Only Norwegians need apply!

Jamelle Bouie does a wonderful job presenting Mitt Romney for who he is:

Romney’s history on immigration is one reason why we should not treat Trump as an aberration from the Republican Party but the outgrowth—and perhaps the apotheosis—of forces that have driven Republican politics for at least a decade. Romney’s hostility to illegal immigration helped him win the Republican nomination. What’s more, he gave tacit approval to Donald Trump’s birtherism, even welcoming his endorsement in 2012. After he lost, Romney attributed Obama’s re-election to a promise of “gifts” to black people, women, and the “children of illegals.”
Romney holds sincere, conservative views on immigration, but he also helped give rise to the divisive politics that he now criticizes in Trump. Romney indulged the worst impulses of the Republican base, feeding it an appetizer of racial resentment and leaving it hungry for someone who could offer a feast.         

Which is why despite all his anti-trump stand during the primaries, Romney eagerly went to dine some fine frog legs with the very guy who trolled about him choking at the elections!



The scumbag in the Oval Office and his 63 million voters have made clear what they think of immigrants, especially the brown-skinned from shithole countries.  So, we will leave them alone and look at what trump's counterpart on the other side--Bernie Sanders--has said.  That should be interesting, right?

Here, Sanders is railing against immigrants in 2007.  Note that he is not merely against those who came here without documentation. Sanders was angry at the guest workers who come here legally!  Make sure you wait until you hear him rant about the millions who will come here and lower the wages for middle-class Americans!



In 2013, he calmly and forcefully asked whether it is really true that we can't find American workers to do the jobs that immigrant workers are doing.



I tell ya, Sanders was not that different from trump in his populism.  There is a huge difference between the two though--Sanders is a decent human being, whereas trump is the lowliest scumbag in public life.

The US has never honestly figured out how it should deal with immigration--legal and otherwise.  Instead of honest conversations and policy, politicians treat the topic as an opportunity for votes, depending on which way the wind blows.  Perhaps the best evidence for this is from the Republican debate in 1980, between the two candidates in the primaries--Reagan and Bush.




This is not a topic that comes up in most other countries.  After all, how many countries have even been open to immigration?  The US, more than say Canada or Australia, has always been a land of immigrants.  With the exception of Native Americans, we are all--including the damn politicians--immigrants or descendants of immigrants.  Yet, the country can't seem to figure out what to do with immigration?  "Sad!" as the scumbag often notes in his tweets!

Source

The frightful adjunct economy

The US is embarking on a potentially disastrous experiment--to create freelance work without a social safety net.  This does not bode well.

Freelancers are not new to the higher education industry--over the years, the system has been increasingly employing part-timers, whom we refer to as "adjuncts."  In large metropolitan areas like Los Angeles, it is not uncommon for adjuncts to teach classes at more than one college.  Given the time they spend traveling from home to different campuses, they are also referred to as "road scholars."

Life as an adjunct is tough.  The additional income is great if one already has a full-time job.  This was my story when I started teaching in California.  But, without a full-time job, and relying on adjunct positions means they have to keep the departments and students happy--else, they lose the gig.  And, if budgets tighten up, they are the first ones to be let go.

When they lose their jobs, the former adjunct professors scramble for health insurance--this is a benefit that is tied to the job.  The lack of a national health plan was addressed only a few years ago with Obamacare, which might be gone really soon.  Retirement and disability benefits are also benefits that full-timers have.

This adjunct thing has not worked out well in higher education.  And now we are taking this disastrous approach to the rest of the economy, via Uber, and AirBnB, and ...

The industry that drove America’s rise in the nineteenth century was often inhumane. The twentieth-century corrective—a corporate workplace of rules, hierarchies, collective bargaining, triplicate forms—brought its own unfairnesses. Gigging reflects the endlessly personalizable values of our own era, but its social effects, untried by time, remain uncertain.

Remains uncertain is an understatement.

Normally, every efficiency has a winner and a loser. A service like Uber benefits the rider, who’s saving on the taxi fare she might otherwise pay, but makes drivers’ earnings less stable. Airbnb has made travel more affordable for people who wince at the bill of a decent hotel, yet it also means that tourism spending doesn’t make its way directly to the usual armies of full-time employees: housekeepers, bellhops, cooks.

We are rushing to decimate full-time work, and replacing that with part-time "gigs" that do not offer benefits and in a society with a frayed and tattered safety net.  All these are profound political transformations, but without the needed political discussions!

A century ago, liberalism was a systems-building philosophy. Its revelation was that society, left alone, tended toward entropy and extremes, not because people were inherently awful but because they thought locally. You wanted a decent life for your family and the families that you knew. You did not—could not—make every personal choice with an eye to the fates of people in some unknown factory. But, even if individuals couldn’t deal with the big picture, early-twentieth-century liberals saw, a larger entity such as government could. This way of thinking brought us the New Deal and “Ask not what your country can do for you.” Its ultimate rejection brought us customized life paths, heroic entrepreneurship, and maybe even Instagram performance. We are now back to the politics of the particular.
For gigging companies, that shift means a constant struggle against a legacy of systemic control, with legal squabbles like the one in New York. Regulation is government’s usual tool for blunting adverse consequences, but most sharing platforms gain their competitive edge by skirting its requirements. Uber and Lyft avoid taxi rules that fix rates and cap the supply on the road. Handy saves on overtime and benefits by categorizing workers as contractors.

 I don't understand how people think that all these will work out without serious discussions on a new social contract that reflects the rapidly changing 21st century conditions.  A new social contract will require the mega-mega-rich to spare a few dimes, but the GOP is only keen on giving them more tax breaks!

If all that doesn't worry one, there is more:

We are, all of us, in inescapable thrall to one of the handful of American technology companies that now dominate much of the global economy. I speak, of course, of my old friends the Frightful Five: Amazon, Apple, Facebook, Microsoft and Alphabet, the parent company of Google.

Enjoy, for now, because "It’s too late to escape."

Captain Goodhope is dead. Long live General Malaise!

I first came across the idea of "social contract" in graduate school.  "Aha!"  I realized that my teenage infatuations with various anti-social political elements were nothing but a result of my frustrations with the existing atrocious social contract and a desire to contribute to rewriting it.

In recent years, as the global economic geography began to tear up the fabric of the fabled middle-class life in America, I started yelling again my frustrations with the political system that was seemingly uninterested in rewriting the social contract.  Of course, nobody listens to me.

The frustrations got worse when the political faces for the rewriting came in the form of Bernie Sanders and the fascist!  Major Buzzkill got promoted to General Malaise ;)

The next best thing then is to wallow in excellent company.  Like with Laura Tyson and Anu Madgavkar.

The consequences of such failures are far-reaching. Stagnating or falling real incomes do not just act as a brake on consumption demand and GDP growth; they also fuel social and political discontent, as citizens lose confidence in existing economic structures.

Yep. And, unlike me, those two are awesomely qualified people to say that.

MGI surveys in France, the United Kingdom, and the US have found that people whose incomes are not growing, and who do not anticipate an improvement, tend to view trade and immigration much more negatively than those who are experiencing or foresee gains. The Brexit vote in the UK and bipartisan opposition to trade agreements in the US are clear signs of this.

In case you are wondering about MGI: It ain't any socialist think-tank!  McKinsey Global Institute is as pro-capitalist as it can get, as I am sure this guy would attest to.

Another expert--this time a male, for a change--who is a columnist at another pro-capitalist publication, The Economist, also states the same ideas, using different words:

I think we are headed for a really important era in economic history. The Industrial Revolution is a pretty good guide of what that will look like. There will have to be a societal negotiation for how to share the gains from growth. That process will be long and drawn out. It will involve intense ideological conflict, and history suggests that a lot will go wrong.

A lot will go wrong?  Looks like I have company in the buzzkill department ;)

 Bernie Sanders and Donald Trump are two sides of the beginning of this social evolution. Bernie is pushing along the direction of, "let’s distribute more." Trump is pushing along a related direction which is, "let’s exclude others who are not like us."

I tell ya, misery loves (excellent) company!

So, what kind of challenging political/ideological issues can we expect in the near future?

What comes next would be higher wage subsidies and in-kind benefits, like tuition-free college or subsidized health care. But it’s coming, and the debate will be: If we’re going to pay people to do work that isn’t necessary, who do we let into the system? Who is allowed to benefit?

If only we the people could talk about all these as responsible adults.  Oh well, democracy ain't perfect!

Those damn Chinese and Indians! Vietnamese and Bangladeshis too?

Evan Osnos--remember him?--writes about tagging along with Zhang Yuanan, who had been sent to the GOP convention by Caixin Media, a Chinese news organization, in order to understand Trump and his blame-China rhetoric.  Osnos writes:

Zhang stopped at a table of T-shirts that spelled out “TRUMP” in rhinestones. The seller was wearing an American-flag cowboy hat and an American-flag shirt with the sleeves torn off. Zhang asked, “Do you know where they are made?” The seller said the rhinestones came from Korea, but he wasn’t sure about the shirts. “O.K., thank you,” she said, and studied the tags. Made in Haiti.

Of course, very few trinkets carry the Made in America tags.

She mused, “Why do you think Americans want those low-end manufacturing jobs to come back here?” In China people don’t exactly love their jobs making peppermint tins. “China wants to upgrade its manufacturing chain,” she said. ...
“It’s true—a lot of manufacturing jobs are now in China.” What mystified her was Trump’s promise to bring the jobs back. “If it’s not China, it’s still not going to be the U.S. It’s going to be in Vietnam and other countries.”

As I have blogged often, like here, if only the Trump and Bernie people would have understood that!

If the dynamics of economic geography are so basic, then why are the millions of Trump and Bernie people angry at China and India for stealing "our" jobs?

Greg Mankiw tackles that in his column at the NY Times.

According to a CBS News/New York Times poll conducted last month, only 35 percent of registered voters thought the United States gained from globalization, while 55 percent thought it lost.

Even as we enjoy the low, low price of everything, on top of the free email, Faccebook, and everything else, only a third think the US gained from the integration with the global economy?  What gives?

As Mr. Mansfield and Ms. Mutz put it, “trade preferences are driven less by economic considerations and more by an individual’s psychological worldview.”

It is not about the evidence--like a tshirt for $4.99--but the "feelings" that drive this anger.  But, Trump's base is mostly angry white men, right?  How come the lower middle class blacks and Latino voters aren't that angry then?  And how do we understand the Democratic Party's vote-base?  Reihan Salam notes:

Native-born black men, in contrast, might compare their circumstances favorably with those of their own fathers, who often faced intense racial discrimination. Similarly, Latino immigrants of modest means generally believe themselves to be better off than they would have been in their native countries. That’s no small thing. In this sense, at least, upwardly mobile working-class blacks and Latinos have more in common with upwardly mobile college-educated whites than they do with working-class whites. And in this sense, at least, the fact that the Democratic Party is now an alliance of college-educated whites and working-class minority voters makes a certain kind of sense.

So, any ray of sunshine in all these?  Back to Mankiw:

The more years of schooling people have, the more likely they are to reject anti-globalization attitudes.

Oh, ok.  But, then he also adds this:

In the long run, therefore, there is reason for optimism. As society slowly becomes more educated from generation to generation, the general public’s attitudes toward globalization should move toward the experts’.
The short run in which we find ourselves now, however, is another story.

Oh yeah. Of course!  It is consistent with the wonderful line in economic thinking: In the long run, we are all dead! ;)

Is the middle-class American Dream dead?

"How's the US economy?" asked an old high school friend.  That is one of the questions he asks me every time we meet.  I suppose there is a professional interest too for him--his executive career is tied to the outsourced back-office operations of a US-based financial firm.

"The economy has definitely picked up" I replied.  And added the commentary that is not new in this blog: "but, the middle-class jobs are not there, which is a big problem."

A couple of days later, it was a similar question from a couple and I replayed my reply.  I continued with "my favorite examples are Facebook and WhatsApp.  They have created billions of dollars, but next to nothing in terms of jobs."

The American model that dominates our thinking is the experience for two generations from the early 1940s.  With a high school diploma, one clocked in and clocked out at work and was assured of a successful middle-class life.  Now, the US and the world are full of வேலையில்லா பட்டதாரிகள் (unemployed college graduates,) as an autorickshaw driver commented two days ago.

What happened?

Offshoring and automation happened.  The old middle class model has been obliterated.

Yes, the stock market is soaring, the unemployment rate is finally retreating after the Great Recession and the economy added 321,000 jobs last month. But all that growth has done nothing to boost pay for the typical American worker. Average wages haven’t risen over the last year, after adjusting for inflation. Real household median income is still lower than it was when the recession ended.
Make no mistake: The American middle class is in trouble.

I have been delivering this bottom-line of the middle class in trouble for a number of years now.  But, hey, who cares about what I say, right?  So, will let some other person say that instead!

Millions of American jobs disappeared during the 1990, 2001 and 2008 recessions. That’s what happens in recessions. But for decades after World War II, lost jobs came back when the economy picked up again. These times, they didn’t. And it was a particular sort of job that disappeared permanently in those downturns, economists from Duke University and the University of British Columbia have found: jobs that companies could easily outsource overseas or replace with a machine.
Economists call those jobs “middle-skill” jobs. They include a lot of factory work — the country is down about 5.5 million manufacturing jobs since 1990, according to the Labor Department — but also a lot of clerical and sales tasks that can be handled easily from a country where workers make a fraction of what they make here.

The sophistication in automation, which seems to have a Moore's Law equivalent of its own with the automation getting better and better every single day, means that there will be lesser and lesser demand for the "middle-skill" labor.  The American middle class model is doomed.  I don't see a way out of this at all.

Which is also why I increasingly find it very, very difficult to deal with students--at my university, they typically come from lower-middle-class and lower-income backgrounds, with the hope and promise that a college diploma will vault them into the prosperous lives promised to Americans.  If I give them my take along the lines of this and many other posts at this blog, I will not be even a little bit encouraging.  On the other hand, not telling them means wilful concealment of the truth as I see it.  Hopefully, some read this blog and the warning:

Even if they all earned degrees, who would hire them?

My life as a middle-class academic ... is one gross lie!

Back when I was a kid, I gathered from family conversations that my people in Pattamadai and Sengottai were rich.  Which confused me because I didn't see any evidence of that wealth.  At our home, heck, we didn't even have a fridge because we couldn't afford one.  The old beaten up car had already been sold and my father bicycled to the store even though he was a part of the upper management in the company town.  "Rich, my ass!" is what I would have said if I had known such language back then ;)

I suppose they were framing it within the contexts of Sengottai and Pattamadai and Neyveli, while my yardstick was, well, my classmates and schoolmates, some of whom had cars and scooters and bikes and, yes, refrigerators.  "Rich" is a relative concept.

Poor and poverty is easy to define, but once past the abject poverty, are we poor or rich?  I, therefore, settled on identifying my family as "middle class." Sometimes I said "upper-middle class."  Of course, now I know better, but wisdom is always a day late!

Who might be the middle-class in India now?  A fairly straightforward question to ask, right?  The older I get, even simple questions become difficult, it feels like.

The rapid growth of the Indian economy over the past three decades has led to a substantial expansion of India’s “middle class”. This has triggered a robust debate over who in India actually belongs to the “middle class,” its size, composition, and political and social behaviour.

A "robust debate" means that this is no simple question.

But even if acceptable measures and hard data could be marshalled, they would still be ill-equipped to nail down a rather elusive concept: whether Indians actually believe and behave as if they are part of the middle class. Self-identification of class status is important because it suggests the possibility that Indians may behave in ways that are actually at odds with material realities.
To investigate this, the latest Lok survey asked respondents from across the country whether they considered their family to be a “middle class” family.

"the possibility that Indians may behave in ways that are actually at odds with material realities" is an interesting phrasing that immediately signals that there is something exciting coming.  So, what is that?

To our surprise, nearly half (49 per cent) of all survey respondents believed their family is a middle class family. There was, as one would expect, great variation in responses across states. For instance, while 68 per cent of respondents in Karnataka believed their family belonged to the middle class, just 29 per cent of respondents in Madhya Pradesh felt the same. Self-identification as middle class is expectedly more prevalent among urban respondents (56 per cent) but the share of rural individuals claiming to be middle class is also remarkably high (46 per cent).

It is a surprise because:

But the extent of “middle class” identification is striking, not simply because of its size or the fact that it seems to run counter to households’ own economic realities, but also because it appears to have powerful experiential effects on respondents’ social attitudes.

If only somebody would say all these in easy to understand words, right?  Here it is:

The results show an extraordinary tendency for people to consider themselves middle class even if they are in fact very poor. The study defined the "lower" annual income bracket as those earning RS 36,000 per year or less, which works out to approximately $1.50 per day. And yet 46 percent of urban residents in that income bracket reported that their families were "middle class," as did 44 percent of those in rural areas.

That's right, folks--even those earning a buck-and-a-half a day identify themselves as middle class.

The economic well-being is a state of mind, once past that horrible, abject poverty.  You are as rich or as poor as you think you are.

Which is why we folks who are rich--yes, you and I are part of the global rich, despite what my "poor" socialist colleagues claim--feel like we are sliding down from the middle class.  After all, our frames of reference are, well, those Facebook and Wall Street people we read about, who earn gazillions.  The football coach at the university in the town where I live earns in a year twice the total amount that I hope I will be able to earn before I die!  Won't I feel poor then?  Am I not justified in thinking, believing, that I am slipping down to the category of low-income, after having lived a life of "upper-middle class?"  Woe is me!

If only!

I am one heck of a rich man.  My parents were right (dammit!)--my people were rich.  To think otherwise is the grossest of insults to the happy "middle class" that earns even as low as $1.50 a day.

Why the middle class doesn't buy Lululemon at WalMart

I am a university professor in the social sciences, and one who comes to political and economic issues mostly from the center-left.  However, unlike most people in those two camps, I do one thing quite frequently. And to many of  those people my action will certainly be offensive. Even unpardonable.

I have no problems going to WalMart and buying a few things there.  And to check my blood pressure too ;)

A few years ago, my daughter was shocked.  "But, I thought you hated WalMart?"

That was a long, long time ago.  And she had missed out on my evolution!

I disliked WalMart not because it was flooding the market with stuff that we really did not need.  It was just that a WalMart almost always immediately altered the spatial arrangement of various economic activities.  Smaller stores closed down, and the empty buildings were not only a waste but were also terrible eyesores.

But then I made my peace with it and continued to coexist.

Sometimes, even when I do not need to buy anything, as much as I might simply walk through the mall, I walk through a WalMart too.  Because, it gives me a feel for what the vast middle-class that lives on tight budgets purchase.  I get a sense of how a middle-class family with a couple of kids has to juggle the competing claims for the few dollars they have.

Over the past few months, it seemed like the crowds weren't there.  The store--the same one that I have been popping into for years--seemed less cluttered, and with fewer customers.  Some of that can be explained away by online shopping, perhaps.  But, the trend was no different at the other big box store--Target.  Could there be something?

Turns out that I was not imagining anything at all.

A couple of days ago, Slate reported with the following headline:

The Working Class Is Sinking and Dragging Walmart Down With It

Today, WSJ has this as the headline for a story on Target:

One Thing That’s Consistent at Target Lately: Fewer Customers 

If I didn't have students to interact with I might not have known about the middle-class reality.  Early in my teaching career, I was shocked to realize that most students in that class hadn't ever flown in a plane.  Not even once.  It was one hell of a reality-check for me.  Teaching at regional universities--in California and here in Oregon--I deal with demographics that are starkly different from the student population at the affluent private university where I was a graduate student.

Thus, I know students are serious about money when students tell me how relieved they are that there are no textbook expenses for my classes (though, I started going textbookless for pedagogical reasons and in order to make use of the rich materials that are for free on the web.)

And then there is the "other" America; here is a classic example--"Yoga participation grew 4.5% in 2013" but:

sales of yoga apparel were up 45%, according to Matt Powell, an analyst for SportsOneSource, a sporting-goods industry tracker.
"Everyone is wearing yoga pants, even people who aren't doing it," said Karen Score, the owner of Yoga Mandali, an independent yoga store in Saratoga Springs, N.Y.
Ms. Score, who also runs an adjoining yoga studio, is drawing up brochures for fall classes with the tag line: "Do you wear yoga pants? Why not try yoga?"
Lauren Wheeler-Woodburn estimates that she owns at least 25 pairs of yoga pants.
As a graduate student at the University of Southern California and social-media strategist, she says she wears them mostly every day, for class or to work, or just sitting at home lounging.
"I sound like the yoga pants version of a crazy cat lady," said Ms. Wheeler-Woodburn, who prefers Lululemon but dons other brands too.

Ahem, do you know how much those Lululemons cost?  No wonder she is a grad student at the same university where I earned my doctorate!

Just for the heck of it, I checked whether WalMart carries that brand.  

You guessed it correctly!

But, you can buy a yoga starter-kit.

California's PINOT

No, this teetotaler is not blogging about pinot the wine.  I concocted PINOT to refer to Progressives in Name Only Techies!  And, of course, the PINOT people go with pinot too ;)

Listening to the techie crowd, one might easily be convinced that they are one of the most progressives of the liberals in this country.   Which is how I answer a core question that is raised in this New Yorker essay on why so many San Francisco Bay area residents hate the tech industry and its people:

What’s going on in San Francisco has been called a “culture war,” and yet the values each side espouses can sound strikingly similar. Protesters like those outside Davies Hall have fought for open and eclectic urban life. They want broader social-support systems; they’re angry about the Man’s systemic abuses. These are, at least in theory, values on which tech’s pursuits rest. Techies tend to have strong feelings about immigration barriers (they’re against them), universal health care (for that), and environmentalism (a big deal). In their minds, there’s no industry more closely aligned with the quirky culture of San Francisco—so why now, after decades in the region, are they being attacked as interlopers from the wrong side of the ideological divide?

A "culture war" that is different from that other nation-wide culture war that the Republicans are maniacal about.  A war that represents the zeitgeist since the great recession began: the income and wealth inequality.

 [The tech] industry, which derives its competitive edge from efficiency, appears to be better at capital accumulation than at job creation. This is one reason, some economists think, that unemployment has remained more or less flat since 2000, even as productivity has continued to increase. An old-line company like Citigroup has some two hundred and fifty thousand employees; Facebook, which is worth more, employs about six thousand, and most tech startups are far smaller. (When WhatsApp was acquired by Facebook, for nineteen billion dollars, it had fewer than a hundred employees.) Tech has brought good jobs to San Francisco, but almost any other industry, charged with similar growth, would have brought many more.

The result: people protesting in front of those special buses that transport the tech folks back and forth, and the intense opposition to the gentrification in a city that was always known for its diversity.

The protests matter to the affluent--the affluent tech community and their financers--not in ways that make them re-think their ways and engage in more productive partnerships with the hoi polloi but to cry that they are being harassed, writes James Surowiecki in his column in the same issue!

Although the Obama years have been boom times for America’s super-rich—recent work by the economists Emmanuel Saez and Thomas Piketty showed that ninety-five per cent of income gains in the first three years of the recovery went to the top one per cent—a lot of them believe that they’re a persecuted minority. 

The old social contract that held together the rich and the rest of us has been shredded.

The well-being of the American middle class just doesn’t matter as much to companies’ bottom lines.

Which is why even though the pinot-sipping crowd might fund the Democratic Party and its candidates, well, it is not because of any old-time populist sentiments.

Even the market-friendly Democrat, Larry Summers, is worried about the tech revolution's inability to create jobs even as we experience economic growth:

If current trends continue, it could well be that a generation from now a quarter of middle-aged men will be out of work at any given moment. In such a world, more than half of men would have an out-of-work spell of more than a year at some point during their prime years. We do not yet fully know what the capacity to come back to work after such an experience will be, but the experience of men out of work for a long time because of the Great Recession is surely troubling.
So the challenge for economic policy will increasingly be generating enough work for all who need work for income, purchasing power and dignity. What will this require? The role of government was transformed to meet the needs of an industrial age by Gladstone, Bismarck and the two Roosevelts. We will need their equivalent if we are to meet the needs of the information age.

Meanwhile, the information revolution continues to gather momentum with the passing of every nanosecond.

The robots are coming. But they won't all be shiny, Apple-designed C-3PO look-alikes with middle-aged Siri brains. I believe the robot invasion will be a hodgepodge affair, with legs, propellers and wheels; robots that run the gamut from embodied android forms to robotic technologies hidden in the woodwork of our homes. ...
Will our robot future deliver massive inequality or revolutionary empowerment? Either way, 2035 will be a disruptive year.

More disruptive than now?  Shucks!  

Maybe I should start drinking; a pinot noir, please.

Are you middle class? You think you are poor? Check this out

If ever you are like me, then, well, I feel sorry for you.   Haha!

Ok, kidding aside, if ever you have doubts on your own economic standing here in the US of A, and want to figure out where exactly you fall along the income spectrum, well, take a look at this table which will tell you which income percentile you belong to.

What is, however, more interesting is the following chart (in fact, it is this chart that led me to the income percentile table too)

 

"Oh my freaking lord" is probably what you are thinking.
Being rich or poor in material terms is all relative.  Check this map of the world:

No more debutante balls for the rich

The economic divide between the rich and the rest of us is very different from the Great Gatsby of F.Scott Fitzgerald, writes Chrystia Freeland in the Atlantic.  While the inequality numbers might seem to be the same, there are plenty of differences between the two, such as this one:

To grasp the difference between today’s plutocrats and the hereditary elite, who (to use John Stuart Mill’s memorable phrase) “grow rich in their sleep,” one need merely glance at the events that now fill high-end social calendars. The debutante balls and hunts and regattas of yesteryear may not be quite obsolete, but they are headed in that direction. The real community life of the 21st-century plutocracy occurs on the international conference circuit. 

What happens in in the international conference circuit?

it has the intense, earnest atmosphere of a gathering of college summa cum laudes. This is not a group that plays hooky: the conference room is full from 9 a.m. to 6 p.m., and during coffee breaks the lawns are crowded with executives checking their BlackBerrys and iPads. ... Though the china is Sèvres and the paintings are museum quality (Marie-Josée is, after all, president of the Museum of Modern Art’s board), the dinner-table conversation would not be out of place in a graduate seminar.

And then, of course, even the latest gazillionaires like Facebook's Zuckerberg soon becomes a philanthrocapitalist:

What is notable about today’s plutocrats is that they tend to bestow their fortunes in much the same way they made them: entrepreneurially. Rather than merely donate to worthy charities or endow existing institutions (though they of course do this as well), they are using their wealth to test new ways to solve big problems. The journalists Matthew Bishop and Michael Green have dubbed the approach “philanthrocapitalism” in their book of the same name. “There is a connection between their ways of thinking as businesspeople and their ways of giving,” Bishop told me. “They are used to operating on a grand scale, and so they operate on a grand scale in their philanthropy as well. And they are doing it at a much earlier age.”

So, ... ?

America really does need many of its plutocrats. We benefit from the goods they produce and the jobs they create. And even if a growing portion of those jobs are overseas, it is better to be the home of these innovators—native and immigrant alike—than not. In today’s hypercompetitive global environment, we need a creative, dynamic super-elite more than ever.
There is also the simple fact that someone will have to pay for the improved public education and social safety net the American middle class will need in order to navigate the wrenching transformations of the global economy. (That’s not to mention the small matter of the budget deficit.) Inevitably, a lot of that money will have to come from the wealthy—after all, as the bank robbers say, that’s where the money is.
It is not much of a surprise that the plutocrats themselves oppose such analysis and consider themselves singled out, unfairly maligned, or even punished for their success. Self-interest, after all, is the mother of rationalization, and—as we have seen—many of the plutocracy’s rationalizations have more than a bit of truth to them: as a class, they are generally more hardworking and meritocratic than their forebears; their philanthropic efforts are innovative and important; and the recent losses of the American middle class have in many cases entailed gains for the rest of the world.
But if the plutocrats’ opposition to increases in their taxes and tighter regulation of their economic activities is understandable, it is also a mistake. The real threat facing the super-elite, at home and abroad, isn’t modestly higher taxes, but rather the possibility that inchoate public rage could cohere into a more concrete populist agenda

The High Cost of College

In the quarter system in which our university operates, the academic calendar has just about started ticking.  I wish my students well.  Many of them will be in college because they have often been told that a college degree is the only route for personal economic security, even if this takes them more than the four-years we normally think about (In the Oregon University System, "Just over half (53%) of bachelor’s graduates complete their degree in four years.")

Most students will be in colleges and universities across this country for this simple economic reason, and not with the idea of knowledge for the sake of knowledge. I hope to contribute to both these goals, which are often in conflict with each other.  (I might even explore related questions at an academic conference early next year)

But, in any case, all the students will come to know about one thing: the high cost of college. I am not talking about the opportunity costs, but simply the out-of-pocket costs.  At dinner, and later in emails, a friend asked the same question that Megan McArdle takes up in her blog (the title of this post was triggered by McArdle's post of the same title).  First, the question:

costs have gotten out of control. Why have tuition rates gone up so much? How does a six figure student loan burden affect a person's future? How are these costs affecting middle class families? Are middle class kids ending up at the University of Phoenix or the local community college, because they can't afford this nonsense? 

McArdle quotes Glenn Reynolds (better known as the Instapundit):

The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we'll have more middle-class people. But homeownership and college aren't causes of middle-class status, they're markers for possessing the kinds of traits -- self-discipline, the ability to defer gratification, etc. -- that let you enter, and stay, in the middle class. Subsidizing the markers doesn't produce the traits; if anything, it undermines them.

What does this mean, you ask?  McArdle writes:

In the case of higher education, the form this subsidy took was particularly pernicious:  student loans. 

Ok, so let us see ... government notices that successful middle class existence seems to be neatly correlated with college education. So, why not then facilitate college going in order to help a lot more Americans realize that American Dream?  As with many noble ideas, there are unintended consequences.  Or, as we learnt quite early enough in urban planning, the road to hell is paved with good intentions :(

In the past, college degrees conferred higher incomes on those who earned them.  But almost all of that surplus went to the student rather than the college, because aside from a small number of extremely affluent families, the students were young and did not have that much cash.  If colleges wanted to expand their market, college tuition was constrained to what an average student, or their family, could pay.

Introducing subsidized loans into the picture allowed students to monetize that future income now.  It's hardly surprising that colleges began to claim more and more of the surplus created by their college degree.  Think about it this way:  if colleges create an extra million in lifetime salary, you're theoretically better off if you pay them the discounted present value of $999,999 in order to earn that extra million.

Or, in other words, government subsidies and loans have become a way to transfer monies from taxpayers to colleges--and not to students!  Will this continue for long?  Even in the new world after the Great Recession?

$1 million is close to the lifetime value of a college degree (it's actually about $1.4 million), and colleges are getting better at extracting quite a lot of that value for themselves.  And I expect that trend to continue for a while, until either the political will for the program is overwhelmed by the side effects (the diploma mills add little value, and burden students with high loans), or the middle class simply revolts, and decides the risk and the higher tuition aren't worth the benefit.  The present value of an extra $1.4 million is well over a quarter of a million dollars. 

The ultimate irony is this: most of the employees of colleges and universities--public and private alike--are middle class folks.  So, we are the ones perpetuating this and making lives increasingly difficult even for our own children and grandchildren?  Sounds bizarre, right?

The disappearing middle class

I will outsource this to James Fallows, who is quoting a German executive who, get this, was an Indian by birth--born in Madras (Chennai) ... aahh, the circular universe we will live in... the name of this executive, Bharat Balasubramanian, is such a typical Tamil brahmin name that maybe dad will tell me that he is some nth cousin or soemthing :)

"I will state that there will be a polarization of society here in the United States. People who are using their brains are moving up. Then you have another part of society that is doing services. These services will not be paid well. But you would need services. You would need restaurants, you would need cooks, you would need drivers et cetera. You will be losing your middle class.

"This I would not see in the same fashion in Europe, because the manufacturing base there today can compete anywhere, anytime with China or India. Because their productivity and skill sets more than offset their higher costs. You don't see this everywhere, but it's Germany, it's France, it's Sweden, it's Austria, it's Switzerland.... So I feel Europe still will have a middle level of people. They also have people who are very rich, they also have people doing services. But there is a balance. I don't see the balance here in the US."

The American Dream ... is slipping away?

In his guest viewpoint, James Newton raises a number of debatable arguments regarding incomes in the private and public sectors, and in the teaching profession. 

To a large extent, the issues that Newton raises are a reflection of the rapidly changing economic structure, here in the United States and elsewhere.  Until perhaps the final two decades of the 20^th century, the American economic structure provided enough and more opportunities for the semi-skilled and the unskilled, also, to earn decent incomes, and this resulted in the much cherished “middle class.” 

However, as economic opportunities opened up initially to tens of millions in South Korea, Taiwan, and Singapore, and later on to hundreds of millions in China, India, and elsewhere, we have simultaneously witnessed a rapid decrease in the ability of semi-skilled and unskilled Americans to realize that middle class dream. 

It is no coincidence that the heyday of the American middle class correlated with a vast majority of humans on Earth living in horrible economic conditions.  It is not that the American society systematically kept the millions in Asia poor—it simply was the effects of the closed and tightly controlled economic structure and policies in most of the less developed countries that had gained independence from their colonial masters after the end of World War II. 

The world is now far less poorer because of phenomenal improvements elsewhere, which have also been triggered by countries opening up their societies to the outside world.  But, this also means that the American middle class is now under severe economic stress.  This is one of the side effects of hundreds of millions of Asians, and hopefully Africans too in the near future, rising above poverty. 

As a recent article in the Economist magazine notes, the result here in the US has been the loss of “manufacturing and number-crunching jobs that used to pay handsomely."  The article adds that the fading union power has been the effect of such occupational shifts. 

Newton argues that unionization in the public sector has been able to effectively counter this and, therefore, he contends that the public sector looks overpaid only because the “working class” in the private sector is underpaid.  But, unionization in the private sector will not prevent the occupational shifts that are bound to increase as economic growth and development further diffuse across the geographies of Asia and Africa.  Of course, the occupational shifts can be prevented by partially closing our economy from competition.  While such a strategy might deliver short-term results, it will cause long-term damages.

Finally, about the teaching profession itself, on which Newton builds his arguments.  Rare is the day that I do not think about the earnings that I have “lost” by giving up my education and training in electrical engineering, to be a professor in a highly resource-starved university system in a state where budget deficits seem to be permanent. 

But, in the history of humans, teaching has never been as lucrative a profession as it currently is.  While the teaching profession has always been highly respected practically anywhere on the planet, those positive sentiments did not always translate to comfortable lifestyles for teachers.  The economic fortunes of teachers—“gurus”—in the old India, for instance, depended on favors from kings and wealthy merchants.  And, it is doubtful whether teachers of yore could have freely expressed their opinions, particularly outside their “classroom,” without a fear of having their heads chopped off. 

Perhaps Newton might argue that this was all a result of unionization of teachers.  But, this is merely a result of the liberal democratic societies in which a good proportion of humans live.  After all, even now, how many Chinese or Saudi Arabian faculty members can freely write op-eds critiquing their government or leaders without worrying about getting thrown in jail, or worse?

At the end of it all, as concerned citizens, we have a responsibility to worry about the increasingly uncertain economic futures that lie ahead for the younger generations who also dream about leading successful American middle class lives.  We ought to worry that our elected leaders do not seem to care that unemployment continues to be high.  But, unionization in the private sector is not sufficient to ensure a continuation of the idea of the American Dream.

The rise of the middle class

Every time I visit India, I am simply amazed at the sheer number of people who have transitioned into a middle class life.

(Though, it equally depresses me that there are millions who are "slumdogs")

So, reading the following in the Economist is not a surprise to me:

By the 1960s they comprised just under a third of the world's population. Nowadays the chance that you are a memeber yourself is high—57% of the globe count as middle class, according to Surjit Bhalla, an Indian economist.