The Real Solutions Are Also the Harder Solutions

My initial essay on how living standards have changed has drawn three responses, from Brink Lindsey, Richard Reeves, and Jared Bernstein. All three are valuable expansions upon the question of what it means to say that living standards have changed. But since Bernstein is the most critical, I’ll start by responding to his points.

Bernstein primarily takes issue with two aspects of my essay: the implication he detects that therefore we should not care about inequality; and my assertion that median income statistics are a fairly impoverished measure of overall well-being. On the first, I can only plead that, while I have no doubt he read that implication in my essay, the writer did not write it. It is true, however, that I have written in the past that I do not care about inequality qua inequality; it does not bother me at all whether a billionaire has a private jet, if the poor have all the opportunities they need for a high-quality life, and conversely, I would not be satisfied with a society that had perfectly equal distribution of long working hours and substantial misery.

Ah, inequality wonks will say, but this is disingenuous. The object is not the equal distribution of misery, but the equal distribution of plenty, and it is unconscionable that poor children drop out of high school while our billionaire rides around his plane. On this I would be inclined to agree, if the two were somehow causally linked. But I have not been shown any compelling evidence that they are.

Whenever someone brings up the wide and growing quantity of material possessions available even to the poor, it is inevitable that someone else will say “But poor people cannot buy a house in a safe neighborhood with a good school district! Few of them go to college! They have worse health outcomes!” Access to high quality food like fresh produce used to also appear on this list, until it turned out that food deserts weren’t actually so barren, and the proximity of supermarkets had no measurable impact on obesity.

I am not going to argue that the poor and near-poor actually have it really great. They don’t. They are, as Orwell wrote of coal miners in 1930s Britain, “harassed, bored, and miserable.” I am going to argue, rather, that the numbers do not tell the tale; for that, you have to look at particulars. By the numbers, the Duggars were undoubtedly living in poverty before they got their hit television show, with three bedrooms for fourteen children. By the numbers, many religious families like them are still living below the poverty line. But no one, except perhaps Planned Parenthood, is going to view this as a social problem in urgent need of a policy solution, because despite their low level of consumption and lack of access to good public schools, their lives have always conspicuously lacked all the things we think are bad about being poor. Or as an academic friend likes to joke, he spent years living in a brutalist building filled with families below the poverty line, and singles whose employment prospects were completely unknown—but he never minded, because really, graduate student housing is a good place to meet people.

It is impossible to list all the ways in which poor people have it worse than the middle class, but here are the ones I think are most salient:

  1. The benefits bureaucracy controls their lives. Middle class people have smiling HR reps to make sure they fill out their insurance and direct deposit paperwork correctly. The poor have an overwhelmed and frequently indifferent bureaucracy in which no one is really accountable for mistakes. Those who subsist entirely or partially on benefits are constant supplicants to the bureaucrats who liberally festoon their lives with red tape.
  2. High crime. The poor live in high-crime neighborhoods, and are therefore at higher risk than the middle class of having what little they own taken away from them by criminals. They’re also at higher risk of violent assault.
  3. The schools are terrible. Graduation rates for high-poverty schools are dismal, and the kids who attend consequently have sharply limited prospects for employment.
  4. The ever-present risk of financial crisis. When your budget is very tight, small emergencies can balloon into big disasters. An unexpected car repair may mean the electricity is turned off. Those who have access to credit to cover the shortfalls frequently find themselves trapped in a vicious cycle of high-interest loans.
  5. Their work is unstable, unpleasant, physically demanding, and heavily monitored. Go to an inner-city hospital, or another facility that provides service to the poor and working class, and you’ll see a lot of people asking for doctor’s notes, including people who are there for conditions that don’t actually require any treatment beyond bed rest, because their employer requires that they prove they were actually sick. A middle class person whose employer demanded documentary proof that he really had the flu would be outraged.
  6. Fragile families. Single motherhood is the dominant family pattern among high-school dropouts, and it is becoming dominant among every demographic group except the college educated. One hardly needs to enumerate all the reasons this makes the lives of the poor harder: it divides earnings across two households, rather than concentrating it on one; it means parents are stretched tight; and means that children are competing for resources with their father’s other children by different women. The hopeful notion that some sort of alternative family structure might be arranged around extended families was always pretty naïve—two-parent households also have extended families, and in fact they have two of them. But at this point, those decades of hope have been fairly obviously dashed.
  7. Incarceration is concentrated among the poor. Incarceration shatters those already troubled families, depriving children of parents, and adults of spouses, siblings, and children. It leaves less money for kids, and makes it hard to find decent employment once you get out. And we haven’t even counted the horrors of prison itself.
  8. The police as a menacing presence. This is particularly true of minorities living in cities, of course, but poor people of all races are more likely to experience the police as a hostile force aimed at keeping them in line, or exploiting them for petty fines, rather than the nice folks in blue who protect them.
  9. Neighborhoods. The homes of the poor have all the modern conveniences—toilets and hot water taps, central heating and electricity, refrigerators and stoves and microwaves. But they are located in places with few amenities, the aforementioned high crime and terrible schools, and all sorts of minor nuisances that decrease quality of life for the residents, from litter to graffiti.
  10.  Transportation. Cheap cars are unreliable, and in a country that is mostly car-dependent, this means that the poor often end up with higher repair bills than the more affluent (unless those people were crazy enough to buy a sporty-looking luxury car).
  11. Social exclusion. As Bernstein aptly notes, we do not compare ourselves to far-off people outside our society, which is why you do not feel wealthy beyond dreams of avarice, despite the fact that you enjoy many times the wealth and opportunity available to a Tanzanian subsistence farmer. Adam Smith summed this up very well more than two centuries ago: “A linen shirt … is, strictly speaking, not a necessary of life. The Greeks and Romans lived, I suppose, very comfortably though they had no linen. But in the present times, through the greater part of Europe, a creditable day-labourer would be ashamed to appear in public without a linen shirt, the want of which would be supposed to denote that disgraceful degree of poverty which, it is presumed, nobody can well fall into without extreme bad conduct.” The lower relative quality of their material possessions lowers their status in the eyes of others, and the poor are very well aware of this. So even if they have very good things by any objective standard, the fact that those things are not as nice or plentiful as the things most other Americans have makes them unhappy.
  12. Health care. Obamacare extended Medicaid to millions, but many doctors refuse to take it because of the low reimbursements. Moreover, even a small medical or dental bill can be catastrophic if you have very little income. And of course, many people still do not have Medicaid, either because they live in states that turned down the expansion, or because they are illegal immigrants.

All of these things are indisputably true. What I think is disputable is whether we can make them better by forcing our billionaire to sell his jet.

Imagine that we sold the jet. What would we do with the money? Improve the schools? Oceans of money have been poured into poor urban school districts without showing up in the form of higher graduation rates. Lower crime? The only way we know how to do that through direct spending is by putting more police on the streets, which would decrease crime, but also increase the feeling of being besieged by the police. More pay for the same unpleasant job would still leave you with an unpleasant job. Higher pay will not fix broken families. Nor does it seem likely that our process-oriented legal system is going to eliminate the bureaucratic red tape at any time in the near future.

A simple transfer, or expenditure on higher social services, would solve a few of the problems on this list: it would buy better transportation, certainly, and ease some of the budget crises. But even something that seems relatively easy, like improving health care outcomes, turns out to be harder than it looks, because socioeconomic status is correlated with health care outcomes even in places, like the British Civil Service, where everyone gets their health care from the same program.

It seems unlikely that any feasible system is going to make the poor indistinguishable from the middle class; status is conveyed by a thousand signals, and East African Plains Apes, primates that we are, will probably continue to avidly look for those signals.

If I may pull back to 30,000 feet for a moment (pun not necessarily intended, but not much regretted, either), the Problem of the Jet is that what works for an individual does not work for a society. You frequently see this in discussions of trade, where people inappropriately generalize from the household (if I’m selling more than I consume, that’s a great thing!) to the level of a nation (… and therefore, we should always want to run trade surpluses).

At an individual level we absolutely can use money to fix most of these problems. If we sold the jet, and gave the money to, say, 100 people, those people would suddenly be able to afford homes in better neighborhoods with better schools, use the best doctors in their city, bump up their consumption to a higher status level, escape the government bureaucracy, and so forth.

But at a social level, the calculation is much different. If we raise the incomes of the bottom 20%, while reducing the incomes of the top 20%, but do not increase the supply of housing, then the bottom 20% will still be living in much the same neighborhoods with much the same problems. (I know what you’re going to say, but surprisingly, crime is not actually as correlated with employment, or by implication absolute income, as you’d think.) They cannot all go to see the best doctors in the city, a privilege which would probably remain largely to the upper middle class, since even in a socialized system “having doctors in your social circle” helps determine which doctors you can see. The people at the bottom of the income and employment scale are still going to have the worst jobs, the least stuff, and the lowest social status.

As we found in the 1960s, government is pretty good at solving simple “stuff deficits.” When people are in absolute rather than relative want of goods, taking money from the well off and giving it to those who are going without will basically fix the problem, which is why America no longer has a problem with malnourishment. Unless you weirdly try to redefine the term to include eating too much.

To put it another way, in the 1960s, we were frequently trying to solve problems in which goods were abundant, but the distribution left some people without enough. Now we’re often trying to solve a very different problem—the major issue with housing for the poor is not that it is virtually uninhabitable, but that it’s in a bad location. Unless we increase the number of houses in good locations, redistribution won’t actually change anything. Relative wants, rather than absolute wants, are hard to fix by flattening the inequality curve.

This is not to say that the problems of financially strapped Americans are not problems, or that we should not try to fix them. What I am saying is that these problems are not caused by private jets and billionaires buying islands. They are caused by some combination of insufficient social capital and by bad policy.

The bad policy we can and should fix. We should focus on the kind of crime-reduction policies that Mark Kleiman talks about in his brilliant book, When Brute Force Fails, including exploring alternatives to incarceration and looking for ways to make people with felony convictions more employable. We should be using the power of randomized controlled trials to improve the educational system. We should change the zoning laws that herd the poor into high-poverty neighborhoods, often far from the best employment opportunities. We should make sure that no child is too hungry or sick to learn. We should have a health care system that preserves market incentives while shielding people from total financial catastrophe. If we can find an early childhood education program that actually scales, we should offer it to kids whose parents are unable to provide the sort of high-intensity parenting offered by the middle class. We should emphatically not use the law enforcement system as a piggy-bank for cash-strapped local governments.

We should of course also make sure that kids who could benefit from a college education can get one. But we should also think hard about the steady rise of credentialing barriers to good employment and entrepreneurship—Cato readers will have already heard much about the insidious creep of occupational licensing, but I’d also like some attention paid to the increasing insistence on college degrees for jobs, public and private, that used to be capably performed by people whose education stopped at high school. These function as unnecessary, and expensive, hurdles for people who are good workers, but bad at sitting still in a classroom for eight hours a day.

I submit that these policy changes are far more important than any change we could conceivably make by taking away all the private jets in the country. The problem is that they are harder to talk about. They require, at least in my case, a 2,500 word essay to elaborate, rather than a simple chart.

Also from this issue

Lead Essay

  • Megan McArdle makes the complicated case for optimism: Present-day Americans generally enjoy lives that at a comparable age their grandparents could only dream about. Technology has turned many onerous chores into trivial ones. It entertains us and supplies us with a wide variety of consumer goods. We spend more on health care, but it’s better care, and it’s also an accomplishment that we can spend so much on it at all. Yet many problems remain: Life is good for college graduates, but for others it can be increasingly hard. Mass incarceration raises questions about how good prisoners’ lives can possibly be. And family and community breakdown seems by many measures all too great a problem. As a result, McArdle’s optimism is decidedly guarded.

Response Essays

  • Brink Lindsey argues that improvements to our standard of living have been real and easily measured. But there have been significant areas of decline as well, and these, while real, are often harder to measure: We can measure increased life expectancies, or declines in the crime rate, but it’s harder to measure the alienation that comes from lost social status, or the long-term effects of pervasive single parenthood, or the fact that fewer and fewer men of working age are staying in the workforce. These negative trends are mutually reinforcing, he warns, and they may represent a growing threat to future generations, no matter how much life may improve by some metrics.

  • Jared Bernstein argues that the less privileged take no comfort from improving living standards. The privileged of today are the relevant comparison cohort, and until the less privileged are comparable in wealth, liberty, and dignity, they have every right to complain. People should - and indeed do - think about inequality in relative terms, and in present-day ones. They are rightly uninterested in historical comparisons. And they are correct to complain when the wealthy get still further ahead than they have. Absolute progress over time is real, but it’s also irrelevant in any conversation that values equality.

  • Richard V. Reeves finds it “offensive” to read that poverty has been eradicated in advanced countries. Poverty is always relative, he writes; it otherwise has no meaning at all. And relative poverty we still certainly have. The relative poverty of Americans – even those who are affluent by historical standards – has had real and indeed devastating effects on their lives. The gap continues to grow between rich and poor, and although our economic development is not to be regretted, its ill effects are certainly to be mitigated through policies that directly benefit those who are paying its greatest price.