Making it in America means never having to meet any poor people

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A brilliant story by David Scharfenberg in the Boston Globe recently addressed a subtle but growing issue for Boston and other cities around the country: the increasing segregation of poor and rich. Scharfenberg writes:

The surge in affluence in some areas and poverty in others has wiped out scores of mixed-income neighborhoods. In 1970, 7 in 10 families lived in these places. Now it’s just 4 in 10…

Blue- and white-collar families who once lived close enough to bump into each other in the aisles of the local hardware store or chat in the pews of the neighborhood church live in much more homogenous places now.

Low-income people can go an entire day without talking to someone who has a college degree or a job in a downtown office. And for the affluent, handing a credit card to the gas station attendant or grocery clerk may be their only weekend brush with blue-collar America.

This is an issue pretty much everywhere, as the article argues. That’s not surprising given that income inequality in this country by some measures is at its worst in nearly a century. It’s not just a matter of white and black; poor and rich just don’t live next to each other and interact the way they used to.

You don’t have to think very hard to imagine what type of impact this might have over time. In a recent post on this blog, I discussed how some economists see marriage trends significantly worsening inequality. Given that we tend to meet and marry only people of similar means and education, they argue, wealth and capital tends to get concentrated in families over time. That we are so spatially and geographically separated from one another ties this narrative together.

As you might guess, this issue is deeply personal for me. My wife and I are both from the Boston area, and recently moved back there after spending the first few years of married life in Connecticut. In the short time we were gone, property values in and around Boston seemed to have exploded. The city was becoming a hot destination, our real estate agent told us, with the biotech industry here booming, new construction changing the landscape of downtown, and Boston increasingly seen as hip and fashionable among young professionals.

We eventually got a house we liked: something with enough space and a yard, in a town with good schools, easily commutable to downtown. What came as a surprise after moving in was that our neighborhood was a lot more diverse than we expected, both ethnically and economically. On our block we’ve got both whites and blacks, both native born Americans and immigrants. Our next door neighbors include a dermatologist, an accountant, and a career social worker. To me, where we live seems like a rare vestige of class and race diversity in Boston, literally on the border between a town that is mostly white and rich, and another that is mostly poor and black.

But the funny thing about our neighborhood is that even people who have lived there for decades hadn’t actually met eachother, a fact we discovered once we went out and knocked on people’s doors to introduce ourselves. Even when we live near each other, it seems, we still don’t tend to mingle across racial, social, or economic lines.

The basic problem here isn’t just that different people aren’t meeting each other, I’d say. It’s that no one is meeting each other, at least not the way they used to. That may be because many of our social institutions have weakened or vanished altogether. From churches to bowling leagues, many of the activities and groups that so commonly tied neighbors together have lost prevalence in American society over the past generation. Meanwhile, the way we socialize has changed, with fewer people slowing down and taking a moment to actually meet in person. To use a stereotypically Boston example: donut shops used to be places where friends would meet to chat over a freshly baked donut and a coffee. But since I was a kid the institution of donut-shop-as-meeting-place has all but vanished, with most converting into pure takeout joints with little or no seating. It’s telling that one of Dunkin Donuts’ most prominent marketing images is now an illustration of people walking briskly with coffee in hand.

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The famed political scientist Robert Putnam — quoted in this particular Globe article, incidentally — calls this phenomenon “bowling alone”. I would call it the “Netflixification of America”, but the idea is the same. As a Baha’i friend of mine once explained during a discussion on why it was so hard to attract people to events, religious or otherwise: “People just don’t go to each other’s homes like they used to. They mostly just stay home.” Somewhere along the way we seem to have lost our tendency towards basic social interaction with those around us, and I sense that the dissolution of that cultural quality is playing an underappreciated role in many of the country’s burgeoning social problems.

As I wrote in the case of marriage and its effects on inequality, we too easily dismiss the way our social lives and individual choices impact society at large. Few people would disagree that the increasing segregation of rich and poor could have disastrous social consequences. But perhaps even fewer are ready to materially change their lives in an effort to push back against the trend. The first step is to recognize that it’s not supposed to be this way. In the words of Abdu’l-Baha: “The surface of the earth is one home; humanity is one family and household. Distinctions and boundaries are artificial, human.” We should not and can not let ourselves think that this is normal.

Regardless of who lives around us, we can all make an effort to make friends with people who are different. If you’re rich and well educated, this could be as simple as striking up a conversation with your dry cleaner, bus driver, or cleaning lady. From there, maybe even invite some of these people over to your house, go out for a movie, meet for a coffee, etc. In other words, start small. Who knows? You may end up with a friend that you never would have known otherwise, while making a small contribution towards repairing America’s frayed social fabric.

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Marriage, inequality, and the social partitioning of America

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At my first job out of college, one of my coworkers told an unforgettable anecdote about a research project he once worked on as a student. At the time he was helping an economist study marriage patterns across the US, and they needed to understand how marriage laws differed by state. So my coworker went to the library, approached the librarian, and had the following exchange:

Research assistant: “Hi. I need to find out the minimum legal age of marriage in each US state. Can you help me?”

Librarian: [Long pause, stares back suspiciously.] “She’s too young for you.”

I bring this up because a) I find this story hilarious, and b) it illustrates that economists have long been curious about how marriage patterns impact economic outcomes. A NY Times blog post from a while back summarized some of the recent research on this, specifically with a focus on income inequality. The way we commonly choose a marriage partner, it turns out, could be playing a significant role in America’s growing income divide.

From the article:

These days, an investment banker may marry another investment banker rather than a high school sweetheart, or a lawyer will marry another lawyer, or a prestigious client, rather than a secretary. Whether measured in terms of income or education, there are more so-called power couples today than in the past, one manifestation of a phenomenon known as assortative mating, or more generally the pairing of like with like…

Money and talent become clustered in high-powered, two-earner families determined to do everything possible to advance the interests of their children…

The numbers show that assortative mating really matters. One study indicated that combined family decisions on assortative mating, divorce and female labor supply accounted for about one-third of the increase in income inequality from 1960 to 2005.

This was a shock to me when I read it. Income inequality in the United States is at its worst in nearly a century. Most people seem aware of this, but how we get married is rarely one of the reasons cited for the trend. Instead, it’s the usual mix of globalization, technology, and union decline that most use to explain the growing chasm between the haves and have-nots. On occasion, smart economists highlight deliberate government actions over the past few decades, like cutting taxes on investment income or relaxing bank regulations, for the explosion of incomes at the top. But social dynamics aren’t usually part of the discussion.

Nonetheless, the finding that marriage can have such significant implications for inequality makes a great deal of sense to me personally. Back when my wife and I were new parents living in a mostly middle class Connecticut city, we had many late night, anxious conversations about the mediocre schools in our town on the one hand and the area’s stratospheric cost of private education on the other. Southern Connecticut, it turns out, is like a souped-up microcosm of America in that regard; public institutions are under fiscal pressure just like everywhere else, relegating the kids of blue collar native-born Americans and first generation immigrants to middling schools, while the area’s bankers, executives and hedge fund managers drive up the cost of living, from houses to school tuition to haircuts. As kids clump together in socially and economically-segregated schools, they’re more likely to interact with and marry those just as privileged as they are, deepening the inequality gap over generations.

What’s the solution to this vicious cycle? First, public policy can make a huge difference by improving the quality of public schools, such that rich, talented parents actually want to send their kids there, and that those kids might mix socially with their less privileged peers. As I understand it, this was a key ingredient in the post-WWII economy, one characterized by stable growth and low inequality; good public education during that time not only produced talent and raised the economy’s productivity, but it also helped maintain a flat society.

But as in many cases, public policy can’t do the job on its own. Solving a social problem as weighty and challenging as this one requires individuals and families to change how they live and interact with others. As I wrote recently on the subject of race, it’s not good enough to have character and integrity in a vacuum. If you want the issue of racism in America to improve, we will have to seek out friends, coworkers, and family members of different races, and consciously include them in our personal lives.

So it is when it comes to class and social status. Given that these days we so commonly live in sequestered little communities where our neighbors have similar incomes and similar education levels, if we actually care about the societal implications of runaway social and economic segregation in America, we can’t just sit there and wait for a solution to descend from heaven. To get out of our comfort zones and to “forcibly agitate” our lives, in the language of that aforementioned blog post, might be the only way to break the cycle.

This takes a radical change in how we live, but on an even more basic level, a major shift in how we view other human beings. Abdul-Baha, for one, asks no less of us than this:

See ye no strangers; rather see all men as friends, for love and unity come hard when ye fix your gaze on otherness. And in this new and wondrous age, the Holy Writings say that we must be at one with every people… they are not strangers, but in the family; not aliens, but friends, and to be treated as such.

That’s not easy, of course. But what’s the alternative? The problem of growing inequality and the deepening stratification of society won’t fix itself. Politicians and bureaucrats can’t be absolved of responsibility. Then again, neither can we.

What’s missing from the conversation on income inequality?

Income inequality is a hot topic these days here in the US, and for good reason: over the past generation or so, real gains in income for those at the bottom and middle of the spectrum have been practically nil, while those at the top (especially the very top) have risen rapidly. As a consequence, income inequality by some measures is at its highest levels since the 1920s.

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If income inequality has been rising for so long, why is it only recently getting so much attention? I think the main reason for the recent attention was the housing bust and financial crisis in 2008 (duh), which provided a shocking contrast between widespread home foreclosures and mass layoffs on the one hand, and generous bank bailouts on the other. But since then, we’ve had plenty of other things to keep our attention on the subject. I’m thinking the Occupy Wall Street/99% movement; the 2012 Presidential election, which forced a national dialogue on the subject; and the near-celebrity status of economist Emmanuel Saez, whose recent book has attracted huge media attention.

Within that debate, economists continue to fuss over a longstanding question: Sure, inequality is rising, but what does that mean for economic growth? Do societies in which the rich take a bigger and bigger slice find it more difficult to grow the whole pie over time?

The Washington Center for Equitable Growth has a new paper summarizing the research, both old and new, on exactly this topic. It’s a good read even if you’re not into economics, especially the overview section, which gives some nice context for this question. Among the report’s conclusions are:

Most research shows that, in the long term, inequality is negatively related to economic growth and that countries with less disparity and a larger middle class boast stronger and more stable growth. Some studies do suggest that in the short run, inequality may spur growth before hindering it over the longer term, but overall there is growing evidence that, in the long run, more equitable societies are associated with higher rates of growth.

It’s always important to differentiate between positive and normative questions in economics, and this subject is no exception. The former asks something about how the world is; the latter, how the world should be. Economists like to focus most of their time on positive issues: Does inequality constrain growth? That is an important question, and researchers and organizations which focus purely on answering it objectively and honestly are doing very important work. Nonetheless, what seems to be missing from today’s debate about inequality is a second, more normative question: If the economy continues to grow while remaining very unequal (or becoming more unequal), is that ok?

For two reasons, I’d say the answer is No (surprise!). The first reason has to do with economic theory. The second has to do with the very purpose of our lives as human beings. Continue reading

The world’s poor: Stressed, jaded, and incessantly patronized

1375849_18372716I write a lot on this blog about economists’ assumptions about human behavior, and when these assumptions are useful to understand reality and when they are not. For instance, a while back I touched on the assumption of “rationality”, which for economists has a strict mathematical definition and is needed to make certain clean, elegant microeconomic models work. Unfortunately, some people take this and other theoretical assumptions beyond their original purpose, asserting, for instance that every human action in real life must be motivated by a rational thought process all the time.

Most of us are observant enough to know that at least sometimes, human beings do not, in fact, behave rationally. Addiction is an often used as example. I’m sure you can construct a model showing how a person could behave rationally and still drink himself into oblivion. But it’s much easier simply to admit to oneself that irrational behavior exists in the world, and basic models based based on an assumption of rationality are limited.

The question is, Just how widespread is our irrationality? That’s the question asked by many behavioral economists and psychologists who’ve attempted to document and codify all sorts of irrational things that human beings tend to do. (Dan Ariely’s best seller Predictably Irrational, though a few years old now, is a great book for a summary of this line of research.) I tend to believe irrational behavior can be found almost everywhere, and understanding this can help us improve ourselves and our society. A few months back, for instance, I made the argument that certain types or consumer loans preyed on individuals’ irrationality, specifically their impulsiveness and lack of understanding of finance. The poor are prime targets, in that they may be less likely to have had some basic financial education, and are naturally more susceptible to the “Interest Free Loans!” thing and other scams, perpetuating the imaginary dream of unlimited access to money without consequences.

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Should fast food workers make $15 per hour?

I think we can all at least agree that this looks delicious

I think we can all at least agree that this looks delicious

A couple weeks ago fast food workers across the US started staging walk-outs in protest of their low wages. These workers want a “living wage”, they argue, and have targeted $15 per hour across the industry.

This story is a pretty interesting one from the point of view or economic justice and the Baha’i teachings. That’s because the demand for a higher wage forces us to ask a critical question: If the market sets wages too low for a particular group of people from the point of view of our own moral judgments, then is it right simply to mandate a higher wage?

This is a common question, especially among Baha’is and other people who seek economic security and dignity for all people. Usually, it’s asked in the context of developing countries, where wages are much, much lower than even the minimum wages here in the US and the rest of the developed world. Let’s imagine that the market pays Malaysian factory workers $2/hour and their American counterparts $20/hour. Is it morally wrong for companies to hire Malaysians at this lower wage? Does it constitute “exploitation”? Does it violate basic moral principles of fairness and justice? Should it be law that Malaysians make the same wage as Americans?

Many fair-minded, well-intentioned people believe the answer is yes to the questions above. The logic is clear: To make just $2/hour is horribly poor by the standards of developed countries, and if it would only be fair to treat everyone equally, then why not pay everyone a higher, “living” wage?

The Baha’i Holy Writings make no specific judgment on this particular issue, even though they teach that all human beings are equal in the sight of God, stand for justice in all arenas of society, and call for an eradication of extreme poverty (as well as extreme wealth). ‘Abdul-Baha did in fact hope “that laws be established, giving… workmen the necessary means of existence and security for the future”. But he also warned that “difficulties will also arise when unjustified equality is imposed”.

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The moral case for good public services

I’ve been working in New York City for the past several months (taking the train in from Connecticut), and I must say I’ve been thoroughly unimpressed. It’s not that I dislike New York in general. I used to love coming for fun when I was younger, and there are still aspects of the city that I find truly unique. The food, for one, is superb. Never mind New York’s restaurant culture; what you can often get out of the side of a truck can be equally impressive.

But the day-to-day of commuting in and out of New York has been disenchanting. The air in the city sometimes smells awful. The people hustling to and from work are often rude. My walk from the train to my office is incredibly noisy, even at 7:15 in the morning (I usually listen to a podcast or the radio, and often can’t hear what’s going on with the volume cranked up all the way). And in the summer it can be oppressively hot and humid, especially in the train station, meaning that these days I’m damp with sweat by the time I walk in the office. I can already hear myself sounding like Mister Complainy Pants here, which I’m not proud of. I realize that lots of people have uncomfortable commutes, and I often remind myself of the need to be grateful simply to be employed. But I’d be lying if I told you that New York wasn’t starting to get on my nerves.

The thing that’s become a symbol of my commute into the City, which is the whole point of this post, is the escalator at the 47th and Madison exit from Grand Central that I take every day. It’s broken, and by that I mean that it is out of commission while it undergoes renovation… a renovation that is scheduled to take up to three months.

Maintenance on the 47th and Madison escalator (left) and the private escalator that's replaced it (right)

Maintenance on the 47th and Madison escalator (left) and the private escalator that’s replaced it (right)… Unexpected symbols of public services’ slow demise

Lately I’ve been thinking a lot about this escalator (pretty lame, I know). Specifically, I wonder how many people must pass through that exit from Grand Central every day into Midtown Manhattan, and whose commutes are impacted in some small way by its unavailable status. How is it possible for this thing to be out of order for this long?

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