It’s fun to pick on the professional class. Obsessed with their credentials and careers, helicopter-parenting their children until they’re admitted into the “best” colleges, professionals make easy targets. Even the professional class likes to eye-roll at its own pretensions.
But does the professional class constitute a distinct economic and political problem?
Richard Reeves, the co-director of the Center on Children and Families at the Brookings Institution, gives a strong affirmative answer in his new book Dream Hoarders. Indeed, he argues professionals are the central drivers of inequality within our economy.
“There is one good reason why many Americans may feel as if the upper middle class is leaving everyone else behind: They are,” he writes. Reeves defines the upper middle class as those in the top 20 percent of households, or those whose incomes start at around $115,000 a year. Reeves believes “it is about time those of us in the favored fifth recognized our privileged position.”
Yet the book is based on three arguments, each of which is flawed. His first contention is that inequality isn’t a problem primarily of the top 1 percent but of the top 20 percent. “This obsession with the upper class [the top 1 percent] allows the upper middle class to convince ourselves we are in the same boat as the rest of America; but it is not true.”
His second argument is that professionals are “hoarding” opportunity for themselves. Opportunity hoarding happens “when the upper middle class does not win by being better but by rigging the competition in our favor.” Examples he emphasizes are legacy admissions (when children of elite colleges get admissions preferences), unpaid internships (which only well-off young people can afford), and exclusive zoning in highly desirable urban areas.
Reeves’s third argument is that we should have a politics of changing the hearts of professionals through moral suasion. Professionals should learn to live with just a little less stuff and a little more risk. This is not only a better way to live, he suggests; it would also lower barriers between the top 20 percent and the rest.
Yet individually and collectively, these arguments point us in the wrong direction if we’re truly interested in attacking inequality.
There’s a big difference between people at the 80th percentile of income and the 99th
At the book’s core is the claim that the left gets the inequality arguments wrong. From Occupy Wall Street to economists like Thomas Piketty and Paul Krugman, many left-leaning activists and commentators have indeed focused primarily on the top 1 percent — and often on inequality within that top 1 percent. But Reeves insists that the real action is in the broader top 20 percent.
Reeves states: “[T]he top fifth has seen the biggest income gains in recent decades, even without the extra lift provided by the top 1 percent.” For evidence, he notes that “the top 1 percent saw a jump of $1.4 trillion in pretax income, while those between the eighty-first and ninety-ninth percentile saw a gain of $2.7 trillion.” Real wage rises have been “sickly for those outside the top quintile” since 1979, Reeves says (which is true enough). Over the same period, average wage and salary income in the top quintile, excluding the top 1 percent, “has grown by a robust 44 percent.” In sum: He places more blame for inequality on professionals than on the 1 percent.
To arrive at that 44 percent figure, however, Reeves focuses only on the raw numbers of income growth. But the economy itself also grew significantly during this 38-year period. How should we judge whether this group is increasing its size of the economic pie or not? One way is to compare income at different levels over time as a proportion of GDP. If Reeves’s theory is right, from 1980 to 2014 we ought to see the entire top 20 percent gaining a larger share of economic earnings. Yet that’s not what we find at all:
It’s only as you get to the top 5 percent — once you get into the class of owners, managers and executives — that you can see the difference begin to break, and it explodes as you get further up the top. This graphic comes from the latest analysis by Piketty, Emmanuel Saez, and Gabriel Zucman of the distribution of incomes in the United States, which Vox’s Dylan Matthews describes here. (The pattern holds for incomes both before and after taxes.)
This is one of the ways increasing inequality at the extreme top end distorts our perceptions. The people in the 80-to-99-percent tier may well be supporting bad social policies, but economically they are mainly accomplishing the feat of not falling behind the top 1 percent as rapidly as everyone else. As the economy grows, they are just growing with it.
What about “opportunity hoarding”?
Yet perhaps the top 20 percent — even it if is not gaining faster than other groups — is denying opportunities to other people. The idea that the lower and middle classes are being actively blocked is important for Reeves, because one of his key assumption is that the economy as a whole is working well — at least once you get past the choke points guarded by professionals. “The labor market is largely meritocratic and competitive,” Reeves writes, all too complacently.
So the real challenge is ensuring that disadvantaged kids get enough access and opportunity: “The chances to prepare for the competition are so unequal” because of rampant “anticompetitive opportunity hoarding.”
Yet the focus on professionals prepping their kids for college, and the best jobs, distorts Reeves’s analysis and pushes our attention away from fundamental changes in the economy in the past 20 to 40 years. For starters, the income premium for those with a four-year college degree hasn’t grown since 2000.
Graduates of even elite colleges are entering a strange new economy. There’s increasing inequality among people with similar skills and within specific industries; wages are being determined less by market-wide skills and more by whether one has the luck to wind up at a company with some level of market power. The sharp rise in incomes at the very top is so narrow that it simply can’t be the result of having the right name-brand college on one’s CV. As Piketty, Saez and Zucman note, “The upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000.”
Something has broken at the heart of the economy, and more education can’t solve it alone. Indeed, as the People’s Policy Project’s Matt Bruenig has argued, we’ve been running a version of the experiment of giving more people college degrees. From 1991 to 2014, “The share of adults with an associate degree went up 3.9 points, the share with a bachelor's degree went up 8.3 points, and the share with a post-bachelor's degree went up 4.8 points,” Bruenig writes. The result was just a more educated group of people in poverty. In the context of inequality, it’s done nothing to bend the share of income taken at the very top or increase economic mobility rates.
Focusing on who gets into a few dozen elite colleges, which educate less than 5 percent of college students, also mistakes cause for effect. The clamor for prestigious degrees is an epiphenomenon of more important structural economic issues. The top schools are indeed one pathway into elite finance and consulting. But surely the larger issue is that we’ve deregulated and empowered those industries over the past four decades. Why not tackle that power frontally?
Reeves would like to see more “downward mobility” — when people end up less well-off than their parents — to help encourage the upward kind. Here he touches on the central problem, without realizing the full implications of the observation: Downward mobility would be easier “if society were more equal, since the fall would not be so great.” He expands on the point, observing: “As the consequences of falling out of the upper middle class have worsened, so the incentives of the upper middle class to keep themselves, and their children, up at the top have strengthened.”
But instead of proposing to build a cross-class movement to ensure more security for workers who don’t catapult to the top, he perplexingly focuses his energy on changing the mindset of the upper middle class: “A change of heart is needed,” he writes, “a recognition of privilege among the upper middle class.” The book is ultimately about the moral suasion of elites.
Here are more practical ideas: We know how to start draining the rents from the upper middle class. An aggressive public option and governmental price-setting in health care would deflate medical sector rents. Free college would force private schools to compete on price rather than continue to feed off people’s desperation to climb illusory status ladders. Deeper transparency in financial markets, more comprehensive prudential regulations, and enforcement of financial crimes would make it harder for financiers to profit off the systemic risk they create. Enforcing antitrust and public utility rules more aggressively would open up bottlenecks in economic activity. Higher progressive taxation reduces the incentives to rent seek in the first place.
Any of these reforms would be more productive than getting a slightly different group into the most elite colleges and jobs.
There’s a reason the upper middle class clings to its tax-free savings plans
Reeves spends a lot of time criticizing “529” college savings plans and other tax expenditures that benefit the well-off while doing little for the working class. He is correct that these programs are unfair. However, he doesn’t seem to grasp that these tax-subsidized benefits constitute a coherent welfare system that people won’t give up without something to replace it.
If you want to go after the upper-middle-class’s 401(k) deductions, you’re going to have to strengthen Social Security. If you want to go after employer provided health care, it matters greatly whether or not there will be Medicare for All or a serious “public option” as an alternative. And if you want to go after college savings accounts, you need to have broadly accessible free public colleges.
People hold onto their 529s because the public system is being dismantled before their eyes. Such tax-shielded accounts are unfair, but they’re the only social insurance system people think they have.
Again, Reeves’s acceptance of the current economic system blinds him to possible solutions. He scornfully dismisses liberals who “wish America were more like Europe — and often specifically Scandinavia.” But if you aren’t replacing the welfare system we have with something else, there’s simply no way to get any traction on fighting inequality.
Reeves also twists himself into knots arbitrating which practices of the upper middle class are fair, and which are unfair. As Rachel Cohen notes in her own review of the book in the New Republic, this gets complicated fast. (Cello lessons: fair. Writing a check to your alma mater: probably unfair.)
Reeves believes in the human capital the upper middle class has created for itself and its progeny. At one point he suggests it has helped him and his peers across a wide range of fronts, improving “our working life; the quality of our neighborhoods; ability to plan confidently for the future; our health, diet, and life spans; the stability of our families.” I believe he sees these things as a legitimate bounty to meritocrats for having good human capital; I see them as rights that should be extended to all working people, regardless of their college’s ranking.
A political party arguing that these belong to everyone, not just a handful of people with extreme credentials, might start winning elections.
Fredric Jameson once wrote that “it is easier to imagine the end of the world than to imagine the end of capitalism.” The same is true of meritocracy. At this point we’ve had enough diagnoses how meritocracy reinforces itself, creates an elite detached from and even hostile towards the rest of society, and how it pervades society with a notion of merit that leaves many people behind. Yet, as the conservative writer Helen Andrews has observed, almost all of the attacks end by prescribing small tweaks to make meritocracy work ever more efficiently.
We see a system’s flaws at its core, and we recommend more SAT tutoring classes to paper over it. We need something different this time.
Mike Konczal, a Vox columnist, is a fellow with the Roosevelt Institute, where he works on financial reform, unemployment, inequality, and a progressive vision of the economy. He also blogs at Rortybomb, and his Twitter handle is @rortybomb.
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