Thursday, December 13, 2007
Defining the Middle Class Up
by Tom Bozzo
A lot of Googlers used to find their way here searching for definitions of "upper-middle class." As far as I recall, we never really provided a definition, though my informal economist's take is that the upper-middle class is basically the upper-working class. That is, in contrast with the "rich," the upper-middle class depends on a flow of wage income to maintain its standard of living, etc. For instance, the 95th percentile net worth in the 2004 Survey of Consumer Finances data, $1.43 million, would buy a $57,300 joint life annuity with some inflation adjustment for a 50-year-old and spouse at the terms offered by the Thrift Savings Program; that's roughly a 65th percentile income.
It follows directly that Harvard's more generous financial aid policies only benefit the upper end of the income distribution, since the Harvard endowment isn't going so far to remedy the institution's "Upstairs/Downstairs" problem as to put the keys to late-model BMW M cars into the hands of kids from actual middle-income families. [*] That is, students from families with incomes under $60,000 get nothing more than before, and that's roughly the median income for families whose heads are old enough to send kids to college. [**] The real action is between the 85th to 95th percentile of the general income distribution and still a lofty slice of the families-with-college-age-kids distribution.
A W$J article (no link) reported that about half of Harvard's undergrads receive grant aid, and about a third of those get the under-$60,000-income free ride. So the national median (or maybe a bit better) income puts a kid at the 17th percentile or so of the Harvard undergrad distribution, and the 90th-95th percentile nationally is something like the Harvard median. So while Megan McArdle may not be quite on the money in characterizing the beneficiaries of the new policy as "actual" "working and middle class students," I can't disagree with her that the implied distribution is interesting if maybe not surprising.
The issue may be one of scale as much as anything — in a population the size of the U.S., being in the top percentile of something puts you in an exclusive club of some three million members. [***] So out of the top couple of deciles of U.S. households by income — the top 25 million or so — there will be smart teenagers far in excess of Harvard's modest undergrad enrollment. Of course, the same goes for the bottom half. In this regard, Felix Salmon is right to say, "I simply don't buy this idea that there's a limited pool of 'top students' which all top universities want." At least, if that's how elite schools' admissions officers view things, then they should sharpen their pencils.
In any event, I can hardly object to more generous aid terms, even though a really bold policy could spend a little more of the Harvard endowment's returns to a more conspicuously anti-elitist effect. If they wanted to do so, they could afford to match the income distribution of the general public.
The AMT discussion is less innocent. This morning, as many others recently, I've groggily heard NPR announcers telling me how an unfixed AMT will ensnare 22-point-something million "middle income" taxpayers. For actual middle-income taxpayers (q.q.v.), it takes very special circumstances to end up with an AMT bill of any size. The typical AMT relievee, in fact, looks quite a bit like me — decent income, couple dependents, relatively large deductions for state and local taxes — and I could not tell you with a straight face that it would cause substantial hardship to pay another grand or two to the Feds.
Middle-income "victims" of the AMT are easier to find than family farmers put out of business by the estate tax, but again the issue is that the moderately-well-heeled are numerous in a big country. There's no doubt that politicians of both parties wouldn't care to annoy tens of millions of taxpayers from high-voting-rate demographics, but by and large the issue is an annoyance rather than an injustice. As it happens, the annoyance could be resolved justly by closing some prominent tax loopholes and modestly increasing rates for high-income taxpayers, but the Republicans who engineered the problem in the first place [****] have decided to circle the wagons around not raising any tax for any reason.
[*] Maybe tooling around Cambridge and Brookline in such vehicles is more of a BU thing. No matter.
[**] The income distribution shifts upwards with age, up to a point, reflecting the progress of typical career paths.
[***] So the answer to questions like "how many people can afford those megabuck lakefront houses and McMansions" is "more than you'd perhaps think," Big Shitpile issues notwithstanding.
[****] That is, the AMT problem was known when the Bush tax "cuts" were pushed through; taking away the cuts for upper-middle-income taxpayers was a means of keeping the official effect on the federal deficit small enough that fiscal conservatives could close their eyes and think of England while voting for it.
It's been interesting to see the Alternative Minimum Tax fix and the hoopla over Harvard's new undergrad financial aid policies framed as middle-class issues. This may be true in some technical sense, but it's misleading.
A lot of Googlers used to find their way here searching for definitions of "upper-middle class." As far as I recall, we never really provided a definition, though my informal economist's take is that the upper-middle class is basically the upper-working class. That is, in contrast with the "rich," the upper-middle class depends on a flow of wage income to maintain its standard of living, etc. For instance, the 95th percentile net worth in the 2004 Survey of Consumer Finances data, $1.43 million, would buy a $57,300 joint life annuity with some inflation adjustment for a 50-year-old and spouse at the terms offered by the Thrift Savings Program; that's roughly a 65th percentile income.
It follows directly that Harvard's more generous financial aid policies only benefit the upper end of the income distribution, since the Harvard endowment isn't going so far to remedy the institution's "Upstairs/Downstairs" problem as to put the keys to late-model BMW M cars into the hands of kids from actual middle-income families. [*] That is, students from families with incomes under $60,000 get nothing more than before, and that's roughly the median income for families whose heads are old enough to send kids to college. [**] The real action is between the 85th to 95th percentile of the general income distribution and still a lofty slice of the families-with-college-age-kids distribution.
A W$J article (no link) reported that about half of Harvard's undergrads receive grant aid, and about a third of those get the under-$60,000-income free ride. So the national median (or maybe a bit better) income puts a kid at the 17th percentile or so of the Harvard undergrad distribution, and the 90th-95th percentile nationally is something like the Harvard median. So while Megan McArdle may not be quite on the money in characterizing the beneficiaries of the new policy as "actual" "working and middle class students," I can't disagree with her that the implied distribution is interesting if maybe not surprising.
The issue may be one of scale as much as anything — in a population the size of the U.S., being in the top percentile of something puts you in an exclusive club of some three million members. [***] So out of the top couple of deciles of U.S. households by income — the top 25 million or so — there will be smart teenagers far in excess of Harvard's modest undergrad enrollment. Of course, the same goes for the bottom half. In this regard, Felix Salmon is right to say, "I simply don't buy this idea that there's a limited pool of 'top students' which all top universities want." At least, if that's how elite schools' admissions officers view things, then they should sharpen their pencils.
In any event, I can hardly object to more generous aid terms, even though a really bold policy could spend a little more of the Harvard endowment's returns to a more conspicuously anti-elitist effect. If they wanted to do so, they could afford to match the income distribution of the general public.
The AMT discussion is less innocent. This morning, as many others recently, I've groggily heard NPR announcers telling me how an unfixed AMT will ensnare 22-point-something million "middle income" taxpayers. For actual middle-income taxpayers (q.q.v.), it takes very special circumstances to end up with an AMT bill of any size. The typical AMT relievee, in fact, looks quite a bit like me — decent income, couple dependents, relatively large deductions for state and local taxes — and I could not tell you with a straight face that it would cause substantial hardship to pay another grand or two to the Feds.
Middle-income "victims" of the AMT are easier to find than family farmers put out of business by the estate tax, but again the issue is that the moderately-well-heeled are numerous in a big country. There's no doubt that politicians of both parties wouldn't care to annoy tens of millions of taxpayers from high-voting-rate demographics, but by and large the issue is an annoyance rather than an injustice. As it happens, the annoyance could be resolved justly by closing some prominent tax loopholes and modestly increasing rates for high-income taxpayers, but the Republicans who engineered the problem in the first place [****] have decided to circle the wagons around not raising any tax for any reason.
[*] Maybe tooling around Cambridge and Brookline in such vehicles is more of a BU thing. No matter.
[**] The income distribution shifts upwards with age, up to a point, reflecting the progress of typical career paths.
[***] So the answer to questions like "how many people can afford those megabuck lakefront houses and McMansions" is "more than you'd perhaps think," Big Shitpile issues notwithstanding.
[****] That is, the AMT problem was known when the Bush tax "cuts" were pushed through; taking away the cuts for upper-middle-income taxpayers was a means of keeping the official effect on the federal deficit small enough that fiscal conservatives could close their eyes and think of England while voting for it.
Labels: Social Class, The New Gilded Age
Thursday, June 07, 2007
Lost in Translation, UK Edition
by Anonymous
There are, however, some ways in which the relative class-ness of the UK becomes quite apparent. Consider, for example, this description of the Honda Accord wagon from Yahoo UK's car site: (Yes, we're back to car talk.)
"Prestige estate sector?" Using "prestige" and "estate" in the same sentence, even to describe a market segment, would be PR death in the US.
Other lost-in-translation moments from the same article:
and, of course, references to what's under the bonnet.
I'd be more inclined to read articles about cars if they all talked about saloons, drinking from black pumps, and sops to convention.
One of the truisms is that the UK is a class society and the US is not. Like many truisms, this one turns out to be true only under certain definitions of the key terms, in this case "class society." E.g., intergenerational class inheritance and mobility chances are about the same in the US and UK, for all the US's cultural rhetoric about being a classless society, Horatio Alger, blah blah, meritocracy, blah blah, American Dream, blah blah.
There are, however, some ways in which the relative class-ness of the UK becomes quite apparent. Consider, for example, this description of the Honda Accord wagon from Yahoo UK's car site: (Yes, we're back to car talk.)
Without a diesel, you're without a prayer when it comes to shifting volumes in the profitable compact prestige estate sector.
"Prestige estate sector?" Using "prestige" and "estate" in the same sentence, even to describe a market segment, would be PR death in the US.
Other lost-in-translation moments from the same article:
The sprint to 60mph will detain you for just 9.2 seconds in the saloon...[ED: not kph?]and
However, given disparaging remarks made by Honda executives over the years about cars able to drink from the black pump, it was tempting to expect their first foray into diesel territory as little more than a sop to convention.
and, of course, references to what's under the bonnet.
I'd be more inclined to read articles about cars if they all talked about saloons, drinking from black pumps, and sops to convention.
Thursday, March 22, 2007
Just the Facts...
by Anonymous
Awful, if true, but note the charges: kidnapping and making terroristic threats. Setting aside whether "terroristic" is even a word, why this charge, and not something like, oh, assault and battery? Has the USA Patriot Act so skewed the justice system that DAs see a better payoff to trying to prove "terroristic threats," demonstrable only through "he said/she said" evidence, than to proving assault and battery, for which relevant evidence is physical?
Truth be told, that's not what initially caught my eye about the story. It's this bit of reporting:
Either the AP journalist is practicing for a second career as an author of airport-kiosk fiction or he/she wanted to be sure that readers understand that abuse doesn't happen to Nice Folks Who Live in Nice Houses in Nice Neighborhoods. No classism here, nope, just reporting the facts, move along...
From CNN, a brief story of alleged kidnapping and physical abuse:
GREENSBURG, Pennsylvania (AP) -- A couple and their three teenage children held a woman captive for six months, referring to her as their "slave" as they beat her, forced her to do chores and threatened her life and the lives of her relatives, police said Wednesday.
All five members of the [Pollard] family, ranging in age from 43 to 16, were arrested on charges of kidnapping and making terroristic threats. They had not entered pleas Wednesday but denied wrongdoing.
Awful, if true, but note the charges: kidnapping and making terroristic threats. Setting aside whether "terroristic" is even a word, why this charge, and not something like, oh, assault and battery? Has the USA Patriot Act so skewed the justice system that DAs see a better payoff to trying to prove "terroristic threats," demonstrable only through "he said/she said" evidence, than to proving assault and battery, for which relevant evidence is physical?
Truth be told, that's not what initially caught my eye about the story. It's this bit of reporting:
No one was home Wednesday at the Pollard house in a dingy alley. The front door was open and had no doorknob; its white aluminum siding was covered with dirt. [emphasis mine]
Either the AP journalist is practicing for a second career as an author of airport-kiosk fiction or he/she wanted to be sure that readers understand that abuse doesn't happen to Nice Folks Who Live in Nice Houses in Nice Neighborhoods. No classism here, nope, just reporting the facts, move along...
Labels: Inequality, Journamalism, Social Class
