December 5, 2011

The Costs of Inequality: Pull from the Top or Push from the Bottom?

Economist Robert H. Frank (as Half Sigma likes to point out, there are a whole bunch of commentators named Robert Frank, so it's important to use the middle initial) writes in Slate:
Because many continue to deny that income inequality has been growing, it’s useful to start with a brief review of how income growth patterns have changed since World War II. The three decades after the war saw incomes grow at an almost uniform 3 percent annual rate for families up and down the income ladder. Since the early 1970s, however, virtually all income gains have accrued to those whose incomes were highest to begin with. 
It’s a striking fractal pattern. Most of the gains have gone to the top 20 percent of earners, but the lion’s share of the gains within that group have gone to the top 5 percent. And within the top 5 percent, most of the gains have gone to the top 1 percent, and so on.

Is this new pattern something to worry about? Many decry rising inequality because it makes those who’ve fallen behind feel impoverished. But it’s done much more than that. It has also raised the real cost to middle-income families of achieving many basic goals. 
It’s done that through a process that I’ve elsewhere called “expenditure cascades.” The process begins with the completely unremarkable fact that top earners have been spending at a substantially higher rate than before. They’ve been building bigger mansions, staging more elaborate weddings and coming-of-age parties for their kids, buying more and better of everything. 
... The important practical point is that when the rich build bigger, they shift the frame of reference that shapes the demands of the near rich, who travel in the same social circles. 
Perhaps it’s now the custom in those circles to host your daughter’s wedding reception at home rather than in a hotel or country club. So the near rich feel they too need a house with a ballroom. And when they build bigger, they shift the frame of reference for the group just below them, and so on, all the way down.  
There’s no other way to explain why the median new house built in the United States in 2007 had more than 2,300 square feet, almost 50 percent more than its counterpart in 1980.

Yes, there actually is another way to explain bigger houses. Are people being pulled by the top or pushed by the bottom? Bigger houses, especially when mandated by developers and / or zoning, are not only an attempt to get closer to the top, they are very much an attempt to get farther away from the bottom, to physically escape to neighborhoods and school districts where the bottom can't afford to live.

Neither the pull nor the push explanation is sufficient by itself, but it's obtuse of Frank to ignore the obvious complementary explanation. (There are also other, non-inequality related explanations, but I'll skip over them here.)
Certainly, it’s not because the median earners are awash in cash. (The median real wage for American men was actually lower in 2007 than in 1980.) Nor is there any other way to explain why the inflation-adjusted average cost of an American wedding had grown almost threefold during the same period.

Hint: what proportion of Americans are married in 2007 compared to 1980? Higher or lower?
Middle-income families have also been struggling to meet sharply higher tuition bills and health insurance premiums. To make ends meet, they’ve taken on substantial debt, worked longer hours, and endured longer commutes to work. In the parts of the country where inequality has grown most, we’ve seen the biggest increases in bankruptcy filings and the biggest increases in divorce rates. 
Many have been harshly critical of families that borrowed more than they could reasonably hope to repay. If they couldn’t afford larger houses and more expensive weddings for their daughters, these critics say, they should have just scaled back. But that charge ignores the importance of context in meeting basic goals. 
All parents, for example, want to send their children to the best possible schools.

I see little evidence for that assertion. It would be much truer to say most parents don't want to send their kids to the worst possible schools. Economists have long distinguished between maximizing and satisficing, and it would seem pretty clear that most parents do more of the latter when it comes to schools. For example, how many American parents apply their children to Eton or Harrow? Instead, Americans put huge efforts into getting their kids into good enough school districts, where the public schools are reasonably safe, where classes aren't bogged down by the children of illegal immigrants who don't speak English well, and so forth. Parents have criteria: e.g., If I send my daughter to this school, how likely is she to fall in love with a gangbanger?
But a good school is a relative concept. It’s one that’s better than most other schools in your area.

To some extent, true, but to a perhaps greater extent, parents try to get into a sufficiently good area and then are satisfied with sending their kids to an average or even below average school in that district. For example, I seriously considered buying the cheapest house in the cheapest neighborhood in Lake Forest and Wilmette, IL. I'm sure my kids would have been stuck in the worst neighborhood public school in Lake Forest or Wilmette, but that seemed like something we could live with. No doubt, if we had lived there, over time we would have noticed that our kids' classmates weren't the offspring of the town's creme-de-la-creme, but the urge to go deeply into debt to move from the poorest neighborhood school to a better one in Lake Forest is a lot smaller than the urge to get your kids out of Chicago public school and into a Lake Forest public school. Economists have a concept called diminishing marginal returns. Economist Frank should use it here.
In every country, the better schools are those that serve students whose families live in more expensive neighborhoods. So if a family is to achieve its goal, it must outbid similar families for a house in a neighborhood served by such a school. Failure to do so often means having to send your kids to a school with metal detectors at the front entrance and students who score in the 20th percentile in reading and math. Most families will do everything possible to avoid having to send their children to a school like that.

Exactly. And the growth in the number of billionaires has only the most distant connections with the growth in the population of students who don't read English well. Granted, some billionaires agitate for more low wage immigrants, so they deserve some political blame, but it's not billionaires' kids who are directly causing the need for metal detectors and dumbing down the public school curriculums.
But because of the logic of musical chairs, many are inevitably frustrated. No matter how aggressively everyone bids for a house in a better school district, half of all students must attend schools in the bottom half of the school quality distribution.

Sure, but how bad in an absolute sense is the bottom half of the distribution in quality of students? In Finland, not so bad. In Lake Wobegon, not so bad. In Lake Forest and Wilmette, not so bad.

In Chicago or Los Angeles, not so hot.

Now, most Americans tend to view education through the lens of diminishing marginal returns. Getting their kids out of the 20th percentile school is a high priority. Getting their kids from the 98th to the 99th percentile schools is a lower priority. The least satisficing / most maximizing behavior in education tends to be found among Tiger Mothers like Amy Chua. Professor Frank teaches at Cornell in Ithaca, NY. The Census reports that Ithaca has more Asian residents than blacks and Hispanics combined, so it's not surprising that he doesn't have a realistic view of the country as a whole.
As in the familiar stadium metaphor, all stand, hoping for a better view, only to discover that no one sees any better than if all had remained comfortably seated.

Indeed. So why cram more people without tickets into the stadium?

Parents confront similar dilemmas when deciding how much to spend on a child’s coming-of-age party or wedding. The expenditure cascades spawned by higher spending at the top in those categories have raised expectations about how one should mark important social milestones. Of course, a family always has the option to spend considerably less on such events than most of its peers do. But it can do so only by disappointing loved ones, or by courting the impression that it failed to appreciate the importance of the occasion they were celebrating.

Coming of age parties? My impression is that spending by white Catholics and Protestants on coming of age parties is not enormous. For my son's 18th birthday, we took him to dinner at The Cheesecake Factory and gave him a laptop computer to take off to college.

Further, my impression is that increases in bar/bat mitzvah spending are driven more by Jewish immigrant families from the Middle East or Russia. I can't tell you about high end entertainment industry bar mitzvahs, but in my experience, the celebrations put on by typical American-born Ashkenazi families are not disproportionate to their substantial wealth.

The big money pit in Southern California is Quinceanara parties. My wife has pointed out the strip of shops in North Hollywood that cater to the Quinceanara business. Side by side there is a dress shop, a tuxedo shop, a limousine rental outlet, a beauty parlor, a nail salon, a florist, and a bail bondsman: everything for your Quinceanara needs, other than maybe a payday loan outlet and a gun shop for all your firing into the air Pancho Villa-style needs (fortunately, the LAPD has pretty successfully cracked down on that over the last decade by shooting a few celebratory shooters to discourage the others).

As for wedding costs, one of the mechanisms driving up the average cost of weddings is the decline in the number of first weddings. As marriage becomes more of an upper-middle class phenomenon, expenditures naturally go up. Moreover, weddings are becoming a class marker -- people wish to disassociate themselves in clear terms from the non-marrying classes, and the most obvious way to publicly do that is by throwing a huge wedding. By no means is this the only explanation, but it's one of the explanations.

In Los Angeles among gentile whites, coming-of-age parties are considered kind of de classe because they are associated with Quinceanaras, while weddings are considered classy because they are common only among the upper middle class.
By creating runaway demands for credit, growing income disparities also helped spawn the housing bubble that gave us the financial crisis of 2008 ...

Indeed, but the the great bulk of foreclosures took place in neighborhoods, such as California's Inland Empire, among people who don't even know anybody who is super-rich. A classic driving force in the run-up of home prices was working class people using subprime and Alt-A mortgages to try to get their kids out of the 'hood.

The median home foreclosed in California was about 1500 square feet. Professors and journalists have a hard time grasping the scale of the various factors because they spend so much more of their time around the hugely rich than anybody else in their pay grade. They also try to avoid spending time with the 85-100 IQ working class, so they are pretty clueless.

None of this is to serve as an all-purpose defense of the billionaire class. But, for many social problems such as the poor quality of the student bodies in many public schools, you really can't blame billionaire's kids for being a big part of the problem.

The most general problem is the legitimacy granted to high-low coalitions: e.g., Angelo Mozilo announcing in 2005 that Countrywide is going to loan a trillion dollars to minorities and the poor to fight racial inequality. So, don't get persnickety with questions about whether the borrowers can pay the mortgages back, you racist, you.

This concept of billionaire-NAM coalitions simply doesn't register on the media radar yet.

57 comments:

Anonymous said...

Robert Frank is discussing his social circle, not the ones most people run in. He is upper middle class, so he feels the pull of competition from the upper classes. Who has coming of age parties for freshman h.s. girls? The dirt poor Hispanics we have been allowing to settle in our country for decades.

morleysafer said...

"Coming of age parties"--yep, this is Slate.com all right: go from what you might have seen on cable the other day & extrapolate to the rest of the world.

Anonymous said...

Because many continue to deny that income inequality has been growing, it’s useful to start with a brief review of how income growth patterns have changed since World War II.

Are these statistics corrected for race?

Because if they aren't, then they're completely bogus.

Just off the top of my head [without consulting the Census Bureau or the CDC], I'd guess that:


1950, BOTTOM 50%:
35 points Caucasian
10 points Negro
5 points Mexican, Amer-Indian, and other

2010, BOTTOM 50%:
5 points Caucasian
22.5 points Negro
22.5 points Mexican, Amer-Indian, and other


Again, those are just wild guesses, but I'd guess that they're pretty accurate.


PS: As for those "1%" at the tippy-top [who are hoarding all of the best goodies these days], the more I think about it, the more I wonder whether Kemp-Roth and the Roth IRAs and the 401Ks, back in the early 1980s, didn't do more to exacerbate this problem than anything else.

All of that Reagan-era structural change in the legalistic landscape just opened up the floodgates for the rent-seeking vermin in the financial sector: The Roth/401K investment vehicles required that your savings pass through the economic choke point known as "a seat on the NYSE", and the rent-seeking vermin are always going to be attracted to those economic choke points like flies on sh*t.

PPS: That, of course, and fiat money - there's another rent-seeking bonanza for you - how do you or I get Ben Bernanke & Timothy Geithner to email us a few spare billion when the going gets tough?

PPPS: Apparently Henry Ford had a thing or two to say about all of this rent-seeking manipulation of the gubmint.

JeremiahJohnbalaya said...

The three decades after the war saw incomes grow at an almost uniform 3 percent annual rate for families up and down the income ladder
Which leads, with mathematical certainty, to increasing income inequality over time.

Yes, I know he used the term "income" and I know that the numbers aren't constant over time, but it's just so obvious that in a growing economy, the people at the very top are going to drift futher out from the mean.

And the underlying assumption by most people that the size of the pie is constant (as in "the rich are taking a larger slice" ) is also clearly nonsense.

ziel said...

Which leads, with mathematical certainty, to increasing income inequality over time.

In absolute terms, yes, but the distribution would be unchanged.

Anonymous said...

http://www.washingtonpost.com/blogs/answer-sheet/post/when-an-adult-took-standardized-tests-forced-on-kids/2011/12/05/gIQApTDuUO_blog.html

"A longtime friend on the school board of one of the largest school systems in America did something that few public servants are willing to do. He took versions of his state’s high-stakes standardized math and reading tests for 10th graders, and said he’d make his scores public.

By any reasonable measure, my friend is a success. His now-grown kids are well-educated. He has a big house in a good part of town. Paid-for condo in the Caribbean. Influential friends. Lots of frequent flyer miles. Enough time of his own to give serious attention to his school board responsibilities. The margins of his electoral wins and his good relationships with administrators and teachers testify to his openness to dialogue and willingness to listen."

“I won’t beat around the bush,” he wrote in an email. “The math section had 60 questions. I knew the answers to none of them, but managed to guess ten out of the 60 correctly. On the reading test, I got 62% . In our system, that’s a “D”, and would get me a mandatory assignment to a double block of reading instruction.

He continued, “It seems to me something is seriously wrong. I have a bachelor of science degree, two masters degrees, and 15 credit hours toward a doctorate.

“I help oversee an organization with 22,000 employees and a $3 billion operations and capital budget, and am able to make sense of complex data related to those responsibilities.

“I have a wide circle of friends in various professions. Since taking the test, I’ve detailed its contents as best I can to many of them, particularly the math section, which does more than its share of shoving students in our system out of school and on to the street. Not a single one of them said that the math I described was necessary in their profession.

“It might be argued that I’ve been out of school too long, that if I’d actually been in the 10th grade prior to taking the test, the material would have been fresh. But doesn’t that miss the point? A test that can determine a student’s future life chances should surely relate in some practical way to the requirements of life. I can’t see how that could possibly be true of the test I took.”"

bjdubbs said...

Are the Quincana parties sort of like a sexual coming-out party? "Hey our little girl is having sex now!" Because I don't think she's going to be doing the circuit of society dances.

Henry Canaday said...

Frank spoke at our Local Lefty Bookstore a few weeks ago. He seems prone to mistake a possibly interesting speculation that might be explored as an explanation of some modest shifts in one slice of the population for The Big Answer To All That Troubles Us because, uh, he is the one who suggested it.

Why would people who are after all getting steadily better off spend their money on things than Robert Frank thinks are silly, unnecessary and counter-productive? Well, possibly because they do not have easy and innately satisfying jobs like teaching at a university and gas-bagging at the New York Times.

Long-term interest rates plummeted between 1980 and 2007, leaving more of the mortgage to pay for the house, not its financing. Incomes did go up, especially for the house-buying section of households. And how many families would not desire a larger house, if they thought they could afford it and believed (wrongly) that it would be a good long-term investment?

Antioco Dascalon said...

1. As Thomas Sowell points out on these occasions, whenever commentators talk about household income over decades rather than individual, they are pulling a fast one. This is because the average household size in 1970 is much different than today. There are significantly more households headed by a single mother and single person households today than years ago and both, of course, are far poorer than a traditional two-parent household. The increase in divorce is sufficient to explain much of the phenomenon Frank bemoans. Imagine if in 1960, 50% of the married couples then instantly divided into two households. The result would be an instant near-halving of median household income. To ignore this factor is scandalous: "Those joined in holy wedlock now only make up 48 percent of all U.S. households. It marks the first time in American history married couples don't make-up the majority. " http://www.cbn.com/cbnnews/us/2011/May/Census-Married-US-Households-Now-in-Minority/

2. As Steve points out, since fewer are getting married, and that decrease is not distributed equally on the income ladder, it is not surprising that weddings are more expensive. Further, the median age for first marriages has increased from 23 for men and 20 for women in 1970 to 28/26 in 2010. Don't you think that a wedding for a 30-year-old professional woman with no brothers and sisters who marries a 34-year-old stockbroker would be more expensive than a 22-year-old carpenter marrying his high school sweetheart, who is barely out of her teens?
3. Isn't it clear that easy credit is a culprit? We are awash with credit cards, student loans, mortgages, etc. These are all "easy" ways for people to spend above their means. Yes, Frank identifies many of the factors but none of these could have caused any of this if it weren't for the deliberate policy to make college and housing "affordable" for the masses.

Munch said...

Most people in the top 20% income group are in their peak earning years and were in a lower group earlier in life.

Rich is lamenting that most people become much more valuable to their fellow man and earn much more when they get work experience and accumulate human capital.

Maybe the top 1% has less income mobility, but I doubt it. Even looking at the richest people in America, many moved from much lower incomes when they started the climb.

That's Thomas Sowell's observation.

And who really cares that because you envy and emulate the rich you buy a bigger house. BFD. I think it is more likely homes grew because government policy on many levels subsidized housing (tax deductions, govt guaranteed financing, low interest rates below inflation, generous leverage policies). Same for education and health care. Everything bought with debt became overpriced (subsidized things the most).

Everyone responds to incentives but it is not the incentive to show up a rich man (which is hopeless for a near rich man) but the incentives to take a path that is subsidized and encouraged.

Anonymous said...

Interesting story from a White Trahs hockey player: http://www.nytimes.com/2011/12/06/sports/hockey/derek-boogaard-a-brain-going-bad.html?_r=1&hp=&pagewanted=all

one has to wonder when the Lawsuit will be filed.

Always blaming others..

Anonymous said...

Is this new pattern something to worry about? Many decry rising inequality because it makes those who’ve fallen behind feel impoverished."
The inequality is the product of the destruction of the labor market, and it certainly is something to be concerned about.

Anonymous said...

"
And the underlying assumption by most people that the size of the pie is constant (as in "the rich are taking a larger slice" ) is also clearly nonsense."

Don't be absurd:
http://imageshack.us/photo/my-images/802/comparisony.png/

Back when labor was scarce and expensive, businesses had to invest their capital in the future to get a return on it, growing the economy, further reducing the inequality gap, and in general being the rising tide that lifted all boats.

Today, businesses are squatting on their profits leading to the above rise in the overall share of wealth that the top 1% have.

Anonymous said...

If you're talking about declining living standards, don't you mean pull from the bottom or push from the top?

Anonymous said...

The healthcare problems for middle class Americans are mostly due to the top rather than the bottom. Illegal immigrants and the underclass raise prices by increasing demand, but per-person costs are twice as much as in European countries, with nothing to show for it in terms of health outcomes. This massive waste is profit for many at the top like health insurance executives, pharmaceutical executives, hospital administrators, and medical specialists.

Anonymous said...

I had a hard time reading the whole article.

The Anti-Gnostic said...

Back when labor was scarce and expensive, businesses had to invest their capital in the future to get a return on it, growing the economy, further reducing the inequality gap, and in general being the rising tide that lifted all boats.

Over at Tyler Cowen's site, I keep asking how we're all supposed to get rich by reversing the Solow growth model and driving down capital inputs per worker to Third World levels. Haven't gotten an answer yet.

Today, businesses are squatting on their profits leading to the above rise in the overall share of wealth that the top 1% have.

Actually, I see that I'm framing the question wrong.

ben tillman said...

Yes, I know he used the term "income" and I know that the numbers aren't constant over time, but it's just so obvious that in a growing economy, the people at the very top are going to drift futher out from the mean.

It's not obvious; it's not even necessarily true.

ben tillman said...

Yes, I know he used the term "income" and I know that the numbers aren't constant over time, but it's just so obvious that in a growing economy, the people at the very top are going to drift futher out from the mean.

It's not obvious; it's not even necessarily true.

Anonymous said...

" I seriously considered buying the cheapest house in the cheapest neighborhood in Lake Forest and Wilmette, IL"

Did you consider buying a house in Arlington Heights, Palatine, Glen Ellyn or similar suburb? While not prestigious, you could still get white schools and more bang for your buck in a house. Although the north side of Palatine is changing into a Hispanic area now.

JeremiahJohnbalaya said...

Anonymous said
[i said:]And the underlying assumption by most people that the size of the pie is constant (as in "the rich are taking a larger slice" ) is also clearly nonsense."

Don't be absurd:
http://imageshack.us/photo/my-images/802/comparisony.png/


Which part of "size of the pie is constant ... is also clearly nonsense" didn't you understand? It's like you were trying to prove my original point.

All of the political arguments are based not only on the premise that the 1% are stealing from the rest of us, but that are lives are somehow "proportionally" worse, b/c we have a "lower percentage" of the "distribution".

Stupid people have a hard enough time without being brainwashed by that kind of buillsh-t.

Or do you really think that everyone should/could be able to own their own plane and their own small island, if only business didn't "squat on their profits".

Anonymous said...

"Since the early 1970s, however, virtually all income gains have accrued to those whose incomes were highest to begin with."

This is a myth, the true figure is around 25% to top 1%, around 75% to rest.

http://super-economy.blogspot.com/2011/11/middle-class-income-stagnation-is-myth.html

Steve Sailer said...

"Did you consider buying a house in Arlington Heights, Palatine, Glen Ellyn or similar suburb?"

Yes. Lots of Saturdays and Sundays driving around the northwestern suburbs. But the northern suburbs make for funnier anecdotes.

ben tillman said...

"Since the early 1970s, however, virtually all income gains have accrued to those whose incomes were highest to begin with."

This is a myth, the true figure is around 25% to top 1%, around 75% to rest.


Non sequitur.

"Those whose incomes were highest to begin with" could mean the top 5%, the top ten 10%, or the top 20%.

Whiskey said...

Only Hispanics spend money on coming of age parties. Its a waste like Chelsea Clinton's $25 million wedding, which lasted 7 months (the two are now separated). Big weddings, big parties, are a waste of time and money. They are not even fun.

The difference is that rich folks can afford to waste money on big weddings where the marriage itself collapses afterwards, while poor people cannot. Sober, thrifty habits as Franklin advised are the best way to climb out of poverty.

Anonymous said...

Steve,

I have a few things in common with you. I live in the Greater Los Angeles area, and I think your observation about "push from the bottom" is very much correct when it comes to home purchasing patterns in Southern California.

However, I am not sure how much this describes behavior in the rest of the USA. My understanding is that there is a general upward trend in people's expectations that is separate from the encroachment of NAMs and immigrants. My understanding is that if you look at a nearly all white and all homogeneous area like southern Utah, you see much the same thing. That is, a young man and young woman who grew up in a large family that lived in a 1300 square foot house will get married and buy a 3 thousand square foot house because the houses that they grew up in just feel too small.

The young married couples in southern utah generally are under tremendous financial pressure and stress due to buying a larger house than perhaps they need, not just due to the cost of the house itself but the cost to heat air condition and repair it. But these young couples keep buying the larger house.

The larger house doesn't get them away from NAMs and immigrants because there really are few in Southern Utah

On a related matter, weddings are larger and more lavish than they were 20 or 30 years ago, even among the red-blooded "founding stock americans" that live in Southern Utah.

I would ask others here to weigh in - do other readers of this blog see larger houses and more lavish weddings as being driven by immigration and NAMs and an encroaching prole class, or is there something else going on ?

Steve Sailer said...

Okay, but there definitely aren't any billionaires in Southern Utah.

Southern Utah is hardly unaffected by what happens in California. I recently drove from LA to St. George in, what 6 hours? 7 hours?

Ac said...

Antioco nails the wedding issue. Fewer kids, later marriages is a big contributor.

The other thing with homes is that at some point people looked at them as less of a place to house their kids and more as an investment which leads to a bigger is better mentality.

Also, don't improved building techniques figure in somewhere?

I like the idea that we should do less covetting, but I'm not sure that we need to stop others from having so to make it easier.

Anonymous said...

This concept of billionaire-NAM coalitions simply doesn't register on the media radar yet.


Once you accept this concept it should not be too hard to accept the similar concept of the high-IQ/low-IQ coalition against the middle-IQ.

Anonymous said...

Most people in the top 20% income group are in their peak earning years and were in a lower group earlier in life.


Well, yeah. When Bill Gates was a high school student "earlier in life", he was not making as much money as he is now.

Anonymous said...

Are these statistics corrected for race?

Because if they aren't, then they're completely bogus.




The median white male worker makes almost exactly as much today as he did back in 1972, after adjusting for inflation. Obviously, that's adjusted for race.

Household income has climbed for decades as more women entered the workforce, and as more and more of those women entered the workforce as doctors and lawyers instead of as supermarket cashiers or cleaning ladies. This process has masked the underlying problems in the labor market.

Peter A said...

my impression is that increases in bar/bat mitzvah spending are driven more by Jewish immigrant families from the Middle East or Russia.

At least on the East Coast, where most Jews live, that is nonsense. Recent Jewish immigrant families are not the ones throwing lavish bar/bat mitzvahs. If anything they are the ones trying desperately to catch up with their American Jewish peers. And spending on bar mitzvahs (and childrens' birthday parties for that matter) is definitely out of control compared to two or three decades ago. Immigrants are not a factor, because in New York/Boston/DC we don't really have the immigrant problems the rest of the country has. It does seem to be driven by an enormous concentration of wealth in the financial, corporate law and real estate sectors compared to the past. I think Frank also misses this point - the hollowing out of our industrial base and concentration of wealth in the finance sector is exacerbating social inequality in a destructive way.

Peter A said...

"Who has coming of age parties for freshman h.s. girls? The dirt poor Hispanics we have been allowing to settle in our country for decades."

Frank means Jews, not Hispanics. When Frank talks about coming of age parties he means bar/bat mitzvahs. There may also be a trend of upper class Christians on the East Coast starting to throw coming of age parties to compete with their Jewish neighbors.

Anonymous said...

"The median white male worker makes almost exactly as much today as he did back in 1972, after adjusting for inflation."

In wages, yes. But in total compensation he makes more--the increased total compensation is largely going to more medical insurance instead of wages.

The big house phenomena seems to be decoupled from both bottom-up pressure and top-down pressure. You can, after all, usually buy a small house in a non-gang-banger area. And the increase in square footage is on a widespread enough scale that you can't really pin it on those billionaires, even via chain reaction. The larger new houses show up even in homogeneous rural communities.

I think houses got bigger because people liked bigger houses, and because of the real estate mania of the last couple decades. After all, house prices never go down, so why not buy more square feet, and push your credit to the limit? It's a sure thing way to get rich.

As I recall home square footage has been steadily increasing rather than just spiking after 1970.

Ernst Stavro Blofeld said...

"Frank means Jews, not Hispanics."

This WASP was puzzled by that. Really? Coming of age parties? The closest I had to that was pops letting me use the power tools.

Anonymous said...

"The big money pit in Southern California is Quinceanara parties. My wife has pointed out the strip of shops in North Hollywood that cater to the Quinceanara business. Side by side there is a dress shop, a tuxedo shop, a limousine rental outlet, a beauty parlor, a nail salon, a florist, and a bail bondsman: everything for your Quinceanara needs, ..."

And every one of these shops is owned by the same Iranian or Korean family.

Anonymous said...

Typo: "In Los Angeles among gentile whites, coming-of-age parties are considered kind of de classe...."

"de classe" should read "déclassé"

"de classe" would actually mean "classy" in French slang, except a French person would say "de la classe".

Here endeth the language lesson.

Reg Cæsar said...

Whatever happened to Buicks?

Paul Fussell pointed out years ago that the true upper classes would never be caught dead in a Cadillac-- too, well, déclassé(e). They went for the Buick, which, with options, was just as good as the Caddy, but a lot less obtrusive. Invisible wealth.
But that was an old-money, WASPy attitude, I guess.

A few months ago the missus went out for an old Toyota and came home with an equally old Buick. I joked that we're doing just what Fussell described-- pretending to be middle class. But we sure aren't doing it from above!

Buick is once again the biggest-selling import in China. But that may have more to do with Sun Yat Sen than with class dynamics.

Douglas Knight said...

Bigger houses, especially when mandated by developers and / or zoning,

Developers and zoning are completely different. Zoning usually mandates large lots, not large houses. This produces artificial scarcity to drive up the price and keep the poor out. Developers want large houses, close together. In CA, the cost of the house is small compared to the cost of the land. And, as you always say, a large house is cheap if you're willing to put lots of people in it.

Anonymous said...

"All of the political arguments are based not only on the premise that the 1% are stealing from the rest of us, but that are lives are somehow "proportionally" worse, b/c we have a "lower percentage" of the "distribution"."

Our lives are worse because of the means used to seize that part of the distribution.

"Stupid people have a hard enough time without being brainwashed by that kind of buillsh-t."

I know, they have people telling them its raining, while doing something else entirely to them.

"Or do you really think that everyone should/could be able to own their own plane and their own small island, if only business didn't "squat on their profits"."

http://online.wsj.com/article/SB10001424053111903927204576574720017009568.html
Come on, this isn't difficult. Investment is how that economic pie grows in the first place.

Anonymous said...

Hmmmm....interesting post Steve.

In England things are a bit different.Here (especially in London), state schools are quite rankly uniformly shit (no other word can suffice).
Therefore the great divider between 'succesful' parents and parents who hate themselves is the ability to send the kids to a fee paying day school - this is the real essence of the the class divide in modern day England.
On the point about the lower orders apeing the rich, again I'm not too sure.Of course an historical view tells us that most fashions and fads (from tea drinking, to cocaine snorting, to such pastimes as football, rugby etc and clothing etc) are almost always started by the leisured classes with the proles moving in afterwards, perhaps initially as a deliberate apeing.
But showy weddings? - I thought that was old fashioned 'ethnic' thing and nothing to do with the trandy movers and shakers who set the pace.On second thoughts staus and hierarchy, trendiness etc are all syptoms of ancient pecking orders which we cannot shake off.The need to be accepted and popular in the group.Hence the need to know the latest trendiest slang words, the latest jokes, clothing, haircuts etc.Think of Seattle in the 90s or San Francisco in the 60s.
Somehow ballrooms and big, fat weddings don't fit in that narrative.
Perhaps the 'peacock male syndrome' is more apposite.Perhaps this is why gays are on the cutting edge.Mexicans, mariarchi bands and big fat weddings don't quite cut it as the thing the 'man about town' wishes to emulate.
This is the key demographic which defines taste and fashion - which the masses wittingly or unwittingly emulate.It is the cachet, the je ne sais qua, that is secretly envied and admired - not the yowling of 400 pound moustachioed singers.

Anonymous said...

Concerning the size of American houses.

As far as I know, most recent american houses are constructed using timber frames, sheet materials and standardized components.Using this mode of construction, housing can be built on an industrialised scale at low cost and quickly.In England up to recent times all housing was brick built and virtually every piece of carpentry and joinery was either made one-off in a workshop or by a craftsman on site - hence huses were generally small and expensive.Plus all walls and ceilings were manually plastered - no sheet rock there.
American construction methods lent itself to making a quick buck, by making houses bigger using these quick-build framing techniques, profit per house was maximized.This was the reason for the trend towards bigger houses.

Anonymous said...

Isn't the Roman Catholic 'Confirmation sacrament' their 'coming of age' ceremony?
As I recall the sacriments were baptism, holy communion, first confession, confirmation and marriage.
I believe Anglicans are also 'confirmed' into their faith, but as far as I know no big deal is made of it.

The Anti-Gnostic said...

But in total compensation he makes more--the increased total compensation is largely going to more medical insurance instead of wages.

This meaninglesss retrospective analysis that economists delight in makes my head hurt. You've got tax incentives, ERISA regs, and all the other distortions inherent in third-party payor systems, much less systems devoted to insuring risk that is inherently uninsurable. Total wash. Calculate for wildly oscillating 401k's and the office Christmas party while you're at it.

The Anti-Gnostic said...

And another thing. Working age men have low rates of health care consumption. Mostly, they're just paying the freight for all the women in the risk pool and the few old guys who are still hanging around.

Oh, and one more: Insurance is an expense, not a benefit. You don't count the casualty coverage you buy along with your car as part of its value. The whole "benefit" thing is really just some accounting/legal gobbledygook.

Dan said...

"Parents have criteria: e.g., If I send my daughter to this school, how likely is she to fall in love with a gangbanger?"

It's not often that I laugh out loud at my work desk. Keep up the good work.

Sheila said...

Whether "coming of age parties" was meant to refer to Jews (bar/bat mitzvahs) or Hispanics (quinceaneras), the impulse behind each is the same - i.e. to impress co-ethnics. Most protestant Whites have nothing comparable, although the lowest classes may have rather ribald "sweet 16" parties. At the opposite end of the spectrum, I knew a number of women in college who actually debuted and had coming out parties (blacks who belong to "Jack and Jill" are aping this more and more, now).

Re wedding expenditures, you're again describing a phenomenon driven by impressing others. Who has the fancier flowers or centerpieces or cake, whose gay party planner is more over the top? My husband and I were both professionals and independent income earners at the time of marriage, and we opted for a small wedding, where our largest expenditure was paying the hotel cost for most of our guests. This was my husband's absolute requirement, because he remembered being cash-strapped and struggling to come up with the money for a tuxedo and air fare for friends' weddings in his 20s.

It's all part and parcel of the vulgar culture, just like women's clothes with words across the buttocks and nouveau riche minorities demonstrating that they've "arrived" financially by loading themselves with "bling." Wealth and class are quite different, of course, and unless you're referring to Hollywood or Euro trash, those with money don't spend it ostentatiously trying to impress the proles.

As far as house size versus house location, it again depends on one's values. I'm agitating fiercely to move to a smaller house in a less "enriched" area. My current location is deemed to have "good" schools (I disagree), but that has merely served to increase the huge percentage of Chinese and Indians in the area and I send my kids to private school anyhow (i.e. my house needs new carpet and a coat of paint but I put my money where it matters most, and that's not in impressing the neighbors).

Most don't even know what "upper class" means, and it differs from area to area. For East Coast Jews, upper class means lots of conspicuous consumption and the Ivies; for blacks it means fancy rims and lots of hangers on. I equate "upper class" with those I first met in college, who went to prep schools (before the rest of the country had even heard the word "preppie") and wore ugly watches that cost a lot (I still hate Rolexes and turned down the one my husband brought home for me!). European diplomats still tend to be from the upper classes, as opposed to the Jews, gays, blacks, and women who now dominate our State Department. Then there was the family whose children I watched one summer in the 70s, whose personal phone book was the Social Register and who travelled by private plane. Their "beach house" (distinct from the enormous summer home a few miles inland) in Montauk was a five bedroom deal; I seriously doubt they're still in the area as it's now infested with the likes of Billy Joel and sundry rappers. Celebrities have gold toilets; these people had a tattered settee in the music room that had good "bones" and had been in the family for years, but which they hadn't gotten around to having reupholstered. That's status - not impressing the hoi polloi.

David said...

>I think your observation about "push from the bottom" is very much correct when it comes to home purchasing patterns in Southern California. However, I am not sure how much this describes behavior in the rest of the USA.<

I will vouch for Steve's theory with Jacksonville, Florida. And Nashville, Tennessee. And Chattanooga, Tennessee.

Has the commenter heard of white flight? At a certain point, the fleers put up a defensive barrier: McMansions. "Keep the riff-raff out." But Fanny and Freddie and Jorge Boosh's universal homeownership push was all about putting the riff-raff IN. Who said diversity was bad for business? No one until the bubble burst.

We moved out of an apartment into an FHA-loan 1000-footer, to get away from the riff-raff. Then (1999) the riff-raff starting pouring into the neighborhood. So we moved 45 miles away from our work and bought a 2100-footer. Were we trying to keep up with the Jones? No.

We were trying to get away from the Jonezes.

Try enduring the hostile stare and sexually harrassing comments from large groups of young hispanic men standing around idly in your driveway all day when you go to check your mailbox.

Try not being able to take a walk in your neighborhood any more, for the same reason.

Try getting to work on time when such gangs stand around in the neighborhood streets and won't let your car pass.

The riff-raff was of all colors, but was predominantly non-white.

From new neighborhood to dysfunctional ghetto in two swift years.

We tried to get to know the newcomers at first, but none spoke English. They looked at you as if they would rather kill you than speak with you.

Can there still be people in America who are so sheltered that they have no experience of such things?

Apparently the answer is yes. America seems to house plenty of hothouse flowers living in all-white communities and dreaming about the pastel-colored wonders of diversity. A nation of Eloi.

Sideways said...

For example, I seriously considered buying the cheapest house in the cheapest neighborhood in Lake Forest and Wilmette, IL.

Steve, I don't know if you've heard, but the west end of Wilmette is full of Asians now, to the point where New Trier is over 10% Asian.

Fellow Traveler in Berkeley said...

Rather than close-hand direct observation of billionaires on the part of the less-affluent classes, I think that at least some of what drives the pull from (or is it push to?) the top is the media saturation coverage of the lifestyles of celebrities and rich reality TV people like the Kardashians.

Homes of what are ostensibly middle-class families in movies and scripted TV shows are usually larger and more expensively decorated in comparison to what the homes of actual middle class families look like.

Otis McWrong said...

@Peter A: "Immigrants are not a factor, because in New York/Boston/DC we don't really have the immigrant problems the rest of the country has." -- please don't take this the wrong way, but have you been outside in the past, oh, 25 years? DC and the VA/MD 'burbs are completely over-run by Central Americans and for some reason, moslems of all stripes. As for NY, take a cab or go into any restaurant or dry cleaner and see how much English you get. You may have been referring to immigrant jews though. I can not speak to that.

"There may also be a trend of upper class Christians on the East Coast starting to throw coming of age parties to compete with their Jewish neighbors." -- again, not sure where you live but in the real world, upper class whites definitely do not try to "compete" with their jewish neighbors. Conspicuously displaying wealth by throwing parties you can't afford is considered, well, something that Mexicans do.

In the South we had debutante balls and the attendant parties, but that is around age 18 and they're fairly modest relative to the father's wealth. The spending limit really is not what you can afford, but closer to what the median in your social circle can afford. Because, as said above, a conspicuous display of wealth is tacky.

Jack said...

Living in the NYC area, pressure from the top is at least as important as pressure from the bottom. The huge concentrations of wealth here make living in a mostly white school district near NYC almost impossible. A rundown looking house in Morris County NJ will cost 500K.

I used to watch "My Super Sweet 16" on MTV. Seems like there were a lot of white girls who's rich daddies paid for extravagant parties (and sometimes, a car). And I don't think they were all Jews.

Aaron Baugher said...

Wedding spending has gone up because (until recently) people had more spending money; they got married later, which meant they were less likely to need to save up for a bedroom set and silverware (which also means they get more cash as gifts, which can go to paying off the wedding); and fewer kids means the mother-of-the-bride with one daughter can go hog-wild on one wedding and not save back for the next few. Trying to keep up with the lavish ceremonies of the super-rich has nothing to do with it; it's about keeping up with (or just a step ahead of) the neighbors and cousins.

Likewise, buying all the house the bank will let you have, or trying to get into a better school district, isn't about keeping up with Bill Gates. It's about doing a little better than your parents did, a little better than your coworkers. Square footage is one easy marker of that.

Anonymous said...

My observation is that rich WASPs tend to spend their excess cash on lots of expensive foreign holidays or on indulging a hobby of some sort.
Splashing cash on weddings etc, just isn't the 'done thing'.

Antioco Dascalon said...

It is always striking to me that when commentators bemoan the fact that there are still so many poor or that there is this huge gap between the rich and the poor, they always fail to mention immigration.
Immigrants tend to be much, much poorer than the average American. In 2010, there were 40 million foreign-born living in America. Importing the world's poor and readjusting the poverty level means that America's poor as a percent of the total population always stays about the same.

Anonymous said...

I've noticed that many wealthy WASPy men so arrange their lives so that thei income from employment is used mainly to subsidize an expensive hobby such as mountain climbing, yachting, scuba diving, surfing etc.
Their philosophy seems to be (and to a man they are atheists) "This life is not a rehearsal, and I might as well get as much enjoyment possible out of my living years and live life to the extreme". A hard-headed, calculating and rationalist approach.

Juan Bautista said...

The hand wringing over "income inequality" seems to be a favorite pastime of the partly educated upper middle class: nothing to do with envy, nothing at all.