Tag Archives: wealth

Questions to ask about the wealth gap in the United States

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The income and wealth gap (also here for information about wealth) in America has grown in recent decades. But rather than simply decry this trend, a sociologist suggests that we should ask some questions:

When it comes to division of wealth, the topic is best tackled by asking questions rather than making statements, according to Mike Dalecki, a professor of sociology at the University of Wisconsin-Platteville.

“How big a gap should there be?” he said, of the wealth divide in the U.S.

“At what point does that gap become so great that we start to have serious societal problems?” Dalecki asked…

How much money do people need to make per year to be satisfied?

If the nation’s wealth divide continues to expand, is there a failure in the economy itself or the ways the rules are written?

Should the wealthiest people pay more taxes?

At what point will they be taxed so much they leave for a different state or country?

These are some good questions because they address larger issues: how do these figures relate to American values and policies? What is an appropriate gap in wealth and how far should we go through measures like taxes to try to limit this gap? These questions link the wealth gap to larger structural and cultural concerns that should interest many Americans. These are the kind of questions I like to ask my Introduction to Sociology courses because they then have to think about how this issue of inequality relates to their thoughts about a “good” or “just” society.

I also think the emphasis here on wealth, instead of just income, is helpful. Income gives you part of the picture but wealth is more accurate measure of the resources people accumulate over time and then can pass on to their descendents. This wealth gap is particularly stark between racial and ethnic groups.

McMansions and the “inconspicuous consumption” of the 1990s

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One aspect of McMansions that is frequently discussed is the tie between such houses and larger patterns of excessive consumption. Here is a quote from a CEO of a Pennsylvania construction company that does just this:

“The new-home industry will have to respond to the market for smaller lot size and efficient home construction,” Wagman said. “We’re past the building of McMansions. That type of inconspicuous consumption is so ’90s.”

To be honest, I didn’t quite know what this term “inconspicuous term” meant. I know what conspicuous consumption as it is a common sociological term first introduced by Thorstein Veblen in his 1899 work The Theory of the Leisure Class. So I went digging around Google for the meaning of this term and how it relates to Veblen’s term. This piece from The Economist in 2005 argues that conspicuous consumption is now much more complex in wealthy, Western societies and so inconspicuous consumption still shows off wealth but in more subtle ways:

As well as traditional conspicuous consumption and “self-treating”, Ledbury Research identifies two other motives that are driving buying by the rich: connoisseurship and being an “early adopter”. Both are arguably consumption that is conspicuous only to those you really want to impress. Connoisseurs are people whom their friends respect for their deep knowledge of, say, fine wine or handmade Swiss watches. Early adopters are those who are first with a new technology. Silicon Valley millionaires currently impress their friends by buying an amphibian vehicle to avoid the commuter traffic on the Bay Bridge. Several millionaires have already paid $50,000 a go to clone their pet cat.

Who knew that spending lavishing to show off one’s wealth and status had become so difficult? In 2008, Virginia Postrel says something similar:

The shift away from conspicuous consumption—from goods to services and experiences—can also make luxury more exclusive. Anyone with $6,000 can buy a limited-edition Bottega Veneta bag, an elaborately beaded Roberto Cavalli minidress, or a Cartier watch. Or, for the same sum, you can register for the TED conference. That $6,000 ticket entitles you to spend four days in California hearing short talks by brainy innovators, famous (Frank Gehry, Amy Tan, Brian Greene) and not-so-known. You get to mingle with smart, curious people, all of whom have $6,000 to spare. But to go to TED, you need more than cash. The conference directors have to deem you interesting enough to merit one of the 1,450 spots. It’s the intellectual equivalent of a velvet rope.

As for goods, forget showing off. “If you want to live like a billionaire, buy a $12,000 bed,” says a financial-planner friend of mine. You can’t park a mattress in your driveway, but it will last for decades and you can enjoy it every night.

So we’ve moved away from garish displays of spending to more exclusive but somewhat more hidden ways to display wealth.

If we return then to the quote from the construction CEO, what exactly was he getting at? A few thoughts:

1. If he is adhering to a similar definition as The Economist piece or Virginia Postrel, then he is suggesting that McMansions were a more subtle display of wealth. But it seems that a lot of the criticism of McMansions comes from the idea that the owners are trying (desperately) to flaunt their wealth in the form of their large, garish house. So is McMansion buying a conspicuous or inconspicuous act? Might there be different opinions if we talk to the buyers/owners of such homes (after all, people need to live somewhere) versus McMansion critics (but people don’t have to live in mass-produced, poorly designed homes)?

2. He suggests that the inconspicuous consumption of McMansions took place during the 1990s. The late 1990s is where the term McMansion started to take off but the houses themselves seemed to receive the most attention from roughly 2000 to the start of the current economic/housing crisis. Perhaps the 1990s get singled out here because of a good economy in the latter half of the decade but much McMansion building and purchasing was still taking place until recent years.

(3. I wonder if he simply didn’t mean to say “conspicuous consumption” and said “inconspicuous consumption” instead.)

(Amazon also has a 1997 book that uses this term as a title: Inconspicuous Consumption: An Obsessive Look at the Stuff We Take for Granted, from the Everyday to the Obscure. Interestingly, it is written by Paul Lukas, the mind also behind Uni Watch, a blog with the tagline of “The Obsessive Study of Athletics Aesthetics.” It appears Lukas is still writing about the same topics for ESPN.com but I haven’t seen his material featured in years. When it was more prominently featured, I would read his thoughts quite often.)

The role of residential segregation in lawsuit over Elgin school district

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The Chicago suburb of Elgin has long been a satellite city with more diversity and manufacturing than the average suburb. The city’s school district, U-46, is the second-largest district in the state and is the plaintiff in a long-running civil suit that is continuing in federal court this week:

The two sides in a long, bitter fight over boundary lines in an Elgin-area school district met in federal District Court in Chicago on Monday, six years after a class-action suit sought to improve learning conditions for minority students.

The students and the families who were part of the original case filed in 2005 have long since left School District U-46, a racially and culturally diverse district of 40,000 students in the northwest suburbs. But the conditions that sparked that initial outrage — overcrowding and poor classroom conditions — continue to persist and are putting minority students at a disadvantage, attorney Stewart Weltman told the judge in his opening remarks.

“U-46 served the needs of white students first, and the needs of minority students second,” Weltman told U.S. District Judge Robert W. Gettleman. “The district knew it had thousands of empty seats in white schools, and yet it forced more and more minority students into overcrowded schools and portable classrooms without running water.”

Attorneys for the school district say race never played a role in the redrawing of attendance boundaries for the district’s 55 elementary, middle and high schools. Instead, they say, the changes were part of a reorganization plan by the district in 2004 to allow more students to attend schools closer to home.

I don’t know the particulars of the case. What the district did sounds like what a lot of American parents might desire: let my children go to schools close to home rather than busing or driving them to schools across the city. Closeness is one issue but the idea of local control or rule of nearby schools is important, even in a large school district.

But as I read this, I am struck by an idea: with the district letting students “attend schools closer to home,” U-46 was letting the wealthier kids go to the nearby nicer schools and the minority kids go to nearby worse-off schools. And if you look at the map of the U-46 boundaries, there is quite an economic range, from Elgin (median household income in 2009: $57,009) to wealthier Bartlett (median household income in 2009: $91,863) and Wayne (less than 2,000 people in the village but a 2009 median household income of $142,321). Therefore, it may appear that the district is not spreading the wealth (in money or children) around the district in a way that benefits everyone. The residential segregation patterns in suburbia, where the wealthier tend to live with the wealthier and the poorer live with the poorer, then get reinforced.

It will be interesting to see how the case turns out. On one hand, I’m sure the district has an interest in keeping wealthier families and areas within the district, something that may have been aided by this 2004 decision. On the other hand, the larger school district is supposed to be providing the same opportunities for all students.

 

Richard Florida argues cities increase levels of inequality

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Richard Florida, dubber of the Creative Class, argues that data shows that cities exacerbate levels of inequality:

“Something fundamental has changed in our economy, and it’s happening at the metropolitan level,” explains Baum-Snow. “If we want to understand what’s causing the wage gap, we now know we need to look at the unique economies of our larger cities,” adds Pavan.

Both the U.S. and the world have grown increasingly spiky, with our socio-economic divide increasingly overlaid with a growing economic geography of class.  Big cities like New York and LA have attracted wealthy people not just from America but from around the world.  This trend reflects the growing advantages of geographic clustering or agglomeration.  The larger and more populous a city or region, the more likely it is to have the human capital and economic ecosystems required to support the most advanced — and hence the highest-paying — technologies and industries.  Bigger cities attract more innovators, more entrepreneurs, and more highly skilled and ambitious people in general, and provide a fluid environment where these individuals can combine and recombine their skills. Big cities also generate powerful economies of scale and scope, resulting in higher rates of innovation, new firm formation, and productivity.  They attract better-educated, better-trained, more-experienced workers, driving up wages.

At other side of the spectrum, manufacturing, which once clustered in and around large cities and metros, has shifted to less expensive suburban, exurban, and off-shore locations. And large cities have become home to a large and growing contingent of lower-skill, lower pay service jobs — from childcare and food preparation to retail sales and personal services.  Taken together these factors have in effect divided or bifurcated the labor market in big cities into highly paid “creators” and much lower-paid “servers.”

On the other side, Florida also shows a (very modest) correlation that city size is related to higher wages. But overall, Florida argues that cities draw both the uber-wealthy and those who “serve” the city.

Florida doesn’t present much data here so we would need more analysis in order to figure out what is going on. Does this argument present a  counterpoint to these two articles about the future of cities and suburbs in Foreign Policy last fall? It is hard to tell – Florida also says that cities are centers of innovation and entrepreneurship. And even if cities do have extreme levels of inequality, do they benefit larger society enough to offset the inequality within their borders?

(Interestingly, both Florida’s data and the study he cites use metropolitan areas to mean cities. This makes a lot of sense: central cities and suburbs should be viewed more often as single, interdependent units. Would the inequality be even more pronounced if the analysis was limited to central city borders?)

What cities are the most conducive to scientific research?

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A new study in Nature examines which cities are the best for scientific research. The article cites some different measures to get at things like output and quality. Here are some of the findings:

-The top cities for number of articles produced: “Tokyo, London, Beijing, the San Francisco Bay Area, Paris and New York.”

-The top cities based on quality of research (measured as average citations of articles): “Boston and Cambridge, Massachusetts, come out on top — attracting more than twice as many citations per paper as the global average. US cities dominate the quality table, with only Cambridge, UK, breaking into the top 10. Cities with the most improved relative quality in the past decade include Austin, Texas, and Singapore City — which has moved from 15% below average to 22% above it. Beijing, however, is below par in the quality stakes: its papers in the five-year period ending 2008 attracted 63% of the global average-citation rate.”

-According to a sociologist, the three factors that lead to more research: “freedom, funding, and lifestyle.”

Several of the experts also caution that cities shouldn’t just throw money at research in the expectation that this will lead to significant wealth generated for the city.

I wonder how much of a role historical factors play in this. Once a city acquires a reputation for prestigious universities and research (think: Boston), how quickly could it lose its status if drastic things started to take place (such as the bankruptcy of Harvard and MIT)? It seems like certain cities gain a reputation or character and that character becomes an inertia that continues to attract new research facilities and scientists.

How much income one needs to be considered rich

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Americans tend to think of themselves as middle-class, even wealthy and poor Americans who objectively are in the upper or lower ranks of income. So this question occasionally arises: how much income does one have to be earn to be considered “rich”?

The current case in the news:

Todd Henderson feels like he’s barely making ends meet. He’s a law professor at the University of Chicago. His wife’s a doctor at the school’s hospital. Their combined income exceeds $250,000. They have a nice house, a nanny, kids in private school, a retirement account and a lawn guy…

“A quick look at our family budget, which I will happily share with the White House, will show him that, like many Americans, we are just getting by despite seeming to be rich. We aren’t,” Henderson wrote on the blog “Truth on the Market.”

While Henderson meant for his posting to encourage a debate about taxes, it turned into a public flogging, characterizing him as out of touch or arrogant. More broadly, it has provoked a discussion about what it means to be rich, particularly in an economy where many people are suffering.

Henderson’s no longer part of the conversation, though. The firestorm of online hostility compelled him to delete his essay and declare on Tuesday that he will no longer blog. He declined to comment Thursday. Even his wife is angry at him, he acknowledged in a follow-up blog post.

A few thoughts on this:

1. The Chicago Tribune article cites someone saying earning $250,000 a year is in the top 3 percent of American incomes.

2. At the same time, incomes can vary in their purchasing power in different areas. A $150,000 income living in Manhattan can lead to different things than living with that income in Atlanta.

3. Is this a microcosm of how Internet “discussion” works? It seems like a perfect storm of bad economic times plus widespread attention leads to a bad outcome for having made this argument.

4. Perhaps the real issue is whether people making $250,000 feel like they can live the lifestyle that is associated with such income levels. If they feel like they have to pinch pennies or a lot of the money is taken out in taxes, they might not “feel rich.” From those with lower incomes, this seems absurd: just think what could be done with that money. But having certain incomes leads to certain ideas about what that level of income looks like or how it is to be experienced.

UPDATE 9/24/10 3:36 PM: A piece from the Wall Street Journal fits in with my idea about the income and lifestyle not matching up. The overall idea seems to be that people who make this kind of money may not think they have to or don’t want to reign in their spending.

Median income falls in the 2000s, poverty rate up

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Recently released figures from the Census Bureau show troubling news with two oft-cited measures of income:

The bureau’s annual snapshot of American living standards also found that the fraction of Americans living in poverty rose sharply to 14.3% from 13.2% in 2008—the highest since 1994. Some 43.6 million Americans were living below the official poverty threshold, but the measure doesn’t fully capture the panoply of government antipoverty measures.

The inflation-adjusted income of the median household—smack in the middle of the populace—fell 4.8% between 2000 and 2009, even worse than the 1970s, when median income rose 1.9% despite high unemployment and inflation. Between 2007 and 2009, incomes fell 4.2%.

While the poverty figures have drawn a lot of media attention, they are now at 1994 levels (also around the time of a recession). It is not good news that the poverty rate is up but this isn’t catastrophic compared to recent historical figures.

Perhaps more troubling is the decrease in the median income over the course of an entire decade. This suggests that the economic problems aren’t just limited to those at the bottom of the economic ladder; it is affecting many more Americans who saw no real income growth over a ten year stretch. Figures like these are also used by some as evidence of the growing income gap in America.

Will the future be ruled by cities or suburbs?

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Two commentators disagree in a special issue of Foreign Policy on global cities: one says cities are the places of the future while another says suburbs are key.

1. In Foreign Policy, Parang Khanna discusses global cities, a concept developed by sociologist Saskia Sassen. Khanna suggests such cities are growing to a point where they exceed the ability for nations or the United Nations to control them. The conclusion is that cities are quite important:

What happens in our cities, simply put, matters more than what happens anywhere else. Cities are the world’s experimental laboratories and thus a metaphor for an uncertain age. They are both the cancer and the foundation of our networked world, both virus and antibody. From climate change to poverty and inequality, cities are the problem — and the solution.

2. Joel Kotkin responds and claims a more dispersed population, in suburbs, can lead to better outcomes in areas like generating wealth, less inequality, and a cleaner environment. He suggests this is particular an issue if we encourage large cities in the developing world:

The goal of urban planners should not be to fulfill their own grandiose visions of megacities on a hill, but to meet the needs of the people living in them, particularly those people suffering from overcrowding, environmental misery, and social inequality. When it comes to exporting our notions to the rest of the globe, we must be aware of our own susceptibility to fashionable theories in urban design — because while the West may be able to live with its mistakes, the developing world doesn’t enjoy that luxury.

An interesting debate – both places have their own issues.  One could ask what residents would prefer to live in (both in the developed and developing world): the wealthy and glamorous megacity or the comfortable and affluent suburbs? Or perhaps different nations could have different planning and policy goals? Or perhaps we need some of both cities and suburbs…

Walgreens and food deserts in Chicago

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Chicago Breaking Business reports that Walgreens is about to unveil expanded food offerings in a South Side store in Chicago. The expanded food line at 10 Walgreens stores is part of an effort to help combat the city’s food deserts:

The stores will offer more than 750 new food items such as fresh fruits and vegetables, frozen meat and fish, pasta, rice, beans, eggs and whole-grain cereals. The Deerfield-based drug store chain said it was approached by Mayor Richard Daley last year to bring more healthy food to areas that the city has identified as food deserts, namely neighborhoods that lack supermarkets.

Large American cities often struggle with this issue: low-income neighborhoods that have little or no access to fresh and healthy food. If the only options available are buying food from a convenient store or gas station, it is more expensive and less healthy. In the long run, this has consequences for building wealth and public health.