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Musings Report 2019-11 3-16-19 Unrealistically Great Expectations
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Unrealistically Great Expectations
I want to tie together four social dynamics today: the elite college admissions scandal, the decline in social mobility, the rising sense of entitlement and the unrealistically 'great expectations' of many Americans.
As noted in yesterday's blog post, the nation's financial and status rewards are increasingly flowing to the top 5%, what many call a winner-take-all or winner-take-most economy.
This is the primary source of widening wealth and income inequality: wealth and income are disproportionately accruing to the top slice of wage earners and owners of productive capital.
This concentration manifests in rising inequality and a broad-based decline in social mobility: it's getting harder to break into the narrow band (top 5%) who collects the lion's share of the economy's gains.
Historian Peter Turchin has identified the increasing burden of parasitic elites as one core cause of social and economic collapse. In Turchin's reading, economies that can support a modest-sized class of parasitic elites buckle when the class of elites expecting a free pass to wealth and power expands faster than what the economy can support.
The same dynamic applies to productive elites: as I have often mentioned, graduating 1 millions STEM (science, technology, engineering, math) PhDs doesn't magically guarantee 1 million jobs will be created for the graduates.
Such a costly and specialized education was once scarce, but now it's relatively common, and this manifests in the tens of thousands of what I call academic ronin, i.e. PhDs without academic tenure or stable jobs in industry.
Since I've lived within a figurative stone's throw of a premier public university, the University of California at Berkeley(UCB) for almost 30 years, I've known many people with PhDs from top universities who have struggled to find a tenured professorship or a high-level research position anywhere in the world.
In other words, what was once a surefire ticket to status, security and superior pay is no longer surefire.
No wonder wealthy parents are so anxious to fast-track their non-superstar offspring by hook or by crook.
There is an even larger dynamic in play. As I explained last week in the blog, the pie is shrinking, not just the pie of gains that can be distributed but the pie of opportunity.
Would parents and students be so anxious about their prospects if opportunities abounded for average students? The narrowing of opportunities to secure a stable career and livelihood is driving the frenzy to get into an elite university.
As everyone seeks an advantage, there's a vast expansion of people with college diplomas and advanced diplomas: what was once relatively scarce (and thus valuable) is no longer scarce and therefore no longer very valuable.
The soaring cost of the middle-class membership basics--home ownership, healthcare and access to college--has drastically reduced the number of households who can afford these basics.
Two generations ago, just about any frugal working-class household with two wage-earners could save up a down payment for a modest home and later, save enough to put their children through the local state college.
Now, even two relatively well-paid wage earners in Left and Right Coast urban areas cannot afford to buy a house or put their kids through college. They are lucky to afford the rent, never mind buying a house.
As the number of upper-middle class slots is far outpaced by those wanting a slot, expectations have risen. This manifests in two ways: a rising sense of entitlement, which broadly speaking is the belief that the material security of middle class life should be available without great sacrifice.
The second manifestation is is greater expectations of material life in general: not only should we all have access to healthcare, college and home ownership, we also "deserve" to eat out every day, own luxury brand items, take resort vacations, and so on.
In my pre-recording conversation a week ago with a podcast host, we were talking about the number of people who think very little (apparently) of buying a $15 breakfast and/or a $20 lunch for themselves every day, plus an expensive coffee or beverage. This contrasts with the "old school" expectations which reserved lunches in restaurants for executives with expense accounts or lunch with The Boss. Everyone else filled a thermos with coffee at home and packed a brown bag lunch (or kau-kau tin in Hawaii).
From this perspective, $25 a day is $125 a week or $6,250 annually (a 50-week year). That's $12,500 annually for a two wage-earner household. Five years of foregoing this daily luxury yields a nest egg of $62,500, a down payment for a $300,000 house, or the cost of a four-year university tuition for two students who attend the local state university and who live at home.
As I noted earlier this month in the blog, the Federal Reserve's obsession with generating a "wealth effect" by inflating bubbles in stocks and housing have enriched owners of capital at the expense of the young.
But even if we set aside the perverse and destructive impact of this disastrous policy, the economy is changing in structural ways. Scarcity value is becoming, well, scarcer. Global competition has reduced the scarcity value of education, ordinary labor and capital, and so the gains flowing to these has declined accordingly.
Yet our expectations have continued ever higher even as the pie is shrinking. Common sense suggests realigning expectations with a realistic appraisal of what's possible and what sacrifices are necessary.
(Sidebar note: a kind person gave us a $50 gift certificate to a popular (not high-end) cafe that's a breakfast-lunch place. I reckoned we'd get a nice chunk of change after ordering two basic sandwiches and one beer. The $50 didn't cover the three items, much less the tip. I nearly fell out of my chair. Over $50 for two sandwiches and a beer? And yet the place is jammed with people, and I had to wonder: if everyone here earning $236,000+ annually, i.e. a top 5% income? If not, how can they afford such a costly luxury?)
Highlights of the Blog This Past Week
A Precarious Revolution Is Brewing 3/15/19
What Sort of "Democracy" Do We Have If Everyone's Goal Is Maximizing Their Government Swag? 3/14/19
How States/Empires Collapse in Four Easy Steps 3/13/19
Here's The Problem: The Pie Is Shrinking 3/12/19
The Source of Killer Inflation: Services 3/11/19
Best Thing That Happened To Me This Week
My lower back pain responded to stretching and alternating cold-warm packs. Whew.
Musings on the Economy: Wages Are Finally Rising, But Not As Fast as Prices
This chart shows inflation-adjusted weekly earnings of non-supervisory workers.
https://gallery.mailchimp.com/d7ee5db74404cedc5e4bba858/images/1b7dfc37-979d-4452-b48b-43bf28610294.png
On the face of it, wages are finally rising above the very low rate of official inflation, which has hovered around 2% for years.
What would this chart look like if it were adjusted for real-world inflation in expensive coastal and urban areas? Would wages adjusted for real-world cost increases still be rising?
The Federal Reserve is tasked with keeping inflation moderate, and if wages really are rising faster than costs, the Fed has to be careful not to let the economy start running "hot," i.e. wages and prices feed back into each other, generating an inflationary wage-price spiral.
But if wages are adjusted for real-world increases, then the Fed doesn't have to worry about wage-inflation, as the supposed increases in wages are phantom artifacts of the convoluted way official inflation statistics are calculated. In the real world, most wages aren't keeping pace with rising prices.
From Left Field
Reasons Why Kids are Bored, Entitled, Impatient with Few Real Friends -- the gloves come off...
Why the Political Is Dead-- or at least irrelevant...
The Math Behind Successful Relationships -- watch out for contempt, it's a killer....
Inside the Hottest Job Market in Half a Century
Kiki de Montparnasse, The Forgotten 'It' Girl of the 'between wars' Paris In Crowd
This is what 500 years of globalization looks like-- the Bronze Age of 2500 BC to 1200 BC was very globalized...
How To Explain That Seizing Money From The Rich Ruins The Economy For Everyone
Michel Houellebecq: Chronicler of Our Mass Incompetence in the Art of Living
Industrial Revolution – Magnum Opus: Humanity At Crossroads
Wiped out: America's love of luxury toilet paper is destroying Canadian forests -- yikes...
Charlotte Rampling: ‘I’ve got a very restless character. It’s a beast’ -- first saw her in a Woody Allen film...
The Green New Deal: When Imperialism Goes Wrong
"The moment you accept what troubles you’ve been given, the door will open." Rumi
Thanks for reading--
charles |
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