Tag Archives: economics

Becoming Wealthy: The Myth of Meritocracy

Flashback Friday. 

How do people in the U.S. become wealthy?  According to the myth of meritocracy, they do so by hard work: blood, sweat, tears, a trace of talent, and a tad bit of luck.  This is the story told in this two-page ad for U.S. Trust in The New Yorker:

On the first page we learn she’s rich, but she’s still a home-town girl at heart. On the second page, we learn a little about how she might have gotten so wealthy:

Note the first few sentences:

Who’s to say how it happened. A big idea. A gutsy work ethic. A lucky break here and there.

Well, uh…what about, “She inherited it”? That’s a pretty common way to end up with a whole bunch of houses and in need of a wealth management team.

The notion that rich people are rich because their parents are rich, however, interrupts the American mystique, the one where we are a country of self-made immigrants who pulled ourselves up by our bootstraps.  People, even people who inherited wealth, like to think that they’re rich because they worked hard.  Hence, the romanticization of the self-made millionaire in the ad and the corresponding invisibility of the inheritance loophole.

On the flipside, this narrative also supports the converse idea that the poor are poor because of their lack of personal efforts and merits.  Perhaps they didn’t have a “big idea’ or the “gutsy work ethic” that enabled them to profit from the lucky break that they inevitably encountered, right?

This ad is just one drop in the sea of propaganda that makes it seem right and normal that a small proportion of our population is able to hoard wealth and property.

This post originally appeared in 2008.

Gwen Sharp is an associate professor of sociology at Nevada State College. You can follow her on Twitter at @gwensharpnv.

Insurance Companies and the Cost of Health Care

When my primary care physician, a wonderful doctor, told me he was retiring, he said, “I just can’t practice medicine anymore the way I want to.” It wasn’t the government or malpractice lawyers. It was the insurance companies.

This was long before Obamacare.  It was back when President W was telling us that “America has the best health care system in the world”; back when “the best” meant spending twice as much as other developed countries and getting health outcomes that were no better and by some measures worse. (That’s still true).

Many critics then blamed the insurance companies, whose administrative costs were so much higher than those of public health care, including our own Medicare. Some of that money went to employees whose job it was to increase insurers’ profits by not paying claims.  Back then we learned the word “rescission”  – finding a pretext for cancelling the coverage of people whose medical bills were too high.   Insurance company executives, summoned to Congressional hearings, stood their ground and offered some misleading statistics

None of the Congressional representatives on the committee asked the execs how much they were getting paid. Maybe they should have.

Health care in the U.S. is a $2.7 trillion dollar business, and the New York Times has an article about who’s getting the big bucks.  Not the doctors, it turns out.  And certainly not the people who have the most contact with sick people – nurses, EMTs, and those further down the chain.  Here’s the chart from the article, with an inset showing those administrative costs.

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As fine print at the top of the chart says, these are just salaries – walking-around money an exec gets for showing up.  The real money is in the options and incentives.

In a deal that is not unusual in the industry, Mark T. Bertolini, the chief executive of Aetna, earned a salary of about $977,000 in 2012 but a total compensation package of over $36 million, the bulk of it from stocks vested and options he exercised that year.

The anti-Obamacare rhetoric has railed against a “government takeover” of medicine. It is, of course, no such thing. Obama had to remove the “public option”; Republicans prevented the government from fielding a team and getting into the game. Instead, we have had an insurance company takeover of medicine. It’s not the government that’s coming between doctor and patient, it’s the insurance companies. Those dreaded “bureaucrats” aren’t working for the government of the people, by the people, and for the people. They’ve working for Aetna and Well-Point.

Even the doctors now sense that they too are merely working for The Man.

Doctors are beginning to push back: Last month, 75 doctors in northern Wisconsin [demanded] . . . health reforms . . . requiring that 95 percent of insurance premiums be used on medical care. The movement was ignited when a surgeon, Dr. Hans Rechsteiner, discovered that a brief outpatient appendectomy he had performed for a fee of $1,700 generated over $12,000 in hospital bills, including $6,500 for operating room and recovery room charges.

That $12,000 tab, for what it’s worth, is slightly under the U.S. average.

Cross-posted at Pacific Standard.

Jay Livingston is the chair of the Sociology Department at Montclair State University. You can follow him at Montclair SocioBlog or on Twitter.

Majority of “Stay-at-Home Dads” Aren’t There to Care for Family

At Pew Social Trends, Gretchen Livingston has a new report on fathers staying at home with their kids. They define stay at home fathers as any father ages 18-69 living with his children who did not work for pay in the previous year (regardless of marital status or the employment status of others in the household). That produces this trend:

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At least for the 1990s and early-2000s recessions, the figure very nicely shows spikes upward of stay-at-home dads during recessions, followed by declines that don’t wipe out the whole gain — we don’t know what will happen in the current decline as men’s employment rates rise.

In Pew’s numbers 21% of the stay at home fathers report their reason for being out of the labor force was caring for their home and family; 23% couldn’t find work, 35% couldn’t work because of health problems, and 22% were in school or retired.

It is reasonable to call a father staying at home with his kids a stay at home father, regardless of his reason. We never needed stay at home mothers to pass some motive-based criteria before we defined them as staying at home. And yet there is a tendency (not evidenced in this report) to read into this a bigger change in gender dynamics than there is. The Census Bureau has for years calculated a much more rigid definition that only applied to married parents of kids under 15: those out of the labor force all year, whose spouse was in the labor force all year, and who specified their reason as taking care of home and family. You can think of this as the hardcore stay at home parents, the ones who do it long term, and have a carework motivation for doing it. When you do it that way, stay at home mothers outnumber stay at home fathers 100-to-1.

I updated a figure from an earlier post for Bryce Covert at Think Progress, who wrote a nice piece with a lot of links on the gender division of labor. This shows the percentage of all married-couple families with kids under 15 who have one of the hardcore stay at home parents:

SHP-1. PARENTS AND CHILDREN IN STAY-AT-HOME PARENT FAMILY GROUPS

That is a real upward trend for stay at home fathers, but that pattern remains very rare.

See the Census spreadsheet for yourself here.  Cross-posted at Pacific Standard.

Philip N. Cohen is a professor of sociology at the University of Maryland, College Park, and writes the blog Family Inequality. You can follow him on Twitter or Facebook.

$291,978 Spent in Philadelphia to Make Poverty Pretty

We have the money and the know how to tackle most of our social problems.  Certainly unemployment, houselessness, and poverty.  So, why don’t we?

In large part it is because our socially created wealth remains outside social control.  Critical economic decisions are driven by private interests not the public good.  One result is hipster economics.

If you are not familiar with the concept, I recommend Sarah Kendzior’s The Perils of Hipster Economics. Here is the first part:

On May 16, an artist, a railway service and a government agency spent $291,978 to block poverty from the public eye.

Called psychylustro, German artist Katharina Grosse’s project is a large-scale work designed to distract Amtrak train riders from the dilapidated buildings and fallen factories of north Philadelphia. The city has a 28 percent poverty rate – the highest of any major U.S. city – with much of it concentrated in the north. In some north Philadelphia elementary schools, nearly every child is living below the poverty line.

Grosse partnered with the National Endowment of the Arts and Amtrak to mask North Philadelphia’s hardship with a delightful view. The Wall Street Journal calls this “Fighting Urban Blight With Art.” Liz Thomas, the curator of the project, calls it “an experience that asks people to think about this space that they hurtle through every day.”

The project is not actually fighting blight, of course – only the ability of Amtrak customers to see it.

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“I need the brilliance of colour to get close to people, to stir up a sense of life experience and heighten their sense of presence,” Grosse proclaims.

“People,” in Grosse and Thomas’s formulation, are not those who actually live in north Philadelphia and bear the brunt of its burdens. “People” are those who can afford to view poverty through the lens of aesthetics as they pass it by.

Urban decay becomes a set piece to be remodeled or romanticised.

The rest of the article is here.

Martin Hart-Landsberg is a professor of economics at Lewis and Clark College. You can follow him at Reports from the Economic Front.

Saturday Stat: Salaries on University Campuses

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- PhD Comics.

Lisa Wade is a professor of sociology at Occidental College and the co-author of Gender: Ideas, Interactions, Institutions. You can follow her on Twitter and Facebook.

The U.S. is Replacing Good Jobs with Bad Ones

In a fancy bit of marketing, U.S. capitalists have been reborn as “job creators.”  As such, they were rewarded with lower taxes, weaker labor laws, and relaxed government regulation. However, despite record profits, their job creation performance leaves a lot to be desired.

According to the official data the last U.S. recession began in December 2007 and ended in June 2009. Thus, we have officially been in economic expansion for almost five years.  The gains from the expansion should be strong and broad-based enough to ensure real progress for the majority over the course of the business cycle.  If not, it’s a sign that we need a change in our basic economic structure.  In other words, it would be foolish to work to sustain an economic structure that was incapable of satisfying majority needs even when it was performing well according to its own logic.

A recent study by the National Employment Law Project titled The Low-Wage Recovery provides one indicator that it is time for us to pursue a change.  It shows that the current economic expansion is transitioning the U.S. into a low wage economy.

The figure below shows the net private sector job loss by industries classified according to their medium wage from January 2008 to February 2010 and the net private sector job gain using the same classification from March 2010 to March 2014. As we can see, the net job loss in the first period was greatest in high wage industries and the net job creation in the second period was greatest in low wage industries.

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As the study explains:

 The food services and drinking places, administrative and support services (includes temporary help), and retail trade industries are leading private sector job growth during the recent recovery phase. These industries, which pay relatively low wages, accounted for 39 percent of the private sector employment increase over the past four years.

If the hard times of recession disproportionately eliminate high wage jobs and the “so called” good times of recovery bring primarily low wage jobs, it is time to move beyond our current focus on the business cycle and initiate a critical assessment of the way our economy operates and in whose interest.

Cross-posted at Pacific Standard.

Martin Hart-Landsberg is a professor of economics at Lewis and Clark College. You can follow him at Reports from the Economic Front.

On the False Idea that Money is a Resource

I am so pleased to have stumbled across a short excerpt from a talk by Alan Watts, forwarded by a Twitter follower.  Watts makes a truly profound argument about what money really is.  I’ll summarize it here and you can watch the full three-and-a-half minute video below if you like.

Watts notes that we like to talk about “laws of nature,” or “observed regularities” in the world.  In order to observe these regularities, he points out, we have to invent something regular against which to compare nature. Clocks and rulers are these kinds of things.

All this is fine but, all too often, the clocks and the rulers come to seem more real than the nature that is being measured.  For example, he says, we might think that the sun is rising because it’s 6AM when, of course, the sun will rise independently of our measures.  It’s as if our clocks rule the universe instead of vice versa.

He uses these observations to make a comment about wealth and poverty. Money, he reminds us, isn’t real. It’s an invented measure.  A dollar is no different than a minute or an inch.  It is used to measure prosperity, but it doesn’t create prosperity any more than 6AM makes the sun rise or a ruler gives things inches.

When there is a crisis — an economic depression or a natural disaster, for example — we may want to fix it, but end up asking ourselves “Where’s the money going to come from?”  This is exactly the same mistake that we make, Watts argues, when we think that the sun rises because it’s 6AM.  He says:

They think money makes prosperity. It’s the other way around, it’s physical prosperity which has money as a way of measuring it.  But people think money has to come from somewhere… and it doesn’t. Money is something we have to invent, like inches.

So, you remember the Great Depression when there was a slump?  And what did we have a slump of?  Money.  There was no less wealth, no less energy, no less raw materials than there were before. But it’s like you came to work on building a house one day and they said, “Sorry, you can’t build this house today, no inches.”

“What do you mean no inches?”

“Just inches!  We don’t mean that… we’ve got inches of lumber, yes, we’ve got inches of metal, we’ve even got tape measures, but there’s a slump in inches as such.”

And people are that crazy!

This is backward thinking, he says.  It is allowing money to rule things when, in reality, it’s just a measure.

I encourage you to watch:

Lisa Wade is a professor of sociology at Occidental College and the co-author of Gender: Ideas, Interactions, Institutions. You can follow her on Twitter and Facebook.

Stay-at-Home Mothers on the Rise among Low-Income Families

“Stay-at-home mother” evokes black and white images of well-coiffed women in starched aprons. Rather than a vestige of a bygone era, stay-at-home moms are on the rise, according to the findings of a new Pew Research study. In 2012, 29% of women with children under the age of 18 stayed home, a number that has been on the rise since 1999 and is 3% higher than in 2008.

However, while more women are staying home with their children, the face of the stay-at-home mom has changed dramatically since the 1950s “Leave It to Beaver” days. Stay-at-home moms today are less educated and more likely to live in poverty than working moms. Younger mothers and immigrant mothers also make up a good portion of stay-at-home moms.

The story of why mothers are staying home is more complex than you may imagine and has more to do with the poor labor market, the exorbitant price of child care, and the contemporary structure of work. In a recent interview with Wisconsin Public RadioBarbara Risman, a sociologist at the University of Illinois at Chicago, spoke about how this report has been picked up by the mainstream media:

What’s surprising to me is the headlines and how it’s portrayed in the news. Although the numbers are going up, when you look at what mothers say, 6% of the mothers in this study say they are home because they can’t find a job. When you take those 6% of mothers out, the results are rather flat. Part of the real story here then is that it’s hard to find a job that allows you to work and covers your child care, particularly if you have less education and your earning potential isn’t very high.

These days stay-at-home moms, who are more likely to be less educated, are not able to make enough money for working to even be worthwhile. Many times, their pay wouldn’t actually cover the cost of child care. Beyond these important financial considerations, lower wage shift work makes it extremely difficult to coordinate child care in the midst of work schedules that change on a weekly basis.

Erin Hoekstra is pursuing a PhD in Sociology at the University of Minnesota. This post originally appeared on Citings and Sightings and you can read all of Erin’s contributions to The Society Pages here.  Cross-posted at Pacific Standard.