Posts Tagged ‘class’

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What happens when you combine conspicuous consumption and consumption productivity?

You get Barracuda Straight Leg Jeans—complete with “crackled, caked-on muddy coating”—on sale for $425 at Nordstrom.

When Thorstein Veblen invented the term “conspicuous consumption,” in his Theory of the Leisure Class (pdf), he was referring to late-nineteenth-century America as having entered the “predatory phase” of culture, when the people at the top obtained their goods by seizure and imputed indignity to the “performance of productive work.”

The clothing of the leisure class reflected this distancing from the world of work—conspicuous consumption combined with conspicuous leisure and conspicuous waste.

In dress construction this norm works out in the shape of divers contrivances going to show that the wearer does not and, as far as it may conveniently be shown, can not engage in productive labor. Beyond these two principles there is a third of scarcely less constraining force, which will occur to any one who reflects at all on the subject. Dress must not only be conspicuously expensive and inconvenient, it must at the same time be up to date.

Nordstrom’s muddy jeans are therefore a perfect example of contemporary predatory culture, when those at the top are afforded the luxury of ironically quoting—but not actually doing—any productive work. Instead, they capture a portion of the surplus and use it to purchase clothing that—in the form of conspicuous consumption, leisure, and waste—shows they are exempted from the exigency of work imposed on everyone else, who are of course required to dress in neat and clean uniforms, just like the servants of the first Gilded Age.

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Now, in the latest stage of predatory culture, those at the top can purchase fake mud-stained jeans while McDonald’s employees will now wear uniforms reminiscent of the Hunger Games.

What’s next, corsets?*

 

*Here again is Veblen:

The dress of women goes even farther than that of men in the way of demonstrating the wearer’s abstinence from productive employment. . .

the woman’s apparel not only goes beyond that of the modern man in the degree in which it argues exemption from labor; it also adds a peculiar and highly characteristic feature which differs in kind from anything habitually practiced by the men. This feature is the class of contrivances of which the corset is the typical example. The corset is, in economic theory, substantially a mutilation, undergone for the purpose of lowering the subject’s vitality and rendering her permanently and obviously unfit for work.

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Special mention

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NYC

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Liberal stories about who’s been left behind during the Second Great Depression are just about as convincing as the “breathtakingly clunky” 2014 movie starring Nicolas Cage.

For Thomas B. Edsall, the story is all about the people in the “rural, less populated regions of the country” who have been left behind in the “accelerated shift toward urban prosperity and exurban-to-rural stagnation” and who supported Republicans in the most recent election.

Louis Hyman, for his part, argues that the people who have been left behind—rural Americans and the people “who live and work in small towns”—hold a misplaced nostalgia for Main Street, which has been exploited by Donald Trump. What they really need, according to Hyman, is to find new jobs online so that they can “find their way from Main Street to the mainstream.”

In both cases, and many more like them, the great divide is supposedly one of geography: everyone is prospering in the big cities—with high-tech jobs, soaring incomes, and a proliferation of non-chain boutiques and restaurants—and everyone else, outside those cities, is being left behind.

Except, of course, nothing could be further from the truth. Yes, lots of people outside of the country’s metropolitan areas have been excluded from the recovery from the crash of 2007-08 (just as they were during the bubble that preceded it). But that’s true also of cities themselves, from Boston to San Francisco.

The problem is not geography, but class.

According to a 2016 report from the Economic Policy Institute, in almost half of U.S. states, the top 1 percent captured at least half of all income growth between 2009 and 2013, and in 15 of those states, the top 1 percent captured all income growth. In another 10 states, top 1 percent incomes grew in the double digits, while bottom 99 percent incomes fell.

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Much the same is true in the nation’s metropolitan areas. In the 12 most unequal metropolitan areas, the average income of the top 1 percent was at least 40 times greater than the average income of the bottom 99 percent. In the New York City area, the average income of the top 1 percent was 39.3 times the average income of the bottom 99 percent, in Boston 30.6, and in San Francisco, 30.5 times.

By the same token, some of the nation’s non-urban counties have very high levels of income inequality. Lasalle County, Texas, for example, has an average income of the bottom 90 percent of only $47,941 but a top-to-bottom ratio of 125.6. Similarly, Walton County Florida, with a bottom-90-percent income of $40,090, has a top-to-bottom ratio of 45.6.

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The fact is, across the entire United States—in large cities as well in small towns and rural areas—the incomes of the top 1 percent have outpaced the gains of everyone else. That’s been the case during the recovery from the Great Recession, just as it was in the three decades leading up to the most recent crash.

While it’s true, the voters in most metropolitan areas went for Hillary Clinton and those elsewhere supported Trump. The irony is that the majority of those voters, inside and outside the nation’s cities, have been left behind by an economic system that benefits only those at the very top.

Trumponomics

Posted: 22 March 2017 in Uncategorized
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TRUMPONOMICS

Part 1 of the Real-World Economics Review on the causes and consequences of Trumponomics is now available.

Here is the direct link to my own contribution, “Class and Trumponomics” (pdf).

Part 2, with additional essays on Trumponomics, will be available next week.

And both issues will combined for a book that will be published in late April.

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It is likely, if some version of Trump/Ryancare is approved in the United States, millions more people will not be able to purchase the insurance necessary to receive adequate healthcare.

The problem is, the United States is already an outlier when it comes to the relationship between health expenditures and health outcomes—measured in this case by life expectancy.

As Esteban Ortiz-Ospina and Max Roser explain,

all countries in this graph have followed an upward trajectory (life expectancy increased as health expenditure increased), but the U.S. stands out as an exception following a much flatter trajectory; gains in life expectancy from additional health spending in the U.S. were much smaller than in the other high-income countries, particularly since the mid-1980s.

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Even more worrisome, higher incomes in the United States are associated with greater longevity, and differences in life expectancy across income groups have increased over time.

As Raj Chetty et al. (pdf) discovered,

Higher income was associated with longer life throughout the income distribution. Men in the bottom 1% of the income distribution at the age of 40 years had an expected age of death of 72.7 years. Men in the top 1% of the income distribution had an expected age of death of 87.3 years, which is 14.6 years (95% CI, 14.4- 14.8 years) longer than those in the bottom 1%. Women in the bottom 1% of the income distribution at the age of 40 years had an expected age of death of 78.8 years. Women in the top 1% had an expected age of death of 88.9 years, which is 10.1 years (95% CI, 9.9-10.3 years) longer than those in the bottom 1%.

As a result, the average life expectancy of the lowest income classes in America is now equal to that in Sudan or Pakistan.

And, with Trump/Ryancare, that class difference in life expectancy is only going to get worse.

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We all know that the recovery since the Great Recession has been highly skewed. But has it hurt whites more than blacks and Hispanics, thereby explaining Donald Trump’s victory in the presidential election?

That’s the story being told by Eduardo Porter (here and here), relying on data from the Economic Cycle Research Institute (pdf). Their basic argument is that, of the millions of net new jobs created since the pre-recession highwater mark of November 2007, most of them went to black and Hispanic (and Asian) workers, not to white workers (who make up the majority of the workforce).

The numbers are correct—but their analysis is seriously incomplete.

According to the numbers that serve as the basis of ECRI analysis (and which are represented in the chart above), about 5.5 million more workers are employed now compared to nine years ago (the purple line)—including 4.9 million more Hispanic (green line) and 2.3 million more African American (blue line) workers but 722 thousand fewer white (red line) workers.*

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It comes as no surprise that those different job trajectories are reflected in the different trajectories of the employment-population ratio. Whereas the overall ratio and the ratio for whites have barely changed (at 59 and 60 percent, respectively) since the recession ended, the other ratios have in fact changed—rising for both Hispanics (from 59.3 to 62.2) and blacks (from 52.9 to 56.6).

So, there are differences in job growth, a large part of which can be accounted for by different regional growth patterns (large cities vs. small towns and rural areas), sectoral shifts (services vs. industrial production), and demographic profiles (both the proportion of the working-age population and retirement rates).

However, in every other way, the different groups within the American working-class have moved in tandem.

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For example, the labor-force-participation rate has declined over the past nine years—in general and for each subgroup, white, black, and Hispanic—and remains now just above record lows.

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Unemployment rates have also moved in the same direction—first rising dramatically after the crash and then falling during the recovery (but still remaining above what they were before the crash).

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Meanwhile, workers’ wages have barely budged—overall and for whites, blacks, and Hispanics—between the fourth quarter of 2007 and the third quarter of 2016.

The folks at the Center for Economic and Policy Research get it:

Porter is right in seeing support for Trump as being to a substantial extent a response to bad economic prospects. But the economic prospects of working class whites in the last decade were not notably worse than the prospects of working class blacks.

And, I would add, all the other groups that make up the American working-class.

The fact is, all members of the working-class—white, black, and Hispanic—have been victimized during the Second Great Depression. As I have shown elsewhere (e.g., here and here), as a class, they’ve fallen further and further behind the tiny group of employers and wealthy individuals at the top. That’s the real skewed nature of the economic recovery.

As I see it, the difference in their political allegiances and voting patterns cannot then be explained by white workers losing out to black and Hispanic workers. It’s due, instead, to the fact that one group that has been left behind (working-class whites) threw in their lot with one candidate (right-wing,  white-nationalist Trump)—while other members of the working-class (blacks and Hispanics), who have been equally left behind, simply could not.

And, soon, all of them will discover Trump’s promises were no more than dog-whistle politics and his economic program will leave them even further behind.

 

*The numbers don’t sum correctly (even without including Asian workers) because white Hispanics may be double-counted as both white and Hispanic, and black Hispanics may be double-counted as both black and Hispanic.

My students are worried—many of them obsessed by the possibility—they’re not going to be better off than their parents.

As it turns out, they’re right.

According to new research by Raj Chetty et al. (pdf), the rates of “absolute income mobility” (the fraction of children who earn more than their parents) have fallen from approximately 90 percent for children born in 1940 to 50 percent for children born in the 1980s. And the likelihood is, that rate is going to fall even more for the next generations. That’s because rising inequality—not slower economic growth—is the major factor contributing to declining income mobility.

In his 1931 book, The Epic of America, writer and historian James Truslow Adams defined the American Dream as the “dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement.” Such a dream has been central to the legitimacy of capitalism—with each generation supposed to be better off than the previous one. Growing inequality, especially from the mid-1970s onward, took a big chip out of that dream, since it challenged the idea of “just deserts.” But at least there was mobility—that children could still have a life that was “better and richer and fuller” than that of their parents.

Now, it seems that part of the American Dream is quickly disappearing, precisely because of growing inequality.

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For each succeeding generation—those born in 1940, 1950, 1960, 1970, and 1980—the chance of making more money than their parents has fallen—from 92 percent (for those born in 1940) to 50 percent (for 1980). That’s an enormous decrease, which is the key statistical conclusion of the study.

But the authors also consider two counterfactual scenarios: “higher GDP growth” (which asks, what would have happened to absolute mobility for the 1980 cohort if the economy had grown as quickly during their lifetimes as it did in the mid-twentieth century, but with GDP distributed across households as it is today?) and “more broadly shared growth” (which asks, what if total GDP grew at the rate observed in recent decades, but GDP was allocated across households as it was for the 1940 birth cohort?). What they find is that less equality is more significant than higher growth:

Under the higher growth counterfactual, the mean rate of absolute mobility is 62%. This rate is 12 percentage points higher than the empirically observed value of 50% in 1980, but closes only 29% of the decline relative to the 92% rate of absolute mobility in the 1940 cohort. The increase in absolute mobility is especially modest given the magnitude of the change in the aggregate economy: a growth rate of 2.5% per working-age family from 1980 to 2010 would have led to GDP of $20 trillion in 2010, $5 trillion (35%) higher than the actual level.

The more broadly shared growth scenario increases the average rate of absolute mobility to 80%, closing 71% of the gap in absolute mobility between the 1940 and 1980 cohorts. The broadly shared growth counterfactual has larger effects on absolute mobility at the bottom of the income distribution, whereas the higher growth counterfactual has larger effects at higher income levels. Since income shares of GDP are larger for high-income individuals, higher growth rates benefit those with higher incomes the most, while a more equal distribution benefits those at the bottom the most.

As we know, neither presidential candidate made inequality a focus of their campaign. President-elect Donald Trump, however, did point out the economy is rigged—and he appealed directly to the anxieties of workers who feel the economy is not delivering for them in the same way it did for their parents. As it turns out, Chetty et al. highlight several sources of those anxieties in the Trump coalition.

They find barely two in five men born in the mid-80s grew up to earn as much, at age 30, as their fathers did at the same age. They show average rates of mobility falling particularly fast in Rust Belt states, especially Michigan and Indiana. And they find a much steeper drop in absolute mobility for the middle-class than for the poor.

Maybe Trump’s victory signals, like George Carlin’s warning a decade earlier, it’s time we stop dreaming and wake up to the end of the American Dream.