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View from the economic top

April 8, 2021 Category: FeaturedLongPurpose
 If there is a mythology around America being a classless, merit-based society, the pandemic has laid waste to this oft-told tale too.

If you are on the upside of the city’s median annual household income of almost $46,116 and you have a bachelor’s degree along with highly sought-after skills — your economic life looks like this. Your job, if it were ever sick, has recovered. If you received a stimulus check, you could save it. You kept your exposure to COVID low through social distancing and the abundant use of delivery services. If you have a mortgage, the value of your house has ballooned. If you rent, your landlord isn’t threatening to evict you. Your stock portfolio is blooming too.

In short, for you the COVID-19 economic crisis barely hurt and has, the experts contend, essentially ended.

And this, according to researchers like Richard V. Reeves of the Brookings Institute, is an illustration of what really ails our country. Reeves said the real trouble is not the separation between the top 1% and the 99%. The problem is the growing schism between the upper middle class and everyone below that. The two groups live distinctly different lives.

For low-wage workers, COIVD pushed them into depression-era unemployment levels or forced them to work in unsafe positions. For top wage earners, there has been a different pandemic economic story — one more of inconvenience than crisis.

“The recession is nearly over for high-wage workers, but low-wage workers are no more than half-recovered,” said John Friedman, co-director of Opportunity Insights. Instead, low-wage workers are struggling with health issues, vaccine accessibility, utility debt, food insecurity, evictions — all which have been well-documented.

Philadelphia has about 580,665 private sector jobs — the majority of which pay below $35,000. But let’s focus on the employees with the 17% of jobs that pay above $100,000.

Reeves called this group the “favored fifth.”

They have an average household income of $200,000 and have experienced a pretax income gain of over $4 trillion since 1979 versus $3 trillion for everyone else. In an 2017 essay for the New York Times, Reeves also wrote, “The rhetoric of ‘We are the 99 percent’ has in fact been dangerously self-serving, allowing people with healthy six-figure incomes to convince themselves that they are somehow in the same economic boat as ordinary Americans, and that it is just the so-called super rich who are to blame for inequality.”

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Look deeper into the top 20% of earners in Philadelphia and you see an influential class of decision-makers in every field whose outlooks impact the lower 80%.

Look deeper into the top 20% of earners in Philadelphia and you see an influential class of decision-makers in every field whose outlooks impact the lower 80%. One problem with this is the most influential are self-segregating in their personal practices in a way that widens inequality.

Economist Enrico Moretti calls this phenomenon the Great Divergence — where Americans are sorting themselves into communities, some for the highly educated and others for the less educated. “While the divide is first and foremost economic, it is now beginning to affect cultural identity, health, family stability and even politics. The sorting of highly educated Americans into some communities and less educated Americans into others tends to magnify and exacerbate all other socioeconomic differences,” Moretti wrote in his book The New Geography of Jobs.

Take, affordable housing for example.

Who doesn’t want to raise their children in safe, clean, crime-free communities with friendly like-minded neighbors and high-quality schools? The problem is a growing number of people can ill afford to live in these types of communities.

According to the Center City District, 47.5 % of Philadelphia’s center city jobs are held by commuters who live outside the city. Many of them live in communities that are replete with advantages. The problem is, these are also  communities that have also fought against building affordable housing. And you can’t discuss the lack of affordable housing in privileged communities and neighborhoods without opening the rancorous problem of exclusionary zoning which has been used to limit or halt the building of affordable housing.

Reeves argued, “The upper middle class have segregated themselves into towns and neighborhoods where the cost of living is high, mainly by using zoning rules that make it impossible for poorer people to be their neighbors and enjoy these communities’ amenities — especially good schools.”

And while zoning appears to be race-neutral, it creates enclaves of privilege that are predominantly white. Even as the country becomes more diverse, the neighborhood that the average white person resides in is 71% white, showing that the racial gap still exists.

And this divide leads to radically different points of view.

"The upper middle class is surprised by the rise of Trump. The actual middle class is surprised we’re surprised."
Richard Reeves

Take politics for example. The rise of Trump and the populist moment he has fanned has baffled many elites. “This separation of the upper middle class by income, wealth, occupation and neighborhood has created a social distance between those of us who have been prospering in recent decades, and those who are feeling left behind, angry and resentful, and more likely to vote for To-Hell-With-Them-All populist politicians,” Reeves wrote in 2016. “The upper middle class is surprised by the rise of Trump. The actual middle class is surprised we’re surprised.”

The separation also gives rise to solutions from policy elites that may not solve the problems.

For example, education is cited as the reason the upper middle class has achieved. And many programs have been designed to push postsecondary education for Black and Latinx students. It isn’t that this is a bad idea — the problem is the returns on education haven’t accrued at the same rate for all. It takes a postgraduate education for a Black family to have comparable levels of wealth to a white family with an associate’a degree or some college education. A discrepancy education proponents can resolve.

Of course, meritocracy argues that hard work and higher quality work is the key to success which, in turn, is rewarded with status and money. What it doesn’t explain  is why white households with an unemployed head have a higher net-worth than Black households with a head who is working fulltime.

Instead, if you are lucky enough to be born in the top 20%, most likely you will remain in among the favored, sheltered from some of the most wrenching economic devastations  that come about.

According to Gary Solon, a noted scholar of social mobility, “Rather than a poverty trap, there seems instead to be more stickiness at the other end: a ‘wealth trap,’ if you will,” Read more about the wealth trap here.

Generocity is one of 22 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city’s push toward economic justice.



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