This is taken direct from Ezra Klein’s piece on “Brave New Economy, With Such Immobility In It” and it goes to the heart of why insecurity over health benefits will be the political issue of the next ten years.
The Center for American Progress just released a comprehensive study of economic mobility and income volatility. And, according to its data, Andy’s right about the American lack of fatalism, the belief in opportunity and mobility. When asked if people get rewarded for their effort, 61 percent of Americans agreed, versus 49 percent of Canadians, 33 percent of the British, and 23 percent of the French (weirdly, the Philippines win this one, with 63 percent agreeing). But of all these societies (save the Philippines), America is one of the least mobile, which is to say the least dependent on hard work rather than social station. In Denmark, the relationship between your parent’s income and yours is 15% percent or so. In Canada, it’s 19% percent. In France, it’s 41 percent. And in America, it’s 47 percent. The only country more hidebound and hierarchal is Andy’s native England (50 percent), also the country most closely approximating the American economic model.As it is, if you’re born in the lowest income quintile, you have a 1 percent chance of reaching the top 5 percent. If you’re born rich, you’ve a 22 percent shot at remaining there. For the middle class, hard work and productivity have begun to count far less. In 2003 and 2004, years when the GDP saw strong growth, the median household was no more upwardly mobile than in 1990-91, during a deep recession. Think about that for a second: inequality has reached such a height that the average household is actually worse off during today’s expansion than yesterday’s recession.There’s been a serious increase in downward mobility, too, with only 13 percent of families seeing $20,000 (in real terms) loss during the 1990-91 recession, while nearly 17 percent experienced such a drop during the 2003-04 expansion. Households in the top 10 percent have, by contrast, seen a reduction in downward mobility during the same period. And while it used to be the case that you could combat stagnation through hard work, even that’s dying out. Households where the adults worked more than 40 hours a week were able, during 1990-91 and 1997-98 able to translate their labor into upward mobility. Now, the correlation has disappeared.
Now overlay over that the findings from Commonwealth (which I wrote about over at Spot-on yesterday) that health insurance from employers is declining fastest amongst those in the third and fourth lowest income quintiles, and that those earning between $20K and $40K—who are probably pretty much the same people—have seen their likelihood of being uninsured at some point in the last year go from 28% to 41%. Add to that picture the fact that the top 10% of Americans have seen their share of national income increase in the past twenty years, while everyone else has suffered a relative (and in many cases a real) decline in income.
So adding it all up, despite a rise in the number of high income households, if you don’t start off that way you’re much less likely to trade up in class or income. You’re going to be making relatively less money than your parents were. And the rising cost of health care is going to manifest itself in your greater likelihood to lose insurance coverage.
This has to keep playing itself out for a while longer before it has any real political effects. But unless these underlying trends reverse, by definition, the politics of redistribution will come up. And because of its crucial and emotional nature, they’ll come up first in health care. Of course we have to get that pesky Iraq situation taken care of first.
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Oh yeah, I’ll probably get my conservative card pulled, but the massive transfers of wealth through inheritance are an actual problem. What is it, about 90% of wealth throughout thw world is landed and a large proportion of that is concentrated in the US.
We can talk about education in the US too, and then we can discus what the one true God is, global warming, non-controversial stuff.
Assuming, of course, the study from the CAP is accurate and that an adequate measure of scoial mobility is the criteria they select.
When white-collar males, ages 25-40, start feeling threatened, that’s when we’ll see a change. They are the swing voters. Until then, it’ll be status quo.
“In Denmark, the relationship between your parent’s income and yours is 15% percent or so. In Canada, it’s 19% percent. In France, it’s 41 percent. And in America, it’s 47 percent.”
Locally I can understand these stats from observation. I live in the countryside where much of the land is owned by those families whose ancestors were fortunate enough to get land grants (free) in the 1700’s. Add to that farm usage loopholes and friendly tax laws where little or no property tax is paid. As well local custom is to make sure, as a father, you get your son into a successful business. I always find those that have worked the least complain the most about the, “social safety net”. Here also Hurricane tax subsidies from FEMA support rich coastal landowners and communities.
The other aspect of eroding employer health coverage is a result of globalization. How do you compete with countries that are going through their 18th century industrial revolution and the exploitation of citizens that encompasses. Look at China, 13 hour work days 7 days a week, no health insurance or work standards at $3.00 per hour. They hire only the young and work their butts off for about five years where fatigue or injury pushes them out.
In the past not many white collar middle incomers worried about it because it was mostly a blue collar problem. But guess what now it’s everybody’s problem, even the educated. And you think education is your savior, well India’s population is getting educated as well and will work for a lot less. You can hire engineers from all over the world. Anything except local service work can be outsourced.
It is indeed a race to the bottom. As Warren Buffet said, if it is a class struggle, my class is winning.