Friday, February 7, 2014

On social mobility: confessions of a former Yuppie

My first Bimmer
Remember Yuppies?  In the early days of demographic stratification, I was classified as a Young
Upwardly-mobile Professional – a Yuppie.  But, I am no longer young or upwardly mobile; so, I don't qualify.

My Dad was a Yuppie, too.  No one was called a Yuppie in his day; but he was young and upwardly mobile.  He was also a businessman.  Today we would call him an entrepreneur.  He and two partners each deposited $2000 in the bank and started a company. 

It was quite an accomplishment given where he started.  When I was born, he was collecting Aid toFamilies with Dependent Children (AFDC, a federal/state financial aid program).  Thank God for the safety net!

Later in life, Dad sold his business to retire.  He would never have been described as wealthy; that was not his goal.  His goal was to be secure in retirement and he achieved that. 

Dad also achieved something I never did.  He transcended his socio-economic class.  He started poor and became upper middle class.  I started upper middle class and became – well – upper middle class. 

Dad worked hard and played by the rules. 

In the context of today’s debate about social mobility, he would be a success story.  He relied on government assistance when he needed it but paid it back many times over by paying his taxes when he was economically successful. 

A Harvard study published last year indicates that there has been little change in social mobility since my Dad’s day.  Still, we are having a debate – which is bound to affect policy, the budget and, eventually, taxes – about how to help those in need move up the economic ladder.  The study pointed to geography as the most important factor in social mobility.  Areas where there was less segregation, more stable families and better education tended to have greater mobility.

Michele and her family
Yet, the debate seems to be about raising the minimum wage.  How will that provide the stable environmental factors that will enable people to move up the economic ladder?

So, I am confused.  We lionize hard working Americans and say we want to help people move up the economic ladder; but, the prescription has nothing to do with hard work.  It is to unilaterally hand more money to people for the same amount of work. 

I support the concept of a social safety net.  My Dad took advantage of it when he really needed to.  But, he succeeded perhaps more than most of his day because he worked hard and made tough choices about how to live his life and support his family.  His success was self-made.  It was not the result of the government reapportioning wealth.

Perhaps, the best perspective I have read on this topic came from my cousin’s daughter, Michele (my first cousin, once removed, if you’re keeping score).  She and her husband are raising three boys on Long Island.  They’re working hard and playing by the rules.  Here is what she said on her Facebook Timeline:

“I usually don't do this on FB but can't help it because it's too irritating. Fast food workers are striking because they want minimum wage to be increased to $15 an hr.?? So after I pay my student loan bills and taxes they will make the same as me??? … So that's what we do now? Protest to make more money?? What happened to making more money based on merit and how good u are? Ok I'm done now:)”

So am I.



  1. Phillip Parker
    Senior Computer Scientist at Orbital Sciences Corporation

    A good post.

    I have a couple thoughts on the minimum wage debate. One is that an hour of unskilled has an intrinsic value, like a pair of jeans or a quart of milk. If you choose to hang a number of 10 as opposed to 7.25 on that value, you may just inflate the value of everything else and the minimum wage worker gains but little real purchasing power.

    The other thought is that I am sympathetic to the view that many minimum wage and low wage adults will require public assistance and in effect, the government is subsidizing the fast food franchises and retailers that pay these low wages. We will end up helping the low wage worker one way or another. Either by giving him food stamps or paying more for our Big Mac or sack of Walmart groceries so that he gets paid more. Which way is better?

  2. Sean Kent
    Development/Management Executive Balfour Beatty Communities

    Nice piece John. Your cousin's daughter has it correct. To establish one's own upward mobility, work hard(er) for goodness sake!

  3. Phillip Parker
    Senior Computer Scientist at Orbital Sciences Corporation

    In terms of hours on the job, physical demands, lack of job satisfaction and low wages, most minimum wage workers work very hard. Harder than most of us in our comfortable white collar jobs. We need to get past the perception that the working poor are that way because they are lazy and immoral.

  4. Sean Kent
    Development/Management Executive Balfour Beatty Communities

    Fair point Phillip and I agree. My comment was a comparison with the cousin's daughter's Facebook post in mind. 'Work harder!' vs 'Support a protest!'

  5. @Phillip. Excellent point. The market value of one's labor is a function of not only hard work but also one's education, experience and other qualifications. The folks who work in fast food restaurants don't bring much to a potential employer in that respect.

  6. Dustin Preuitt
    Mobile & Technical Consultant

    Thanks for the article, John--it contains a lot of the same skewed framing of arguments that I seen before. One that stands out is " His success...was not the result of the government reapportioning wealth." --which always rankles me. Any government action that has economic impact (basically anything) causes redistribution of wealth on some level. I think there was mutual agreement on the "disappearing American middle class" thread that the tax code distorts tax liability in favor of the wealthy and against the middle class. Also this article seems to be another attempt to blame the poor for the middle-class's woes.

    More to the point, the article seems to think that people just "need to work harder and stop whining". While $15/hr is a high number for the minimum wage, it is not that high to begin negations; so they start at $15 and end around $11.50. As also was discussed on a previous thread, we have employers in this country that are taking from the public via the low wages they pay their employees--we should not have people who work full time and still live in poverty.

    The fact is though, that poverty and low social status can be caused by many things, and a band-aid solution won't help much. Are some people poor because they're deadbeats? Sure, and any amount of aid won't change that. Are other people poor because of circumstances beyond their control? Definitely--and with assistance they can go on to do great things.

  7. Arden Tom McClure
    Employment Specialist at Jay Shop, Inc.

    Recently a prominent conservative in California came out in favor of Walmart paying a minimum of $12/hr. After careful calculation, the study group found it would add about $12 per year to the average family spending at Walmart. And would also releve the tax payer of a lot of subsidies for people close to the poverty line. In fact, if that is true, it would cost Walmart less to bring all of its employees to living wage area, than it costs to accept credit cards. While that is designed to increase business, raising the minimum wage would also increase business, since people on the low end of the economic scale quickly cycle their money back into the economy, much faster than people higher on the income scale.

  8. @Dustin. You've made a cogent argument with some very good points. You have also inferred a few things that I didn't intend.

    I agree that "any government action that has economic impact... causes redistribution of wealth on some level". I advocate that we stop doing that (my inspiration is Hayek). Yes, you are correct that I have taken the same approach in another discussion in this group.

    I do not believe that people just "need to work harder and stop whining". I am not sure why you put that in quotes. I never said it. To be clear, this is what I advocate (and have in the blog post):

    1. There is a legitimate reason to ensure that we have a safety net for the very poor (Hayek again).

    1. Wages (like prices) should be set by the market not by the government. In a capitalist system, the buyer (businesses) and the seller (workers) should agree on the rate. (As an aside, I see nothing wrong with collective bargaining.)

    1. Paying a higher wage for the same amount of work is not productive on a macroeconomic scale.

    1. There is moral hazard in providing a higher wage without higher productivity. What incentive is there to provide more value for more compensation if you can get more compensation for no more value added?

    1. If government wants to play a role, they should go to the cause. Low minimum wage is not the cause of poverty. If the Harvard study that I cite is correct, the causes are segregation (which limits opportunity), poor education (which limits skills) and unstable family environments (which leads to workers few would want to hire).

    As an aside, I think the federal government has a poor track record in addressing these issues.

  9. Eric Hulbert
    Consumer Prod Strat Analyst at Bank of America

    One thing that gets lost in the discussion is that if you want to really change things, the vote that you make with your wallet usually counts a lot more than the one on a ballot. If you feel strongly about poor low wage worker treatment, do business somewhere else. I know minimum wage workers probably do not have a choice but to shop somewhere like Walmart, but most people sympathetic to their cause do. Losing business is a far more powerful statement to company leadership than employees protesting.

  10. Ray Wach
    Sales at Silk Way Cargo

    These are complex subjects, but I notice we're conflating three different things: the safety net, upward mobility, and "protest as a form of negotiation for higher pay."

    I have no objection with protesting in principle, but I also have no respect for someone who doesn't have anything better to negotiate with. And if employees are going to take their negotiations to the sidewalk, they should be ready for their employers to tell them to stay on the sidewalk, and not come back.

    The minimum wage is a safety net issue, and perhaps a more efficient way to help those who are potentially destitute than government largess. I don't hear people asking to raise the minimum wage because they want to help poor people become wealthy, but rather because they think poor people don't have enough money to survive. Unfortunately, I think they're mistaken in believing that poor people will have more money if the minimum wage is raised. Phillip made some good points, but I'll add one more: raising the minimum wage also raises taxes, at least as much as it gives the poor more money. I'd be much more supportive of raising the amount of take-home pay the poor receive by giving them better tax breaks (and just in case anyone forgets, they still pay taxes such as social security both directly and through their employers' taxes).

    Upward mobility is largely a matter of motivation and culture. The other things John mentioned are enablers, but if the culture doesn't encourage ambition then fewer people will be ambitious.

  11. Louis Partida
    Navy Range Subject Matter Expert at SAIC

    Ray is correct that some have confused the discussion, just like our current President. Income inequality is a myth, but the idea of 'fair' pay may have some application. This subject though is entirely separate from social mobility (which studies have shown has not really been reduced), and entirely different from what should be the objective of Government reform - "Opportunity Equality."

    The idea of fair pay has been with us since the reforms instigated by the abuses of the American Industrial revolution. Labor Unions played an important role to promote the idea of a 'Fair Wage' and workplace safety, but over the last several decades, the Federal government has stepped in with oversight that has made most current Labor Unions unnecessary and in some cases detrimental.

    I like to look at the current debate on the minimum wage by reviewing my own past. When I was trying to earn money why still in High School before getting a 'real' job, I advertised my services for landscape and mowing services. I used the Federal minimum wage scale as my guide to pricing, which back in 1978 was about $2.65 per hour. Now I had just learned to drive at 16, and borrowing the family Chevy Van to haul my gear to job sites required that I pay for my own gas, this averaged about 67 cents a gallon back then.

    Now this is by no means scientific, but if last year's minimum wage is $7.25 an hour, and the average retail price for gasoline was $3.48 per gal. that means it would take someone almost 30 minutes of work (before taxes) to earn a gallon of gas, where back when I was learning the value of hard work, I could earn nearly four gallons of gas for an hour of work. Heck sometimes on a hard job I would bid 3 bucks or more an hour, believe me I earned it, one of the major reasons I pushed myself to get into college.

    This country has become successful based on the principles of equal opportunity. That combined with fair pay, will keep Americans from arguing about socialistic 'fair share' programs, and the Liberal ideals of wealth redistribution, and allow people to create their own safety net while they earn their way up the social ladder.

  12. Phillip Parker
    Senior Computer Scientist at Orbital Sciences Corporation

    True, raising the minimum wage will create second order effects that are hard to predict, but my guess is that an appreciable drop in employment is not one of them, mainly because that is never what's happened before when the minimum wage was raised. The business community uses that as a scare tactic. Raising the minimum wage doesn't affect the competitive landscape because every employer has to pay it. Further, the cost can be passed on the customers, also without much fear of additional competitive pressure. Where business might get hurt is that volume may suffer. People will buy less fast food, etc. Employers are always looking for ways to optimize staff anyway. Raising the minimum wage probably won't make them look any harder.

    Another trend I see in this discussion is that hard work is a necessary but insufficient condition for success. Also required is talent and a bit of luck. There are lots of folks out there that are willing to work hard, but no matter how hard they try, they will not be able to earn a credible and marketable college degree or get hired at a living wage. There used to be assembly line type jobs that would give them a decent living, but there aren't any more. They're not lazy or immoral, but they just aren't making it. What do we do for them, if anything?

  13. James Byers
    Computer Technology Opportunist

    There should be no minimum wage at all for entry level jobs. Low pay or even No pay can be fine for an entry level job or internships.

    Normally, I would say the free market should be used to set all wages. But a free market only works when you have market free from outside artificial influences, such as oil cartels, product dumping from countries that highly subsidize a product (such as steel), or, specifically regarding low wage jobs, people dumping from countries that are corrupt and autocratic, creating permanent poverty and absolutely no mobility.

    Keeping our borders open seems like a big-hearted solution to the ills of the impoverished from countries with no economic mobility, but it's a small brained solution that props up the home countries of the immigrants. Mexico has a great solution for it's permanent poor - send them to America! That leaves the wealth of the country for the politically favored and powerful.

    But if Congress and the President are hell bent on flooding the job market with illegals, then a higher minimum wage is all that will protect workers in low wage jobs (not entry level).