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How the upper middle class keeps everyone else out

August 5, 2017 at 4:28 PM EDT
In the United States, people within the top 1 percent income bracket own one-third of the nation’s wealth. But scholar Richard Reeves, author of “Dream Hoarders,” argues that the top 20 percent has created an even starker divide with behaviors and policies that limit economic mobility for lower-income groups. Reeves joins Hari Sreenivasan.

HARI SREENIVASAN: Scholar Richard Reeves believes the United States is in need of some self-reflection about income inequality.

RICHARD REEVES: I think America doesn’t want to have a conversation about class because it is uncomfortable with it.

HARI SREENIVASAN: Reeves is a co-director of the Brookings Institution’s Center on Children and Families. His new book, “Dream Hoarders,” argues that while the top one percent of america’s wealthy receive so much attention, the more significant divide is between the top 20 percent and everyone else struggling to achieve the American dream.

HARI SREENIVASAN: Reeves suggests the advantages of those at the top are gained simply by being part of the right socioeconomic group. By supporting certain policies and behavior they protect their status and keep others out.

RICHARD REEVES: A dream hoarder is someone that’s a member of the American upper middle class. So on the top rung in terms of income. But is then using that position to rig certain systems or certain markets so that they succeed and that their kids succeed. So rig the housing market. Rig the education market. Some say rig the labor market. And so it’s basically like a cartel in business, if you like, but you’re using your power in an anti-competitive way rather than in a competitive way.

HARI SREENIVASAN: We all want to think of ourselves as middle, middle class, but we’re not.

RICHARD REEVES: I think nine in 10 Americans define themselves as middle class in one form or another. And it’s obviously an attractive thing to say we’re all the same class. We’re all in the same boat. You’re stretching the definition of middle now to include people with very healthy six figure incomes right at the top of the distribution at some point the word middle ceases to mean very much.

HARI SREENIVASAN: Reeves defines the upper middle class, the top 20 percent, as families making $117,000 or more a year.

To illustrate the difference between them and everyone else, Reeves points to this statistic: between 1979 and 2013, the total pre-tax income income for the bottom 80 percent of Americans grew by $3 trillion. The much smaller group that makes up the top 20 percent, their income grew by $4 trillion. A $1 trillion more.

Reeves says the upper middle class income gains mean a greater benefit from the government’s home mortgage interest tax deduction and more power to insulate themselves in better schools and neighborhoods.

RICHARD REEVES: If you’re in the upper middle class you get to buy an expensive house more expensive than most people can afford. You then get a deduction from the Treasury for doing that so you’re helped by the government to buy this expensive house. You can then use local zoning ordinances or land use regulations to ensure that only people like you can live in your neighborhood. And then you can organize your school admissions policies based on neighborhoods which means that even public schools can actually be predominately affluent and high quality because of the way we’ve organized it.

HARI SREENIVASAN: Reeves calculates almost 40 percent of the upper middle class live near public schools with the best test scores, according to the data from the U.S. Census Bureau and the nonprofit, Great Schools.

RICHARD REEVES: It’s like an X-Ray that exposes class fracture when schools get involved and when you think about kind of integration.

Take this elementary school in New York City’s affluent Brooklyn Heights neighborhood. P.S. 8 is predominantly white, with test scores considerably above average.

When the city’s education department rezoned the area two years ago to ease overcrowding in P.S. 8 and assigned children to nearby P.S. 307, some P.S. 8 parents rebelled. P.S. 307 had served predominantly low-income, minority students with lower test scores.

It’s not that anyone sat down and said look let’s do some devilish scheme Let’s let’s find a way to rig the system and design tax and education housing like in this way. But it is the result of the interaction of those different kinds of systems which many of us benefit from, and candidly we’ll support those sorts of exclusionary mechanisms, because it’s in our short term immediate self-interest to do that.

In the end, the Brooklyn Heights school rezoning went through. But Reeves says the class gap in education continues right on through college.

HARI SREENIVASAN: You also talk a little about the idea of legacies and giving you a leg up if your parents went to the same college. How does that play out because most of the Ivy League schools say “No, no no, we don’t really do that.” Not to a great extent, anyway.

RICHARD REEVES: There is something deeply troubling about the idea that my kid should get preferential treatment getting into a particular college, because I happened to go or my wife did. Whereas the kid of an immigrant by definition can’t benefit from that or a kid who was born poor, first in their generation to go to college. So that’s something symbolically, deeply unfair about that system.

HARI SREENIVASAN: Besides that idea, slightly more public example might be internships, who gets them, how diverse that actually is.

RICHARD REEVES: One survey suggests that three in five graduating college seniors have done some sort of internship. Many employers will give a job to someone who’s done an internship.They’ll certainly value someone who’s done it. So it’s become quite an important transition institution in the last 20 years. And what you find is that first of all, many of them are unpaid, which means almost by definition that they’re biased in favor of those who are from affluent backgrounds. But also an even more egregiously, in some ways that are often handed out on the basis of who you know or as a favor. Well that’s just cheating in terms of an open labor market and the kind of social norm we need to shift.

HARI SREENIVASAN: Some critics of Reeves’ work argue that laying the blame for lack of upward mobility on the upper middle class is misguided.

In a recent Washington Post op-ed, economist Robert Samuelson wrote: “Though economic opportunities abound, the capacity to take advantage of them does not. That, not hoarding, is our real problem…As for parents, why make them feel guilty for wanting to help their children? What are parents for, after all? …Let’s not blame the struggle of the lower middle class and poor on the success of the upper middle class. The two are only loosely connected, if at all.”

But Reeves says being a successful parent shouldn’t mean rigging the playing field.

RICHARD REEVES: The question then is where’s the line when the sort of good parenting become some form of hoarding or kind of cheating, because we’re all so in favor of a fair society. How do we manage schools, how do we vote on a local zoning bill? Do we play the legacy card or the donation card? How do we operate in our own institutions? It’s not quite good enough just to say, ‘Well, everyone’s doing it,” because that’s the moral reasoning of a sixth grader. If my kid comes home and said, ‘I cheated in maths today, but everyone was cheating,’ do I say, ‘Well, that’s ok. As long as everyone’s cheating, it’s fine.’ At some point we have to do better than that, I think.

HARI SREENIVASAN: One of the controversial things you point out is that for someone to move up, another person might have to move down. And that runs counter to everything we have ever grown up with: “Oh, there is plenty of room at the top. We can all get there.”

RICHARD REEVES: It is a zero sum game. You know the top 20 percent can only ever contain 20 percent; that’s that’s just a math statement. And so to that extent if you want more people moving it back up 20 percent, you do need some more people coming out of it, falling down. But downward mobility, while mathematically necessary, is also deeply unpopular both on a personal and a political level, and I think that’s true for all of us. Very few of us are willing to decide which of our kids are going to be nominated to go down in order to create more room for poor kids to rise up. But it is a necessary, necessary part of the story.