Among the readers of an opinion piece I wrote in the New York Times on July 21st, Who’s Your Daddy? Job Opportunities for the children of the top 1 percent, are two top 1 percenters who kindly took the time to email me their thoughts.
One of the goofiest most nonsensical things I have ever seen filled with
contradictions as you twist opposite conclusions to fit your thesis of
inequality. Just bizarre.Sent from my iPad
My article was based on a soon to be published paper, Income Inequality, Equality of Opportunity, and Intergenerational Mobility , so I would hope that it has some logic to it.
The following comments are from another top 1 percenter who offers a more nuanced view on my logic, such as it is.
Dear Prof. Corak –
I read your piece in today’s NY Times with great interest. As a fourth generation Italian-American who is one of the cohort of the .1% of American income earners and aggregate wealth, I think my observations may be helpful to you in your scholarship.
- You did not address the issue of out-of-wedlock birth in your piece. The correlation between being born out of wedlock and poverty is very high. Rich people have a high incidence of getting married before having children. That tends to insulate their offspring from dropping down the economic ladder.
- Rich people live in wealthy towns with good school systems. The very rich send their children to elite private schools. Consequently their children attend elite colleges and can secure high paying jobs. Nothing particularly notable there.
- America is a nation of immigrants who came here to make money. Consequently a large percentage of their children and grandchildren have had that drive and focus inculcated into their psyche. They have a self-expectation to achieve and move higher on the socio-economic ladder. My sister , a professor at the US Marine Corps Staff and Command College and at the American Military University, and I are certainly poster children for that ethic. There are millions just like us in the USA.
- Technology , aka facility with computing and access to it, has tended to widen income inequality. My son conducts his business , commercial/corporate real estate brokerage, electronically. My daughter, a college senior, does all her work electronically. Children who don’t have access and facility in technology are dramatically hampered in their quest to move up the economic ladder. That is going to increase income inequality over time.
- Social and business connections yield economic advantages for the children of the rich. My father went to the USNA-Annapolis and my mother went to Rutgers. Both my wife and I went to an Ivy League university at which we met. We belong to clubs at which we play racquet sports and at which we connect with other rich people. My son is now a member of two of the most prominent racquet sports clubs in Midtown Manhattan at which he plays squash and two other very arcane racquet sports at the highest level. He makes connections at those clubs, and other similar clubs in the east through tournament play, which help him in business. In fact his boss is my former doubles squash partner. Is the deck stacked in his favor? Absolutely. And that’s exactly in accord with my objectives. I am highly confident that when he takes over my business he will be in a position to lead it to become even more successful and prosperous , making use of his education ( a private prep school and an elite NESCAC college) and NY business contacts.
In summary, my great-grandparents and grandparents would be overjoyed about the results which their offspring have achieved. I am the only one of seven of my generation who’s not a lawyer, doctor, or holds a PH.D. so I’m the dummy of the bunch! We are each responsible for our own lives and our own children. Public policy can be changed, but it won’t be able to overcome the five points I listed above. That can only be changed by individual initiative, good decisions, brains, energy and ambition.
There are many other interesting comments on the NY Times website, but not so many that appear to be from top 1 percenters.
To some degree you can read my article as a counterpoint to Greg Mankiw’s defense of the top 1 percent in a commentary on his blog, which is also based on a forthcoming paper in the same symposium on the top 1 percent in the Journal of Economic Perspectives that will publish my paper.
We come at this topic as academics, so to have a little life breathed into texts based on theoretical models, numbers, and graphs, is refreshing. But to reflect on these real life experiences in light of theory and data is also educational.
Economics for public policy 
I echo the 4th generation Italian Immigrant’s comments, plus I add the following. In the U.S. I perceive a larger and larger gap between the social behaviors between the “haves” and the “have nots”. Out of wedlock births is definitely one of the behaviors. Here are a few others that I see – a fierce resistance to organized religion, a life-long mantra to live it up and party (hey, you only live once), a love affair with tatoos and other bodily mutations, a use of language that includes near constant swearing the use of slang to such an extent that I cannot even understand them, and the idolization of the bizarre – whether behavior, dress, hairdos, etc.
Would you want this kind of person managing the local bank branch? Do you feel comfortable with them in your house to fix your water heater? If you owned a company would you want them to be the face of your company (assuming you don’t run a Harley dealership or strip club)?
Many years ago the differences between the classes were much less based on social behavior. Nearly everyone attended church, strove to look neat and clean, acted courteous, had manners, etc. Thus, it was much easier for people to pull yourself up into a higher social strata. These days, parents seem to encourage their children to be freaks and hoodlums, and these kids end of having no chance.
I could take any lower income person and quickly teach them how to get a much better paying job – clean yourself up, speak proper english, get rid of tatoos and piercings, and so on. It’s not rocket science. If you want to get out of a hole, stop digging!
My question to the sociology experts of the world – why is it always blaming the rich? Can none of the blame be placed on the other end of the spectrum? Or would that offend your liberal brethren and then jeopardize your career? Apologies for being cynical, but I’m seriously tired of always hearing it’s the fault of “rich white dudes.”
My dad grew up poor. His father (an italian) left the family when he was very young. They scraped by. And, although never having a large salary, he saved and worked to ultimately have a good sized net worth. I worked hard, studied hard, and have saved my money. Even though I can easily afford a Bentley, I drive a Honda. I’m apparently an evil “one percentor”.
Bottom line, there’s a lot of talk about inequality, but every “expert” conveniently dismisses the obvious. And when somebody does bring up the obvious, they quickly get labeled a racist biggot.
My two cents.
A thought on out of wedlock births and paternal abandonment among the poor, which I agree are major drivers of the divergence: we live today in a world where wages have remained stagnant for most people for 30 years. The price for consumables, available at Target, has plummeted in this time, but the price for the core items necessary to support a family have skyrocketed (home prices, health care, education, gas). Taken together this makes marrying and raising a family a terrifying prospect to many young men, who despite knowing that the world has changed and they no longer need to be the primary breadwinner still feel societal pressures to play that role.
Household formation is down across the board for people in their 20s and 30s, not just those in poverty. The forces and dire responsibilities outlined above scare the elite white male as much as the one in the ghetto. The difference is that the elite have the resources to deal with it somewhat responsibly. They put off marriage, are on hormonal contraception, save slowly for a house, etc. On the other side it’s more often that a baby is conceived and then it’s panic and run.
But underneath the same dynamic is at play. It is a lot more difficult to provide in today’s world. The circumstances are different. The elite white male may not be able to get the house he pictured or send his child to the school he wants, while the poor may have to take up a third job just to pay basic rent. The scale is different and the social pressures are different, but the basic mental reality is the same.
Ah, yes, that old canard that if the poor would just go to church more often, they’d be rich too….
Well, the data is in and throws a real monkey-wrench in that idea (not that it will change any minds as these beliefs are almost never based on fact). The recently released report on socio-economic mobility across the country shows that the areas with the lowest mobility (primarily the south, but also parts of the midwest) are the areas with the highest rates of religiosity. And the areas with the highest rates of mobility (with the exception of Salt Lake City) actually have the lowest rates of religiosity. I hate to get anecdotal, but you really should make some friends among the SF Bay Area elite and see just how many of them participate in any sort of organized religion…and for bonus points make some friends in a poor neighborhood and see how many attend the ubiquitous churches on most corners in poor neighborhoods.
And then there’s the old having kids thing. True enough, if the daughters of poor parents had the same access to contraceptives and abortion as the daughters of the wealthy, they’d probably have fewer kids which would make it easier to move up the career ladder. But if you’re suggesting that wealthy young women are more virtuous than poor young women, I’d suggest visiting some sororities.
Devin – I understand your point, but I think the report confuses geography and behavior. Clearly if you live in a small town in rural america you will have difficulty improving your socio-economic status whether a saint or a sinner. My observation (and I would wager real money that this is the case) is that the people who choose to work harder, dress like they aren’t a thug, live within their means and hold high moral values will ultimately be better off than their neighbor who does not.
I believe this would hold true in San Francisco as well. I don’t see any dotcom CEOs covered in tatoos or body piercings.
2nd point – Wealthy have access to contraceptives? Most inner-city schools hand out condoms, from what I hear. My childrens’ schools do not hand out contraceptives. If anything the less wealthy likely have more access to contraceptives.
Cheers.
It’s important to keep in mind that most arguments against high inequality, such as the one put forward by Professor Corak in the NYT, do not necessarily intend to “blame the rich” — they are simply trying to shine light on the sources of inequality so that we may better understand what the problems are and how to fix them.
As to your statements about how the lower classes dig themselves into holes by exhibiting certain behaviors— I see your point. It’s true that most people, at least those who are white and affluent, would not be comfortable using a bank that is managed by, let’s say, a cursing, tattooed Satanist. But the values that are taught to the children in one household are very different than the values taught to a child in another. And especially in this day and age, personal and free expression is highly valued, especially by those who feel they have no voice otherwise. Is it right to punish them economically? What are the social consequences of homogenizing the workforce? Who gets to determine what the “appropriate” behaviors are, and in the end how similar is that group to the 1% who already have the power to determine and prioritize the affairs of American politics and business?
E.G. – point taken, Professor Corak was not blaming the rich, but one could interpret that it was being implied. Nonetheless, my main point was that the actions that people voluntarily make can greatly influence their fate.
Is it right to punish them economically for the choices? In my opinion, nobody is punishing them, they are punishing themselves. And I would argue that those who are successful (of any race or heritage) DO have the standing to make the rules.
Cheers.
“America is a nation of immigrants who came here to make money.” – Um, no, actually it’s a nation of people, many of them descended from immigrants, but not all. And not all of the immigrants came here of their own free will. Besides, I could have sworn they came here for a better life, not just to make money. Funny how the wealthy bend our ethos to fit their purposes.
So it looks like the reason I’m not a member of the 1% is that I failed to jump at my father’s one attempt at nepotism. I should have taken that job, apparently. Also, I should have a problem constructing sentences.
And my children are doomed because I didn’t send them to a private preparatory high school, because we can’t afford it. Obviously, how they should do in future education should be decided by how much money I’m paid. Never mind if they’re bright and hardworking.
But clearly, the world needs poorly paid ditch diggers just as much as multi-millionaire CEOs. So the rest of us should just accept our fate and stop whining about our place in life. If we had superior breeding like the wealthy, we would have their opportunities to give our children the jobs they so richly haven’t earned. Apparently my problem is all of those tattoos I never received as a teen.
Bottom line, we should put back the marginal income tax rates in place under Eisenhower; those good old days when everyone dressed nicely and went to church.
KJMClark’s comments don’t refute any of the statements made at the top of this blog. I think it’s fair to say that 99% of immigrants would have equated ” seeking a better life” with making money. While stated marginal tax rates under Eisenhower were higher than today, the deductions and exclusions made for effective tax rates similar to those in effect today. For example when corporate mergers took place the merged entities could make use of tax loss carry forwards at 100% of their value. That was changed in 1986. Further the depreciation schedules on real estate and all manners of capital expenditures were significantly shorter.That is undisputed fact.
As a tax professor, allow me to point out that depreciation schedules were shortened in the early 1980s, long after the Eisenhower years, and coincident with the lowering of tax rates. NOL carryforwards are arguably not particularly cogent in distinguishing between the different tax burdens borne by the bottom vs the top 10 percent of individuals. Finally, while it is certainly true that tax sheltering activities were much more frequent when rates were higher, effective rates were still higher than they are today.
Robert is right. ACRS was passed in 1981, generally shortening depreciation periods, and MACRS passed in 1986 as part of the Tax Reform Act, shortening depreciation periods for most assets even more.
Comments that assume social behaviors lead to one’s socio-economic position have the arrow of causation backwards. Socio-economic advancement today is largely based on one’s possession of a decent education. In a system based largely on local property taxes it is very difficult to equalize access to a decent education. Then there are all the ancillary educational benefits that wealthier people can offer their children: better pre-schools, after-school classes in music, dance, etc., prep classes for the SAT… not to mention the level of education of one’s parents, which correlates highly with intact marriages, reading to children, etc. Anyone who ignores the privileges of wealth is ignoring much that contributes to inequality. Moreover, the immigrant experience is not necessarily a useful model. It turns out that those who pick themselves up and leave for an alien culture tend to be people with a great deal of agency. Many immigrants were born into the middle class in their home countries and their families had fallen into hard times. Italians who came to America were mostly rural people who were caught up in the move to urbanization that occurred in Europe well before urbanization in the Americas. The Irish were victims of the potato famine. The Jews had been forced out of rural areas in the Pale decades before and were fleeing ongoing oppression. (see The Ethnic Myth: Race, Ethnicity, and Class in America by Stephen Steinberg).
PT – Yes, a good education is important, but today there are more opportunities than ever to gain access to what was once only available to the wealthy. Education grants and loans, minority scholarships, learning via the internet, access to fabulous libraries, affirmative action programs, and on and on. I once worked with someone who got free tuition to an elite east coast prep school and then full scholarship to an Ivy League university – I was very envious.
I’m not ignoring the privileges of wealth, but south Asian families prove my point over and over – work hard, study hard, and integrate yourself by your actions into a higher position in life. How many first generation Asians now see their their children working in Wall Street, in hospitals, and in law firms? Apparently nobody told them that our country has become a terrible place to raise your social standing.
Cheers.
The Asian immigrant story actually proves my point. Asian immigrants have consistently been among the group possessing the highest level of skills entering the US. The INS keeps very specific records of the skills immigrants bring with them. As with the century earlier Eastern European Jews who entered the US with a very high level of skills appropriate for an urban environment and advanced more quickly than the mostly rural-bred Irish and Italians, the same has been true of Asians, who are, on average better educated when they emigrate. The Koreans, for example, were the first group that surpassed the level of skills those Eastern European Jews brought with them around the turn of the 19th – 20th century. Starting with a leg up helps, whether that consists of skill sets or inherited wealth. For all the extra opportunities you anecdotally report, “[a]ccording to the most recent statistics, the nationwide college graduation rate for black students stands at 42 percent. This figure is 20 percentage points below the 62 percent rate for white students… High dropout rates appear to be primarily caused by inferior K-12 preparation and an absence of a family college tradition, conditions that apply to a very large percentage of today’s college-bound African Americans. But equally important considerations are family wealth and the availability of financial aid. According to a study by Nellie Mae, the largest nonprofit provider of federal and private education loan funds in this country, 69 percent of African Americans who enrolled in college but did not finish said that they left college because of high student loan debt as opposed to 43 percent of white students who cited the same reason.”
http://www.jbhe.com/features/50_blackstudent_gradrates.html
Those on this commentary who essentially claim that the rich get there because of merit are speaking gibberish. The rich get richer mostly because of their connections, their “in-group”, their education, and all of the other privileges that accompany their being in a better position to start with and having numerous opportunities for advancement that the truly poor lack and even the lower middle class generally do not have.. The notion that the poor are poor because they aren’t willing to work hard–the idea of “poor behavior” being the cause of their lack of success–is not supported by the evidence. But I suppose it helps avoid guilt feelings among those who have greedily taken advantage of their racquet-ball club connections, wealthy parents’ friends, and all of the other privileges of growing up privileged but yet think of themselves as “meriting” everything they’ve gotten.
The second 1%-er’s comments are extremely revealing.
He(?) notes that rich people have better access to schooling, then concludes there is nothing that government can do to reduce income disparity. He finds “nothing particularly notable” in the fact that we have an educational system that helps maintain income disparity across generations.
Many of our forefathers showed up to engage in subsistence farming. Those may not be the forefathers we glorify, but they were far more numerous than the rich owners who signed the Declaration of Independence. Religious immigrants were not as numerous as some of our national legends suggest, but there were still a bunch of ’em. The Irish came here in large part to avoid starvation. Criminal transport accounted for a share of immigration in the colonial days. The notion that “immigrants” came here to make money looks like either ignorance or the dreadful “everybody who matters” kind of thinking.
The writer acknowledges some of the advantages that assure the inter-generational transfer of opportunity (he ignores wealth transfer), but seems to think they are natural, not the result of effort to jigger the system, and that there is no question than selective access to technology, education and the like should and will continue as it is. The writer seems to think he has offered a refutation of your premise, but has actually only grunted “so what?”.
If this sort of thinking represents the stuff for which the 1% gets its generous wage, they really can’t claim to have earned it.
1. Maybe he should check to see if the causation is running the other way there. I used to write about family issues, and while it’s true that children born in wedlock and raised by two married parents tend to make more money later on, it’s not really known exactly why.
2. Yeah, policy can deal with that. Just fund schools through the federal government.
3. That’s a non-sequitur. Most Americans are immigrants or descendants of immigrants. Some are rich and some are poor and some are middle class. So?
4. Policy can also help there by giving poor kids access to technology. Not that it’s all that big of a deal (it is important, but no where near as important as it gets hyped to be by companies that want to sell computers to schools).
5. And finally we’re here. Yeah, policy can’t really change that, but there are lots of ways to diminish its importance. In the end, though, all it does is diminish the case that rich people earned all their money through their own hard work with no help from anyone else.
This all seems to be an argument for redistribution – I know, an evil word these days. So much wealth is concentrating at the top and is not recirculating in the general economy. I have no problem with raising the tax rates on the rich and using the funds to pay for better education, smaller classroom sizes, enhancing the infrastructure, and expanding healthcare. All those funds would be creating jobs and providing a benefit to society as a whole, making this a better place to live. If people on the lower end had a better life, not through handouts but increased services, they would have a greater chance to succeed. Society seems to be intent on punishing the poor for being poor, while so much of their condition arises from the circumstances they were born into.
Early childhood seems to be crucial: to enrich young kids’ lives seems to be the most effective anti-poverty intervention available. Note the long-term success of Harlem Children’s Zone, with its Baby College (which teaches parents what to do for their children’s success) for an example.
Whitney Tilson out of New York has demonstrated through comprehensive research that income equality or inequality is directly co-related to education. In our more populated U.S. cities the quality of education has been diminishing significantly – despite in most cases increased real dollar investment. The U. S. used to rank in the top ten in education on a global scale – now we are maybe ranked 26th. The statistics cited by Professor Corak appear to glaringly neglect the statistics on education quality differentials between the U.S. and Denmark, Canada etc.
The one percent in large part do not educated their children through the public system because of its deficiencies and while that is not a solution it bears witness to some of the real underlying issues in addition to family networks.
Maybe I am one of the dumb ones, but it appears to me that the “fourth generation Italian-American” proves your point and does not refute it at all except in the conclusion, “…that can only be changed by individual initiative, good decisions, brains, energy and ambition.” For example, I suppose the son made the good decision to join “the most prominent racquet sports clubs in Midtown Manhattan at which he plays squash and two other very arcane racquet sports at the highest level.” If the son really had a “fair” choice to make in the matter we would have to require that any son of a family at any income level could make that same choice. As far as I know, not every son can make the “good decision” to join such a prominent racquet sports club in Mitdown Manhattan that allows him to make excellent business connections. It appears to me that this is exactly the type of set-up that makes inter-generational changes in wealth less likely. I must be missing something. Surely, this very successful fourth generation Italian-American can explain the logic to me.