thought experiment. I'll probably finish with this where he talked about a society was made up, it's in the book, of warriors, of fighters, and its hereditary system. I think it's gendered as well, but let's say sons and daughters of the fighters become fighters, and they get all the money and wealth and so on. Then there's a campaign against it, so it should be opened up, it should be equal, it should be meritocratic, so then they open it up.
Without even knowing who the sons and daughters are, they just have a fair trial, but turns out the sons and daughters of the fighters had more money, more health, more training, et cetera, so they still continue to become the fighters. It doesn't actually change the inherited pattern after all, and so what happens then is that the protesters, the reformers protest. I'm quoting Williams now. Protest the equality of opportunity has not really been achieved. The wealthy reply that in fact it has and that the poor now have the opportunity of becoming warriors. It is just bad luck that their characteristics are such that they do not pass the test.
We are not they might say, this is wealthy excluding anyone for being poor. We are excluding people for being weak, and it is unfortunate that those who are poor are also weak. Now replace weak with academically under-prepared or dumb or something like that and institutions of post-secondary education could say we don't want to exclude these poor people, but look they're just not ready, they're not smart enough, they're not prepared enough. Excluding them for being poor, excluding them for being done to be provocative, and it is unfortunate that those who are poor are also done.
Thus, the meritocratic wheel turns and institutions are able to convince themselves are acting meritocratically, but they have defined meritocracy so narrowly as to mean that it almost inevitably things that people will replicate themselves. I would say the last thing because Paul raised it, the personal aspect of this. This gets real personal real quick and actually I really did struggle with it and probably the tension is probably shown in the writings like SAT. Should I pay for SAT prep? Actually I don't think I also wasn't quite clear enough because I don't think I can actually claim that that's ... Well, I think there's a gray area, there is a line.
The line is the point at which the natural parental preference of the kids to do well comes in to something else, which is to opportunity hoard. Where that line is drawn will depend on the norms and institutions of a society within which they find themselves, so your point about a position all good I think it is true. I try to draw the line as somewhere where it's actually you've stopped preparing them better for the competition and you're rigging the outcome of the competition through various institutional mechanism. That's a very hard line to draw, but nonetheless that's where I try and draw it. It seems to me implausible that we can actually criminalize SAT prep.
I mean even in France where Francois Olan suggested getting rid of homework, everybody was horrified except all the school children, and the reason was that because he said if you have homework, the rich kids will do homework and the poor kids won't, and so it replicates class. People I think is taking it a little bit far and I think the same would apply from these own. I think it's like where the institutions that are rigged and so yes, it's a collective action problem. I think it is unethical to engage in a behavior which is a market rigging opportunity hoarding behavior as opposed to a preparation behavior. Again, it's hard to draw the line.
It gets unethical, so I think it's unethical to get your kid into an institution based on your personal networks or your legacy status or you donations to the institution. I think it's unethical to give an internship opportunity to someone who you happen to know or it's rigged in some way. I think those are unethical behaviors. I don't know if I would go as far as you to then say SAT prep is unethical too, but I will say that has the same feature, it's a collective action problem as you correctly say. Everyone says well everyone's doing, it's suboptimal, I don't want to do it, I don't want to play these cards, but I've got them and everyone else is playing them, and to not do so will somewhat damage my children's life chances.
I actually think we have to be willing some of us to slightly damaged our own children's life chances, slightly in the interests of shifting a social norm against those practices. You went from collective action problem to policy. You can go from collective action problem to social norms as well. Legacy preferences were not made illegal in the UK. They became indefensible in the face of a new Galatian spirit and it became indefensible not only among poor people but among the upper middle class themselves. I will not get an internship for my kids. I will not use legacy preferences for their kids because I think it's unethical to do so, and I might at the very margin somewhat damaged their life chances, but let's not kid ourselves.
I'm not consigning them to the salt lines. They're marginal and the point is unless they're willing to sacrifice it a little bit, even around our own kids' life chances, then it seems to move can't create culture that's necessary. Collective action problem, yes, but sometimes through policy yes, but also through a shift in social norms. I'm very fond of Jerry Cohen's phrase from his wonderful book, "If You're an Egalitarian, How Come You're So Rich?" where he says social justice is not just found in policies and in distant institutions. It's also to be found in the thick of everyday life, and so actually the things we do in the thick of everyday life in our own institution, in our own life painful though this is, painful though it is are necessary too.
This is a moral argument just as much as a policy argument. With that, I better stop. Thanks.
Audience: Yes, I'll start us off. To pick up on this last point of conversation about where is this line given how much some parental influence I think matters and indeed class gaps and parenting time and investment have grown a lot. Recently gaps are really present in entry into kindergarten before. Any public policy has even enter in and maybe by some measures, those gaps don't why do much during the school year. Even if people stop forwarding, if we stop giving kids internships, if we stop with exclusionary zoning who didn't ask our friends to please help our child get into Harvard because we promise to give them a million dollars, it sounds like it might not make it worse, but it's not there that would actually help.
A lot of these gaps were there so early for things that we have such trouble imagining not doing, talking a lot to our children when they are very small. How do we solve that problem without some massive public policy, not just to get rid of the advantages of the rich, but to really lift up and to make public replace private?
Richard Reeves: Is this on? It is. Back to Cybelle's point about the wholly inadequate chapter ...
Cybelle Fox: Woefully.
Richard Reeves: Woefully, woefully. It's actually worst. Woefully inadequate policy chapter, which I confess to think we do need the massive public policy changes and although I skip over them, I think some of the things that I suggest would actually be quite significant. For example, huge increase in investment in community colleges which are very significantly underfunded, and I don't spell these out in very great detail, but I do think the whole structure of post-secondary education financing is a huge problem, yeah, legacy preferences and so on. That's the tip of this massive iceberg of financing and incentives that the admission system, the financing, the US post-secondary education system is just horrific. It's a class.
George Carnevale, a colleague. George had said it's an inequality machine. He's absolutely right about that. Underneath it all, that's right. Why then am I going on about SAT prep or legacies or why am I fiddling around with these slightly uncomfortable dinner party conversation type issues than the other middle class? The reason I do that is because I believe as a matter of politics that we'll only get those sorts of big public policy changes as a result of a change in culture, mood, instinct, norms, whatever phrase that we want to use, which has to include an affair of the conscience among the upper-middle class. Now I could be completely wrong about that, but I believe that's the case.
This is a deliberately attempt to sort of begin that conversation and then down the road, yeah okay, but I don't think our problem as the lack of good policy ideas to address some of these problems. We've got lots of them. We produce them all the time. The problem is a climate within which they can actually become feasibly connectable. Why? Because of the whole culture and I would say if it was going to be a moment when, and maybe I'd love to know what both of my respondents think of this, there was a moment when we're going to shift towards really much more aggressive public policy interventions. It might have been in the aftermath of a massive recession, stagnant income growth, galloping income inequality, and the election of the most progressive president for a generation.
I would respectfully suggest and in no way to undermine the achievements of President Barack Obama that it didn't happen. I'm bit skeptical that it's going to happen anytime soon. Now maybe you have a different conversation of Bernie Sanders at one and so on, but nonetheless I think there's something deeper here. This is a cultural battle we have to win first then the political battle then the policy battle. That's my thought. You want to respond to it? Okay, you should definitely respond.
Cybelle Fox: Well, I mean I think get to the cushion of why had we adopt the policies that we adopt and how important is public opinion for the policies that we have, how powerful is the top 20% in shaping policy in the United States. I don't know the answer the question for the top 20%, but a lot of the literature suggests that public opinion doesn't matter very much for the adoption of progressive social policies that the opinions of the poor and the middle class, they essentially only get their way when their opinions happen to align with those of the wealthiest.
Part of this is about theorizing a theory of political change, how important are changing the social norms among the top 20% and how much of this is really a story about the elite, and then ignoring the policy preferences of the vast majority of Americans.
Paul Pierson: Yeah. Again, I guess I would say we can think both these things matter, right? We can handle we can handle that, and I very much believe that part of what happened in the Obama administration and the first thing to say was they actually did do some pretty significant redistributed policies. The stimulus package was actually quite a distributive and the Affordable Care Act and this is a big part of why it was hated on the right was because it was actually the most redistributed public policy adopted in the US and at least since the 1960s, right? It was paid for by the top 1 or 2% and it transferred really, really valuable resources, the people in the bottom half of the income distribution, right?
They clearly didn't do enough to break the cycle and I guess the place I would start is I think the bottom 80% in American politics is increasingly weak and increasingly disorganized, especially around economic issues. I think the decline of unions is a big part of the long-term story there. A lot of complicated things that one could say about unions including I think one could say that as unions get smaller and smaller and as a share of the population and reduce the little enclaves increasingly in the US now only in the public sector, that too can become a kind of opportunity hoarding, right? I mean there's a way in which you build up ... There's a big difference between the political economy of a society in which or 50 or 60% of workers are in unions and one in which 10% of workers.
The decline of economic organization among the bottom 80% is a really important change. Having said all that and being pretty committed to that view, I do think norms really matter. I'm increasingly convinced that norms and expectations matter. I just finished reading Steven Levitsky and Daniel Ziblatt's book, How Democracies Die, which I highly recommend in which they argue that the threat of backsliding into autocracy that a huge part of the story there is the gradual erosion of norms, right? I like this idea about that political elites when they came power, they have to exercise what they call forbearance, right? Don't push your advantage all the way to the point where you're like bending every rule to your permanent advantage.
You lose forbearance, which is really a norm because the rules are on paper. What they're saying is there are always opportunities to exploit everything that's available in those rules and turn them to your advantage. If you see a breakdown of norms around forbearance, you're in a very dangerous place and it tends to just be it on itself. I actually found that argument quite convincing and I think an important part of what you're talking about. The idea that every time you say okay well, I've got to go along and I'm going to send my kids to SAT prep too, you are reinforcing a particular norm. If you find ways to push back in that and other contexts, you're challenging yourselves.
Audience: Hi, great talks, comments. Thank you. Before my question, I just want you animate a point like I'm Brazilian and whatever you say upset about the top 20%, thinking it's not a problem, the promise of the rich and the political lacks catering to those interests instead of the poor. The same thing happens in Brazil suspecting the country, so maybe you want to sell more copies of your books, just get a translation there, change some norms. Now I will too ask a question about social networks and the story about information bubbles.
Your challenge is to get those people in the trainee but not top 1% to say okay, so we are part of the problem, but then maybe if they are inside those bubbles where we just reinforce their norms, maybe they're just going to reinforced that they are actually the middle class and nothing needs to be done. Do you think that's like a concrete problem that's in the way of solving this incorrect perception or that's just a distraction or a symptom of something else?
Richard Reeves: Should I go first? I think it speaks to the issue about segregation. I'm using that term quite broadly now and that you use the phrase bubbles, the social networks, and so on. I think there's a number of problems that occur as a result of growing economic segregation by spatially, occupationally, institutionally. You saw the charts for the colleges. You've seen the income segregation numbers and I think the problem is twofold. One, there are clearly huge public policy problems as a result of that which we've I think talked about, but I'm more interested in a way what are their sort of psychological problems if you like. I think or two, one reference point bias, which as I alluded to earlier.
I think the problem is that we always compare ourselves to a certain group, which it tends to be the people who are around us and so the more separate dependable class becomes, then the more you can convince yourself that you're not rich because your reference point is the people who are rich. I think that causes a real problem and I think you see that in survey after survey. It's deep problem and to some extent, it's human nature, but the human nature to always compare yourself to people above you gets much worse when you've got these quite deep segregation patterns happening. That's problem number one.
Problem number two is almost like the economic gap comes a bit of an empathy gap again because of the bubble thing, because there isn't they're sort of in the thick of everyday life interaction through institutions like unions or to some extent churches or even public schools or whatever. They're aren't the same cross-class sort of interaction and cross-class intimate friendships or relationships. It means that it's harder for those of us who are in the upper middle class and in institutional and geographical bubbles to really truly understand the pressures and struggles the Americans in the bottom 80% have.
I think it's a necessary part of my story too which is that actually we do need to have a greater understanding of that in order to be willing to give up some stuff, especially money and to some extent power to those groups, but I'm worried there comes a bit of a lock-in at a certain point where the separation is such that it's almost impossible to create a sort of political culture that's based on a recognition of A, you're doing really well and B, there a lot of people are really struggling.
I don't think it's a danger that off the middle class people can convince themselves that neither of things are really true because they're not doing very well by comparison to their friend from college, and they're really struggling because by the time they paid for their house, their other house, and their private school fees, there's very little left at the end of each month. You see it, there's that Bloomberg article about a couple on 500,000 in New York itemizing it and it really went viral because it's sensor. You know what $500,000 is not what it used to be and I'm thinking it's true, but it's a real problem with American political culture.
It comes back to this forbearance point, which is why should I be having any restraint at all when I'm just a struggling member of the middle class. I think that if you get that lock in of separation leads to buy it, then we're in real trouble which comes back to land, it comes back to institutional integration.
Audience: Thank you very much for this fascinating talk and I have to thank you for the period they've given me. I thought I came to US in 2016 and that's why the election is exploratory. [Crosstalk 01:33:05]. I found some good into this one, sorry for breaking interest. I have two questions, slight observations. The first one is about this idea that you are filtering your talk that they should be no medical procedure in your children, but I don't know what that is great part is and then there should be ... I wonder what you think about Silicon Valley where these meritocratic institutions and all the people who are there. Let's assume that they are coming from the same place from 20%, but what do you feel about the gap in the wages?
There's always gender, men getting paid more than woman. Even if we have this meritocratic atmosphere environment, still women are getting paid less, so then how will we justify this one crazy thing? Second, when you talked about 20%, I wonder who are these 20%. Don't you think the most important thing is to know from where they are coming? Then if we expect them to change the social norms and what they are thinking, it's very important to see who are these 20%. I am the 20% now. I am an immigrant. I don't even have children, yet but I took your quiz and I was a dream hoarder even without having children. For me, I was a dream hoarder who come from lots of background, the culture that I have because I'm an immigrant and for white American, it would be different.
If there are African Americans, it would be different. Think of LGBTQ community in the 20%, they would want everything that they can have for their children and not because they are thinking then it's opportunity hoarding or something. It's basically because what they have gone through and they might want to protect their interest. This is something that I'm wondering that it would not be a nefarious design in 20% that they want to protect. It's just that the basic human emotion that you want to protect what you have, but even in that 20%, the diversity of the group to understand where this is coming from. Thank you.
Richard Reeves: Shall I give out to you? Okay. Thank you. Great, great questions both. I think the when do we flick from non-meritocratic to meritocratic and I think that's about labor market entry, now you need post-secondary education really I think. Let's say 25, okay, but it's really my view and I think again this is perhaps both my respondents is that by and large, I think labor market institutions shouldn't be having to try and pick up the pieces from a just horrifically unequal human capital system in the first 25 five years. I think that asking them to do that too much will damage the economy. I think we can disagree about that.
I agree about power and unions though by the way, and I think having a strong floor is important, but well I try and put it simply as possible which is let the market largely at meritocratically but try and equalize the preparation for it. As far as the gender pay gap is concerned, one of the reasons income has been reduced is because of I think the introduction of the idea of meritocratic principles which is that if a woman is the best person for the job, she should get that job. Nothing about the fact that she's a woman should stop her doing that and the same could be said of race.
Now are we there yet? No, for sure we're not, but I think the trend has been in the right direction. I'm very reluctant about that principle and the gender pay gap actually has reduced quite significantly particularly if you take into account things like occupation, and then I think it's about a norm which is like very gendered assumptions about what kinds of work men and women should do in both directions, which I think we might come into later. The point about race, I'm glad that you raised that because the book doesn't really talk about race very much, my other work does.
One reason that is because the upper middle class is predominantly white and almost as white, in fact more white compared to the population now than it was 40 years ago because of immigration and certainly no more black to the extent that it's more diverse all, it is because of an increase in number of Asian-Americans in the top 20%. There's been no increase in any other racial category in the top 20%. The question is like is it the same if you're an immigrant or if you are say Asian American or Black American, do the same moral calculus is applied, and I actually don't think they do and it's partly because Cybelle said the risk of downward mobility are much higher for Black Americans from the top, and they're really high from the middle.
Actually it's not the same being upper middle class and black as the upper middle class and white all being middle class and black, all being poor and black, and so I think it does make a big difference. Similarly when we think about immigration, I think you're talking about people who specifically might have come here to get the very best of their kids, and so it's harder in some ways to ask of them that they don't opportunity hoard. However, to the extent that immigrants might bring with a meritocratic impulse, then maybe that could be helpful too. I'll be clear, my target in my book was the predominantly white upper-middle class rather than those from other racial groups who are in that category. You don't want to talk?
Cybelle Fox: No.
Richard Reeves: You don't want to talk?
Paul Pierson: We want to get as many questions from the audience as we can, so we don't need to all ...
Richard Reeves: I'll get shorter as well.
Paul Pierson: No, that's good.
Audience: Hi, thank you all for sharing back here, I particularly appreciate the last segment of your comment that did make the distinction between the differences in racial experiences. I'm really curious if this is a conversation about economics, is it really about money, and what is the relationship between this hoarding and mental health and if we're talking about like a collective action, how do you think about the way in which there is potentially some kind of social cultural illness that has led to this idea of pulling resources out of the public space.
I'm just really curious about if we can just have a little bit of discussion a lot of like what I don't understand, like I don't understand economics particularly coming from a place where I came from a family that did not have a lot of resources, like you just created from what you had. I'm just really curious on how we can think about that.
Paul Pierson: Richard mentioned actually this in passing in his pocket. It was a really, really important point is that at the same time that the United States has become much more unequal economically, we have also shifted in the direction where more of the things that used to be at least somewhat detached from economics, they weren't modifying if you want to use that language. Now you have to buy them or you can't buy them, right? If you don't have money, you may not have access to these things. In European social democracies, a contrasting situation, there's just a lot of things that aren't that to modify, like your access to say mental health services or healthcare services or educational opportunities, there are not things that are bought and sold in the market the same way, right?
In the US though increasingly they are, which is why ... Or at least it's a big part of the reason. Richard actually scores this in some depth in his book that the inequality is growing not just with respect to money but with respect to a lot of other social outcomes that we would care about a lot. The one that [Jacob Hackerman 01:41:03] and I have used is a little downward too. It's really striking is life expectancy which is a just ... He wanted to look at one number to figure out like how a society is doing or how a particular group is doing in society. Take a look at what's happening to the life expectancy over time, right? US looks really bad, looks really bad.
Actually life expectancy in the last two years in the US has actually declined, which I remember when I first saw the data about that in Russia and it's like boy, that society is messed up. Their lives, can't you believe it? Their life expectancy is outnumbered. Yeah. Right. There's a huge divergence across incompetence and actually now there's some groups of whites that have seen some of the most negative trends really, so less educated, fairly low income, older white sub-scene, really shocking changes in life expectancy. That's one way I think I would think about.
Yeah, it's not just about economics, but economics is playing a really important role there because so many of the other things that help live a good quality of life are increasingly the US tie up with economic resources, at the same time those resources are being distributed plus nicely to it.
Richard Reeves: I'll just add one note on their point about race because I think if you think about together race and class and give a shout to Tony Jack who's a Harvard scholar. He's work on what color grouping calls the privileged poor and yes, data showing they're a very high portion of the black students, IEP colleges went to private K12 schools. We have another scholarship, but all of them did that in scholarship and so that is very interesting to see what kind of Hampstead that, the journey, but the elite colleges one of the reasons they don't have any black students in them is that they're taking from these private K12 schools. Quite interesting way to class and race interact there. The stakes are much higher when you don't have public good.
I think both my responders have said that, and so I'm strongly in favor universal health gap, but I didn't talk to you about that and how we get there from here is a different matter all together. I went through a period of thinking you could understand America best from the movie Jerry Maguire. This is over my career, but one reason that there is a moment in Jerry Maguire which no European understands and every American understands immediately, which is that she gets into the elevator after, Renee Zellweger's character. She walks out on her job. She has a kid with asthma and she walks out in a job to come join this new phone.
The first thing she says to him is the elevator going down, you will have health insurance, won't you? Unless you know European, like what the heck is going on there. She just left a job, why has she asked me to help her because it was just ... Also we know we've got healthcare and you don't have to worry my kids are not going to have healthcare, so it significant allows the stakes around there and it's the convertibility of money into other viewers is I think at least as bigger problem in many ways does the actual distribution of money.
Then I think this last point is I think going for other ladies associated cultural thing and one of my goals is trying you guys think about inequality culturally and psychologically, and not just economically, and in particular just think about the ways in which culture and economics their overlap with each other. I think this point about clustering is really important, so that you have one more reference, a book like Avner de-Shalit and Jonathan Wolff called Disadvantage, a huge influence on.
They are mentioned in a book and they talked about the clustering of advantages and disadvantages, and they say the dole running out Aaron is to de-cluster disadvantage because you've always going to have inequalities on every domain when you try to juice them, but what you should be able to do is just to be able to know the disadvantages from any one of those debates. Right now I know who poor people are and who sick people are and ill-educated people are and people having mental health problems because they are the same people to a very large extent and separating out different kinds of dysfunction is a big goal I think for [inaudible 01:45:03].
Sandra Smith: Final question.
Audience: Thanks to each of you for all of your provocative comments and might excellence in this culture consumers and that culture change often if not always precedes a political change, but in a lot of the comments that I attend today, it sounds as though there's an implicit focus on urban inequality specifically. I'd like to hear from each of you just the extent to which you're thinking about the deep intergenerational and concentrated inequality in rural America because in my work, sitting in an urban place but working in rural places and finding that this disproportionate focus on urban inequality is creating political conditions in rural America that are inadvertently undermining our progressive agenda, so thoughts on that.
Paul Pierson: Yeah, I'll take a request, I would love to talk with you about this because it actually is something that I'm interested in my research together with Patrick on ... Because I think that divides all sorts of divides between urban loosely deformed and rural loosely deformed are growing and both economically and politically. When I was talking about a client life expectancy that a lot of that is actually is rural where you see a lot of the places where some of them have lots of financial problems are, and also this question about zoning that we were talking about before.
This is a really stunning change and the structure the American economy, there is never before of an economist are now quite animated about some of this work, so I decided ... Well, some of this has been done in this campus like people like Moretti, right? There has never before been a time in which the places that are seeing the biggest productivity growth in the economy are not the places than most people are moving forward, not gaining in population, right? Typically economist would say those places are going to grow on population because that's where the economic opportunities are. That is not happening in the US right now because people can't afford to live here, right?
Instead, they move to places where the cost of living is lower, like parts of Texas for example, just to take an example. Even though the economic opportunities may not be as good as the long-term economic opportunities, the chance of stability in the capital are not as good, right? This is a big deal, so a lot of people increasing and they sense that part of what's going on a lot of these rural areas is they feel like a lot of the very most talented kids, the ones whose talent is identified, they go to a good college or something to get away. They don't come back, right?
For most of the rest of the young folks there, they can't get out, they don't have opportunities where they are, and they can't get to the places where the opportunity are. I think this is really, really important.
Richard Reeves: I would add to that this is a moment where the powerless become powerful through a particular political system because I think of all people who offer you quite powerless, some of the reasons you just are actually able to exert sometimes by their power over their political economy. I think that's actually a sort of microcosm of the broader political decline, which is that a particular subset of the USA lecturer are able to exercise quite a bit of power for the global political economy, heads up in the white house. Actually what it shows is you can be disproportionate political damage being done from some of these sort of critics and they're learning that the hard way, especially those it's evolving for all these free-trade policies.
In the past means point back stuck in place as well as stuck in a particular economic category is really powerful. When it speaks to a very deep dilemma, which is the extent to which are going to shift away from the traditional US approach is people know places and towards what we more to traditional European launch is places, not people. Traditionally in the US, it is this movement, it is that it is a geographical mobility was very often filled economic mobility. We're seeing huge obstacles to that now, but it might not just be the same to talk to Arizona. It might be personal preference, might people not wanting to be around as much as what, maybe they've got two earners, maybe just one, maybe they don't want their kids to be up in maybe have school.
It could be good reasons for that desire to it as well, but that old debate about people in play is really come to the fore again. You have to understand why and to the extent, are they trapped or choosing because I think that has quite significant policy implications. Just empirically some work that I've done using Chatty's data show so the rural counties with the most up with downward mobility are the ones with the most down like relation. You get higher rates of downward mobility on most counties because they've gone, and so it's a question about is that good or bad and where do your invest your marginal dollar, do your invest your marginal dollar to the people so that they cannot go if they want what or do you invest in place based institutions so that people can up and stay if they wish to too.
I think we're only in the beginnings of thinking that through.
Cybelle Fox: I think this is a really important question, the one book that's way on my mind a lot in the last year has been Kathy Kramer's book about rural resentment. That's a part of her argument is that rural I know which helps explain a lot for a lack of what we've seen, is that rural communities feel as if governments ... One of the reasons why they're not in support of government solutions to their problems as much as you might expect is that they feel that all of the benefits of government policy are going towards urban areas, and they're going towards elites in urban areas.
It's not necessarily true, but they have a very strong belief that that is the case and clearly they are disadvantaged in terms of economic opportunities. That's why we have to figure out a way to tie our faiths together in a way that doesn't continue to drive rural America away from urban America.
Sandra Smith: Well, we're going to have to call it. Before we give our folks here a round of applause, I'd like to thank the staff at The Institute for Research on Labor and Employment and Haas Institute for a fair and inclusive society for making this possible. On their way out, thank them and then I'd love to thank Richard Reeves, Paul Pierson and Cybelle Fox for an incredibly... [inaudible]