Wednesday, December 26, 2012

America: A Meritocracy? (End of Year Re-Run)

Since we are spending a lot of time arguing about whether and how the "rich" should be taxed, and whether people who aren't born rich are takers, I thought it time to revisit Mandi's piece from September 25th, about whether we are a Meritocracy...

The New York Times recently asked, "Should people who have had no financial help from their families get more credit for their accomplishments than people who did?"

Americans cherish the idea that we are a meritocracy, that solely through our own efforts, the cream rises to assume their rightful place atop American society, while the poor and destitute obviously deserve their position, because if they had worked harder, they would have risen ahead.  Mitt Romney believes this, and says that he is a self-made man, that he didn't inherit anything.
Contending that he is a self-made millionaire who earned his own fortune, Romney insisted, "I have inherited nothing." He remarked, "There is a perception, 'Oh, we were born with a silver spoon, he never had to earn anything and so forth.' Frankly, I was born with a silver spoon, which is the greatest gift you can have: which is to get born in America."  

Romney apparently doesn't count the connections he has made by being the son of a governor, his privileged upbringing, nor the money in the form of stock options he was given to help he and his wife pay their way through school. While technically Romney did not inherit anything from his father, he used his father's estate to donate to the Mormon Church and to pass the money along to his children, and thus avoid estate taxes. The fact is that rich parents can help out their children in a way that poor parents can't, and such structural factors prevent poor kids from being able to enter into certain fields. These structural barriers then prevent people from moving into a higher social class than their parents.

America is no longer the land of opportunity.  People have trouble moving to a higher social class than their parents. 

Especially in the United States, people underestimate the extent to which your destiny is linked to your background,” says Fabian Pfeffer, a sociologist at the U-M Institute for Social Research (ISR)...Research shows that it’s really a myth that the U.S. is a land of exceptional social mobility...
He found that parental wealth plays an important role in whether children move up or down the socioeconomic ladder in adulthood. And that parental wealth has an influence above and beyond the three factors that sociologists and economists have traditionally considered in research on social mobility – parental education, income and occupation.

“Wealth not only fulfills a purchasing function, allowing families to buy homes in good neighborhoods and send their children to costly schools and colleges, for example, but it also has an insurance function, offering a sort of private safety net that gives children a very different set of choices as they enter the adult world,” Pfeffer says.

There are now huge financial barriers to "full adulthood", and only middle-class parents and above have the resources to help their children set aside those barriers.  College tuition is extremely high, and home ownership, thanks to tightened lending rules, is very difficult.  Even couples deciding to have children has decreased, in part due to financial considerations.  But having wealthy parents help you along the way can change everything:

Some parents help their adult children financially, while others cannot or do not.

This living inheritance comes in many forms. It exists along a range from the free room and board for a 23-year-old intern to a stay of years for a 43-year-old single parent who has lost a job or recently divorced. The contribution can be as small as a first month’s rent or as large as the 25 years of payments that many parents now make on college loans they took out so their children would not have to.

The less help you have as an adult starting out, the harder you have to work to make the next geographic, career and economic step up. If you lack that help, any and all mistakes (and there will be plenty) often have much bigger consequences. And the lack of any family help can have a compounding effect on the millions of people who have negative net worth well into adulthood thanks to their student loan debt.

In certain respects, it’s bewildering that this is our current state of affairs. How can it be that the more tuition costs rise, the fewer opportunities there seem to be for educated people in their 20s and 30s to move seamlessly into jobs that offer health insurance and pay enough to cover their living expenses?

Another author muses about how lack of familial wealth acts as a entry barrier into certain fields.  The author tried to break into the journalism field, but found that it now relies heavily on unpaid internships to select their job candidates.  People that have student loans, or whose families are unwilling to give money or assistance to them have an impossibly difficult time breaking into the field.

To be a writer in this market requires not only money, but a concept of “work” that is most easily gained from privilege. It requires a sense of entitlement, the ability to network and self-promote without seeing yourself as an arrogant, schmoozing blowhard. And it requires you to think of working for free—at an internship, say, or on one of those gratis assignments that seem to be everywhere now—as an opportunity rather than an insult or a scam.

This is no longer an industry that rewards working-class values, in other words, and I underestimated how hard it would be to shuck them. It still seems strange to me that people work, unpaid, without a guaranteed job at the end. And I haven’t reconciled myself with the central irony here: that journalism, ostensibly a populist endeavour, is becoming a rarefied practice best suited, both financially and psychologically, to the well-off.
Does the fact that wealthy parents can help their children lead to more income inequality?  Are we creating a gentry class within the United States, into which those who were not born into it have an almost impossible time breaking in?  Should estate taxes be even higher to take away the advantages that the wealthy pass on to their children?  Isn't this partly what government is for, to level the playing field for those who were not born into advantage?  How much help did you have from your parents up to this point?

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