The Growing Class Divide—Posner

Charles Murray’s recent book Coming Apart has gotten a lot of attention because of the data it presents concerning the growing social and economic gap between working-class and middle-class people (politicians call all nonwealthy Americans “middle class,” but that is because politicians in a democratic society need to flatter the masses in order to get elected). The incomes of working-class people have fallen, family stability and employment have declined, and the crime rate has risen, creating a very large gap in these respects between working class and middle class, especially upper middle class. As summarized by the Washington Post’s economic analyst Robert Samuelson, “Among those 30 to 49 in the blue-collar community, 84 percent were married in 1960 and only 48 percent in 2010. In 1962, 96 percent of children were living with both biological parents; by 2004, the proportion was 37 percent. Meanwhile, the share of households with someone working at least 40 hours a week dropped from 81 percent in 1960 to 60 percent in 2008.” The middle class and especially the upper middle class have escaped these trends. Murray’s book is not very analytical, however, and also (though this is a limitation more than a defect) contains no constructive proposals for narrowing the class divide—both points argued in a recent online review of the book by David Frum. As Becker points out, the proposals that Murray made in a March 7 New York Times piece are unhelpful.

A significant causal factor in the growing class divide reported in Murray’s book may be the increasing return to IQ. In a society in which most work is manual (for example, agricultural labor, construction of buildings and roads, mining, assembly-line manufacturing, old-fashioned soldiering, and craft work such as plumbing and carpentry), the demand for manual labor is great, and the return to personal qualities that enhance the productivity of a manual laborer, such as physical strength and tolerance for dirty or dangerous working conditions, is substantial and favors men, because they have superior aptitude for most manual labor. (Male upper-body strength in particular is substantially greater than female.) Women have the superior aptitude for household labor, including child care, and so do not compete with men in the labor market in an economy dominated by manual labor.

With technological advance, the market value of the traditional male labor assets—assets that are not correlated with IQ—declines, and men find themselves competing with women for service jobs, which grow relative to mining, manufacturing, and other heavy-duty traditionally male jobs. Hence working-class male incomes fall, and at the same time middle-class and especially upper middle-class incomes rise because the return to IQ rises with the increase not only in technologically complex jobs but also in managerial and other intellectually demanding service occupations. Society becomes more complex and increasing complexity increases the demand for IQ even if the complexity is not technological.

IQ is normally distributed, with a standard deviation of 15 from its arbitrarily scored mean of 100 (not a “score,” really, but just a round number to designate the mean). Hence two-thirds of the population has an IQ between 85 and 115. Persons with an IQ below 85 are pretty much limited to working-class jobs; but that is probably also true of a majority of persons with an IQ between 85 and 100—and persons with IQs below 100 comprise half the population. The percentage of the population with IQs between 70 and 130 (two standard deviations from the mean) is 95 percent, which means that only 2.5 percent have an IQ above 130. The increased return to IQ provides far more opportunities to that intellectual elite than in a society in which the overwhelming demand is for manual labor, and in which the demand for high-IQ persons is largely limited to priests and tyrants.

Of course there are people with modest IQs who are immensely successful, including professional athletes and entertainers (though only a small minority command high incomes in either group). There are even very successful businessmen who owe their success to charisma or even sheer luck rather than to a high IQ, and there are a fair number of dopes who are in the upper middle class by reason of inheritance. And there are high-IQ people who are held back by poor physical or mental health. All this is just to say that IQ is by no means a conprehensive index of personal success; it does not even measure all dimensions of intellectual prowess. There is certainly no one-to-one correlation between IQ and income or family stability or crime, but IQ is an important factor in success in these domains.

If this analysis is correct, then (it seems to me) an essential means of narrowing the class divide, if that is thought an important goal, is redistributive tax and spending policies (which are costly, hence not worth undertaking if narrowing the class divide is not deemed important). Improving our educational system, even if possible, which it doesn’t seem to be, wouldn’t do much, because education can’t do much to increase intelligence. Milton Friedman used to say that the problem of poor people is that they don’t have money, and he advocated a negative income tax (which we now have in the form of the Earned Income Tax Credit). Increasing the income of the depressed working class might go far to increase family stability in that class, lower the crime rate, and perhaps even increase employment, provided the redistribution was coupled with the creation of incentives for working.

Comments

[Thomas Matia]

Jack, with the exception of your first paragraph, I agree with almost all of what you said. However, it you have just re-stated the problem. We all know that there is wage inequality, and we all know that many people struggle to get by in this country. My argument is not that there is no economic divide in this country; it is that simply redistributive programs are not always the best means of bridging that gap.

Second, I speak of "redistribution of income" because that is the language used by Posner in his post. However, more than that, no one can seriously argue that the money I have legitimately worked for and earned is not mine. I have "deservedly earned it" myself. I have not stolen to acquire my wealth; I have not used fraud or duress; I have not abused anyone or taken advantage of them in acquiring any wealth; the level of income I possess is the direct result of my hard work and education. Regardless of what your opinion is of redistributive policies, you cannot seriously advocate that it is not mine.

Lastly, by stating that I cling to the status quo you ignore the essential thrust of my argument: that those who advocate redistributive policies are themselves stuck to a status quo. The idea that tax and spend policies is some kind of a panacea for all of our societal woes is a tired and worn out solution. we need better ideas. My use of words might be cliche, but it is no less accurate for it: we do throw money at social programs. Examples of institutional waste abound; programs are funded without any serious debate over the potential effectiveness of the program being funded. Examples: Cash for Clunkers; Federal Student Loan programs; computers in classrooms... I could go on. I'm sure you can think of several yourself. We need to stop the knee-jerk reaction of taxing and spending to solve problems.

[CoonAndFriends]

Jack: You would be right if you work under the assumption that the current job mix will stay the same in the foreseeable future - in view of the current population trends, I don't think it will.

I don't see a value in knowing what the "optimum number of college grads" is, since college graduates can (and do) also work in jobs that don't require a college degree. I sincerely doubt that the US is producing more college graduates than it needs, at least for the key sectors (though there may be too many going for careers in the humanities). In the unlikely event that it becomes easy to get a job that doesn't require any sort of higher education (not necessarily college), then you can expect families and the government to stop spending on that - in any case, I don't think higher education will harm anyone's future.

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[NEH]

Thomas, "Tax & Spend" mentality? How about the "Cut Taxes & Spend" mentality? This will bring us closer to Edge of the Budgetary & Depression/Recession Abyss far faster and creates even greater Budgetary problems that need too be resolved... ;)

[Thomas]

NEH, I couldn't agree with you more. It's not as if either side of The Aisle has a monopoly on spending. Clearly, both sides need to cut back on spending. Moreover, if I had to choose, I would choose to cut back on the spending programs of the Right. We might be wasting money by spending loads of money on healthcare and clunkers, but at least we get some marginal benefit out of it. I cannot say the same about defense spending...

[Jack]

Thomas: Well, you're right in that the solution is not easy. But GIVEN that we've gone much to far down the unsustainable road of massive wage/wealth inequity we do have to find a way back.

First, let's consider some of the costs to us all and what remains of our economy:

The "financial sector" that in our heyday of being the mfg powerhouse of the nation has ballooned into a monster from what was, and should be, a fairly boring little sideshow of clearing payments and facilitating beneficial mergers blessed by a fully awake Anti-Trust Division.

What these SOB's have and ARE doing to us today is proprietary trading for their own account with we the taxpayers and Goldman's "muppets" (clients) as the patsies.

Here, were are not speaking of the lower end of the "1%" who've by dint of productive work, or even luck, gotten into the $350,000 plus group but those carving off tens of millions with NO consequent productivity.

Ha! in this last year when companies should be making "come back" gains about the ONLY gains came from two companies, one being Apple, (deserving on the one hand for innovation and excellent marketing but also riding on the bowed backs of nearly prison level labor in China) and the other AIG, an outfit clearly having benefited more than any from the FREE use of Fed Funds to save its wretched self when we SHOULD see Sea Land van sized paddy wagons hauling the whole top management off to prison.

Let's take a look at things nearer the bottom: Consider..... these decades of stagnant wages HAVE hollowed out everything we once expected of middle class and of course those below. Think..... millions having lost their jobs with millions of other not being able to launch. Had our M/C wages not been so badly eroded most families could afford to help their 20 somethings or family members perhaps kicked to the curb in their 50's never to work in their field again.

In short this isn't about some theoretical "wage fairness" or what's "mine is mine" but about making OUR society work again.

Over these decades "we" have let the min wage erode below even the rate of inflation. ie the min wage guy had more purchasing power in 1980 than today, despite more than a doubling of per capita productivity. (Trust that I KNOW the "GOP" theory is that, magically, the CEO's productivity has increased many fold from 30 time worker pay (still prevalent in most of the world) to over 400 times today....... and that they've carefully measures and found the productivity of the lowest paid has not improved one whit in the last 30 years ------ and that I find such argument hrsht)

For may part with some still, perhaps unearned, reverence for the power of capitalism, I'd MUCH rather see incomes from min to mid range increase in the "rising tide lifts all the boats" manner hoped for by JFK for all the capitalist reasons including deploying scarce resources efficiently on a level playing field as compared to Walmart and the like getting away with paying a token wage with the taxpayer subsidizing the rest.

Hey, if that rich company's biz plan does not allow paying its valued associates a living wage, either get more efficient, take a chunk out of the upper management or get out of the way and let Costco that does pay its people take more market share.

As we've strayed so far it will be DECADES for working folks to claw back to a reasonable wage distribution so 2nd best IS that of deploying universal H/C and using a much more progressive tax schedule to help pay for it.

However one goes about it...... THE main message is that we are at the END of continuing on this path. You WILL see the Occupy folks in the streets this year and a lot of Presidential and Congressional election focus on the issue and it will ONLY get worse if ignored.

Tax and spend?? NEH answered well, but truth is we do HAVE to tax and spend. IF the US were a company it would be negligent to ignore over $2 trillion in long delayed infrastructure maintenance and criminal not to include the item on their balance sheet.

The opposite? to not spend at the necessary rate of $250 billion/year and let the bridges fall down? roads wash away? roofs collapse? and traffic gridlock? is hardly in the style of a forward looking, "can do" America. And we'd better tax for it instead of putting it on those credit cards run up so high by the "conservative" set as who knows how long bond rates will be near zero?

"Optimum college grads?" My first choice, as mentioned, would be that of tradesmen, retailers and all getting something of a liberal arts education to enjoy a higher quality of life and able to better participate as a citizen in and democratic system.

But! as college costs have soared and for many become VERY "scarce resources" we should, as a matter of economic measurement have some idea of how many "college grads" it takes to run the show. That's not to say anything about limiting "college" for others, but perhaps there are more efficient means of attaining what is needed and what is best..... focus on cheaper community colleges for example, and or, if we are not graduating enough......either finding ways to provide the education cheaper or as with many other nations, subsidizing it more.

What is the best "bang for the buck" in our spending? Perhaps as Thomas I'm wondering if our HUGE "defense????" budget is not coming close to being counter-productive. Suppose for example that when we were being rapidly lied into the unwarranted "preemptive" attack on Iraq that even the neo-con fools in charge had doubts as to whether we could carry it off alone?

We'd have then had to either delay while building the right "army" for the job (that it turns out we did not have anyway) or work with NATO or the UN before going of half-cocked. In either case we'd have been likely to skip sacking Baghdad in favor of dealing with Afghanistan in concert with NATO and the UN as is the case there.

Lastly? Just now we're collecting something like 16% of GDP in Federal taxes which is hardly a case of being "overtaxes" in a modern society given to periodic fits of warmongering.

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[CarlSchmitt]

The Keyenesian solution proposed by Posner is far more sensible, assuming that it is accompanied by the necessary corollary Keynes himself always envisioned: a control on lower class reproduction.

Posner apparently believes that education has scant ability to increase intelligence beyond the range set by genotypic IQ, which means he likely believes that a significant portion of human intelligence is inherited. With this in mind, redistribution of wealth to the lower class would create more problems than it could solve unless there were a corresponding limit on lower class reproduction.

[Jack]

Carl! Ha! Would Keynes favor the neutering of "our?" Wall Street thieves? in hopes of both getting rid of mouths to feed and on a basis of a genetic disposition toward greed, theft and no sense of community?

And Whew! By now I think most agree that most of one's IQ is inherited but perhaps tweaked for ten points, give or take, by environment.

But what those ignoring that has taken place over the last 40 years, term "redistribution" being related to birth rates?? Nah, the issue is that of food and housing along with participating in our economy that is 70% dependent on consumer spending. "No dollars, No Demand" for our excess productive capacity.

And a puzzle for your perhaps? supremacist leanings? For quite a few generations the fertility rate for "lower class" Americans and immigrants has been far higher than that of the "upper class", yet!! very mysteriously average IQ has not fallen.

Here's a couple of graphs depicting the utterly unsustainable ALL FOR THE RICH trend and GOP agenda:

http://lanekenworthy.net/2008/03/09/the-best-inequality-graph/

After looking it over do you see reason to anoint the top 1% with tax bennies while those of the lower economic strata tighten their belts another notch?

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read "The Bell Curve" by Richard J. Herrnstein and Charles Murray 1994

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[Taylor Bollman]

There are two important problems with this argument.

First, it, I believe, likely overrates the IQ level required for non-working class jobs. A high IQ is certainly critical for many high-paying jobs, but there are likely many business jobs that pay at least middle or upper-middle class salaries. I don't have data on this (might look), but it is incumbent upon Mr. Posner to give some empirical support for his intuitively (for anyone who knows corporate america) questionable claim.

Second, Mr. Posner's demotion of the impact of education on IQ is not well founded. IQ is indeed highly heritable, but twin studies show that IQ is around 70% genetic, which leaves 30% of IQ determined by environmental factors such as education.

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