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The Top 20 Percent Are the Real ‘Hoarders’ of Wealth

White House aid Stephen Miller made headlines last week over his contentious exchange with a CNN reporter during a press briefing about a new immigration bill. Miller made various bold claims about the bill’s benefits, one being that it would reduce “wealth inequality,” provoking backlash from the Huffington Post [1] and the Washington Post [2].

Income inequality is a popular enemy for politicians to attack. President Obama called [3] income inequality the “defining challenge of our time,” and Senator Bernie Sanders famously railed against [4] “the top one-tenth of the top 1 percent” for months during the 2016 election. President Trump won the office because he appealed to low- and middle-class Americans who felt left behind in the age of globalization.

Conservatives tend to brush off concerns about inequality. After all, in the free market, we’re rewarded based not on our class status, but on our own abilities. Right?

Sadly not, argues Richard Reeves. In his new book, Dream Hoarders [5], Reeves argues that the upper middle class, or the top 20 percent, is “hoarding” the American Dream.

Reeves uses statistics to show that there is both a poverty trap and a wealth trap in America; children born wealthy will stay wealthy, while children born poor will stay poor. Data [6] from the University of Michigan’s Population Studies Center show that 37 percent of children raised by families in the top 20 percent of incomes remain there as adults, while at least a third of children raised in the bottom 20 percent stay there.

Why is this? Reeves first points to unequal development of human capital.

By unequal development of human capital, Reeves is talking about parenting and education. Upper middle class parents are more likely to be married, and they’re more likely to plan their pregnancies. A study [7] at the Columbia School of Social Work found that parenting behavior, namely maternal warmth and sensitivity, to be the most important factor of the gap between upper middle class children and bottom-income quintile children. In other words, parenting behavior is more important than maternal education, family size, and race.

Furthermore, upper middle class children generally live in neighborhoods with high-performing public schools, or they attend posh private schools. Upper middle class parents can hire college admissions consultants for upwards of $5,000 to guarantee that their children attend a selective college. Not to mention that most upper middle class parents have often gone through the college admissions process themselves and can help their children succeed.

But all these behaviors should be lauded, not discouraged. Why shouldn’t parents spend time with their children, read with them, and do all that they can to send them to a good school? These behaviors are clearly not wrong, but Reeves does suggest some reforms to equalize the playing field for lower-income children. He suggests reducing unintended pregnancies through better contraception, improving parenting among low-income parents by funding home-visiting programs that build parenting skills, getting better teachers at underachieving schools by paying  more to work in those environments, basing student loan repayment levels on income, and simplifying the college financial aid application process.

Unfortunately, Reeves chooses not to promote school choice as a solution to inequality in education. This is surprising because upper middle class parents already have school choice—they can afford to pay to send their children to the school that works best for them. School choice would give children from disadvantaged backgrounds the same opportunity to attend a good school––a large step toward equal opportunity.

When Reeves talks about “opportunity hoarding,” he’s referring to certain behaviors the upper middle class engages in to rig the competition in favor of their children. In order to give all children the chance to succeed, Reeves suggest that we curb exclusionary zoning, especially density requirements that prevent multi-family homes from being built in wealthy areas; end legacy admissions at the top colleges in America that inevitably give preference to upper middle class children; and open up internships by increasing regulatory oversight and extending student financial aid to cover summertime opportunities.

There are certainly barriers to economic mobility in America. Some of these are natural results of upper middle class families having more resources and others come from harmful government programs. But even if relative mobility is decreasing in America, absolute mobility is alive. Gallup’s standard of living index [8] has more than doubled from 2008 to 2015, demonstrating that Americans view their economic situation as getting better, not worse. Relative mobility is concerned with whether people bypass others when their incomes increase, while Absolute mobility is concerned with whether incomes increase or decrease. Over time, everyone can be better off as the economy grows. Why do we need downward mobility from the top? If everyone’s standards of living are rising, why do we need to be concerned with class status?

Reeves makes a convincing argument for the importance of relative mobility when he writes, “increasing the number of smart, poor kids making it to the top of the labor market is likely to mean an improvement in quality and therefore productivity.” Upper middle class people are top influencers in society; they are politicians, pundits, broadcast journalists, and financial analysts. These people should be the most talented people in society, not just the ones lucky enough to be born to rich parents because that is best for the economy. To give one of many examples, a working paper [9] published by the National Bureau of Economic Research determined that fund managers from low-income backgrounds perform better than those from upper middle class backgrounds.

Reeves points out a problem that should alarm conservatives and liberals alike. Equality of opportunity is the cornerstone of the American Dream. Our identity as a country is founded on the idea that everyone should have a fair chance to succeed, no matter who you are or where you grew up. The American Dream is still alive, but it’s far more difficult to obtain for some than others. Policymakers should refocus on equalizing opportunity rather than fighting income inequality.

Amelia Irvine is a Young Voices Advocate studying government and economics at Georgetown University. You can follow her on Twitter here [10].

30 Comments (Open | Close)

30 Comments To "The Top 20 Percent Are the Real ‘Hoarders’ of Wealth"

#1 Comment By TheCollectiveGasp On August 10, 2017 @ 10:28 pm

Liberal America, please wake up.

You may look down on us as white trash, but understand that not two generations ago we were the educated middle class as well. Our kids all graduated from high school and that was good enough for a decent middle class life of being a machinist or an autoworker. You could even own a house and send your smartest kid to college. You didnt mind immigrants, or anyone else for that matter, because everyone pretty much kept to themselves, and there was enough for all to live a decent life.

Then one day the wealthy decided they didnt have enough, and thought that they could get more, so they changed the rules and wrung us out like sponges, until now there is nothing left to us but the small joys we have, and yes this includes alcohol and other drugs for some. This kind of death is all around us now.

But dont think we are dumb. No. Never think that. We are and were as smart as you last November when we flipped that switch for Donald Trump. Most of us knew that he would not keep his promises. None of them do. But maybe, we thought, just maybe he would do to you, what the economy has done to us. Then at last we would all be in the same boat, and can face the common enemy, which are those who have so much that they need not think of the rest of us. How we live or how we die. Their Opium is their money, and protects them from all the pain that the rest of us have to face every day.

#2 Comment By ScottA On August 10, 2017 @ 10:37 pm

Are you aware that the state of California, which has the largest number of illegal and legal immigrants of any state, also has the greatest income inequality of any state?

#3 Comment By John_M On August 10, 2017 @ 11:51 pm

I too am troubled by legacy admissions – but the value of the expensive private schools has been shown to be primarily in network building for fields where this is very important.

If your kids are going into the classic STEM areas and related technical areas of business, the value add of expensive private schooling is much more questionable – the real value for the students is higher grades for the same effort at the private schools compared to state universities.

I certainly am in the top 20%, but I am running my kids through the public schools + running start for joint college and high school credit and then off to local state universities as commuting students – living at home cuts the costs in half. Yes, I moved into a good school district, but even so, my kids were eager to get out of high school as soon as they could.

The community college has an amazing number of slackers and a moderate number of serious students.

Yes, I am trying to prepare my 17 year old son for an internship next year – I am adding supplementary material to master in addition to his business and computer science coursework – I am targeting him against auditing and computer security compliance. I work in computer security compliance so I know what he needs to master – but he still has to do the work, I cannot influence the selection process.

As for my daughter, she dropped out of high school after 10th grade, when she was 14 and did early admission to the state university. While I did help her with some of her math and science questions at time, she got her own internships in civil engineering after she turned 18. Before then, she was too young. Yes, I pushed and supported her rapid progress in math and physics in middle and high school, but she had to do the work and master the material, which she did rather independently of the school classes.

I gave my kids support and guidance, as any parent would. In this case, I have a deep knowledge of some of these areas, so my guidance and help was probably a bit better than most. But I don’t see this as blocking others.

#4 Comment By polistra On August 11, 2017 @ 2:26 am

You’re looking at the wrong side of the problem. Education is not the problem. We shouldn’t be trying to train everyone to be fund managers. Fund managers are thieves and parasites.

We should be trying to rebuild the MAKING side of the economy, which used to give good jobs to poor people without Harvard PhDs. In fact it gave excellent jobs to men who completed fourth grade, like both of my grandfathers.

Those MAKING jobs did not become obsolete. They were STOLEN by the thieving fund managers.

#5 Comment By libertarian jerry On August 11, 2017 @ 4:40 am

The American Welfare State has been one of the main contributors to income inequality. Since the implementation of the Great Society,the roll of the 2 parent nuclear family,especially among the lower income groups,has been devastated. Intact 2 parent families are more likely to work for the best interests of their offspring. Nowadays a women who has children out of wedlock,especially at a young age,is often married to the state. Self responsibility and self reliance are 2 key factors that contribute to the successful. Single parenting makes it more difficult to achieve self reliance.
All of this is the end results of Cultural Marxism as applied over the past 2 or 3 generations. The Cultural Marxist goal of destroying the traditional Western Culture,especially the culture of the patriarchal family,has forced many “single mothers” into being nothing but wards of the state. Not just for one generation but for generation after generation. The question to ask is; Why should the poor work to achieve more “income equality” when one is penalized for being successful and rewarded for not being responsible for your actions? I guess the most important question to ask is; Where’s the daddy? What is needed today is the goal of restoring,as much as possible,the 2 parent nuclear family. It is the quickest way of closing the so called “income gap.”

#6 Comment By Jon S On August 11, 2017 @ 6:43 am

While I would likely be the prototypical top 20 per enter per this article, I wasn’t born that way. I was just extremely lucky to be a very good software engineer in an age where that skill happened to be highly valued.

My comment is that maternal care is not that easy. It requires a good, paternal figure to provide care and a minimal stress environment for the mother. I wanted each of my children to have every ounce of nurturing they could get. For that to happen, I had to give their mother every ounce of nurturing I could give her.

#7 Comment By Don On August 11, 2017 @ 7:43 am

As a liberal, I read TAC all the time as I do think there are great conservative voices that are interesting. However, what I find infuriating is somehow all the things we liberals have said for years(income inequality, social problems, human capital development, etc) are somehow finding their way into the conservative conversation. Almost everything in this article has been a staple of liberal conversation for decades. And over the last 8 years everyone from Krugman to Dean Baker to Mark Thoma to Piketty to Brad DeLong have been all over this conversation.

Make no mistake, I am happy to see the conservatives FINALLY wake up to the reality that free markets are not really what they think they are (and on a side note I am so happy to see economics finally ditch the religious hold that rational expectations had on them that prevented them from seeing econ through a more complicated lens).

So welcome to the liberal conversation. But make no mistake. We started this. It would be nice if conservatives threw a few bones our way and admitted we are right about a lot of things.

#8 Comment By Ontarah On August 11, 2017 @ 10:25 am

I’ll say what I’ve said before. The issue isn’t income inequality of itself. If it’s just a matter of only 1% of the population has yachts or 20% live in 5 bedroom houses or whatever. The issue is when they have those things and the rest of us can barely afford to pay rent. Nobody cares if the rich have cake. The issue is when they say “let them eat cake” while the peasants scramble for bread.

#9 Comment By Positivethinker On August 11, 2017 @ 10:41 am

The bottom line, as pointed out in this article is: family up bringing, more so than wealth, matters in the success of a child.
That’s not a message that most progressives want to hear – it means being responsible for your choices

#10 Comment By KD On August 11, 2017 @ 10:55 am

Gregory Clark in the Son Also Rises looked at income inequality across difference cultures, and found the actual rate of intergenerational immobility is generally about .75 (kids 75% likely to end up in the same class as parents). This is true in Sweden, true in America, and actually higher in post-Maoist China and quasi-socialist India.

Without looking at historic and cross-cultural data, it sounds like Reeves is pathologizing normal, and proposing policy solutions (becoming more like Sweden) which won’t actually work.

#11 Comment By Dan Green On August 11, 2017 @ 11:03 am

We simply cannot assemble the political elite and their influences to accept the Social Democratic Welfare State Model. That model is clear. It calls for the state to re-distrubute the wealth and everyone is the same from cradle to grave, no distinctions . Of course Silicon Valley , Wall Street, and Hollywood talk a good game but they are planning via the Democratic party to get back in power after Trump his forced from office or has to offer to resign.

#12 Comment By EngineerScotty On August 11, 2017 @ 11:40 am

And those of us on the left could have cited chapter and verse on this topic, for years.

The broader right, however, has generally regarded this as a natural state of affairs–and that noticing such things is class warfare. But with the rise of a young urban professional class that is politically liberal, and the devastation of blue-collar America thanks in good part to labor arbitrage championed by the 0.1%, all of a sudden all this faux populism.

The real problem isn’t the salaried professional class sending Junior to SAT prep courses–even though I would agree that many of them (both left and right culturally) would gladly pull up the ladder behind them. I’d suggest instead the real problem instead is the Davos crowd, who don’t need to worry about their children’s college education because said kiddos will have a trust fund supplying them with an income far greater than most of us will ever see, and are actually guilty, in many cases, of “hoarding” wealth (keeping it out of productive endeavors whenever their ROI isn’t sufficiently high). (Most money earned by the 20% isn’t kept in the bank, it’s spent).

#13 Comment By Paul Clayton, aka Carl Melcher On August 11, 2017 @ 1:09 pm

This “…getting better teachers at underachieving schools by paying more to work in those environments…” and this … “promote school choice as a solution to inequality in education…” .. will have ZERO effect in the long run until you re-establish discipline and order in the schools. As someone who ‘subbed’ in the schools, I’ve seen what goes on. And I can compare that with my own childhood and schooling, when order prevailed, and if not, discipline was applied. And I’ve come to the conclusion that sending ‘dysfunctional’ kids to the best schools will not improve them (and will drag the schools down), and throwing twice as many shovel-fulls of money at discipline-starved, dysfunctional schools will change nothing. In chaos, no learning takes place. Just as a force must be sent in to stop raging riots, new operating rules and new teacher-training must be incorporated in our K-12 educational systems to re- establish order. Then assessments can be made, improvements decided on. But what you have today in many, too many schools, is simmering chaos.

In any classroom, the disrupters must be ejected. Yeah, I know, they’re really good kids, and they’re just acting out because they only got one egg that morning instead of the two that rich kids get… But, no learning will take place when the disruptive students spend the hour or day competing with the teacher for the attention and loyalty of the other students. They must be ejected.

All cell phones and smart phones must be banned. Since the Industrial age, children have spent the whole day at schools without smart phones and survived. Smart phones, which are really mini-computers and entertainment systems, are a major distraction and teach kids nothing. Yes, the phone may be smart, but the person staring into it all day is dumb, well, ignorant for sure, unless getting all the updates on Jennifer Aniston makes one brilliant. How the hell can you do that? One might ask. Well, laws can be passed. If some kid has medical problems requiring a phone, that can be allowed. But all other phones are verboten. Parents can call the school office like they did in the bad old days. Also, a building can be ‘de-wifi-d’ so that no child can use their phones there.

Back to the intent of this article. Yes, many of life’s problems and iniquities stem from lesser the ‘hands’ we’re dealt at birth. And society can help address this with interventionists strategies, but just putting out-of-control kids in good schools, and continuing to allow disruptive brats and their litigious parents ‘drag down’ good schools and teachers will solve nothing.

#14 Comment By Nelson On August 11, 2017 @ 1:42 pm

I see this in the healthcare debate. “We’ve already got healthcare” the 20% argue, “it is a privilege, not a right.”

#15 Comment By Richard On August 11, 2017 @ 1:54 pm

“Income inequality” is an academic concept. “Fairness” is a moral concept. Guess which one reverberates with Americans more?

I once read an article regarding this very subject, whose point I recall agreeing with–namely, that the idea of “income inequality” doesn’t register with most people. Why? Because “income inequality” is a vague, illogical concept. Of course I’m not going to make as much money as a hedge-fund manager or neurosurgeon, but that’s okay, because I chose not to be a hedge-fund manager neurosurgeon. “Income inequality” makes it sound as if there’s a Keebler Elf in a tree handing out cookies to everyone, and others get far more cookies than others because they cut the line.

Whether I got the opportunity–a fair shot at–being a hedge-fund manager or neurosurgeon is another story, however.
The reason health care reform, e.g., is so popular is because the vast majority of Americans, whatever your income, don’t think it’s fair that you should go bankrupt because you get a catastrophic medical illness.

#16 Comment By Greg Webb On August 11, 2017 @ 4:11 pm

The statistics used to support the wealth trap and poverty trap to me show the opposite. Thomas Sowell this writer is not. This reads like a high school book report.

#17 Comment By JWJ On August 11, 2017 @ 4:47 pm

First off, no matter how wealthy the US gets, there will always be a bottom 20%. That is just math, right?

The numbers quoted in the article have 63% of the children in the highest quintile (the top 20%) DROPPING DOWN out of the top 20%.
Also, 67% of the children in the bottom 20% RISE UP to a higher quintile.

The inference in the article is that these are “bad” numbers, so I ask
What are “perfect” or “ideal” numbers in terms of children in a quintile moving up or down?

Historically what has it been?

How much wealthier (in terms of calories consumed, or air conditioning, or heating, or cell phone, etc.) are the bottom 20% today [please include ALL transfers to this quintile including food stamps, housing vouchers, medical care, energy assistance, etc.] compared to the bottom 20% of 2000, 1980, 1960, 1940, 1920

#18 Comment By Cal On August 11, 2017 @ 9:55 pm

You can come up with all the programs you want to increase ‘opportunity equality’

BUT….If the parents of children/students don’t teach and motivate their child to *take advantage of opportunities*….then its a waste of time and money with no better results.

#19 Comment By Wilfred On August 12, 2017 @ 12:01 am

So by raising my children, proving them a home in a safe neighborhood and a good education, I am not being a good father; I’m a “hoarder”? Maybe I should neglect them some, so they won’t have any unfair advantages.

Reminds me of when I found out, by paying our credit-card bills in full each month, I was not being a responsible borrower, but rather a “free-loader” on the system.

#20 Comment By Thrice A Viking On August 12, 2017 @ 5:49 am

The real scandal here, it seems to me, is that so many of your prospects for life depend on your education, and that in turn is heavily correlated with intelligence. It strikes me as simple genetics that the children of smart parents are likely to be smart, and that the children of unintelligent parents are likely to be unintelligent themselves. So, if all children were raised in Platonic orphanages, there might be surprisingly little difference in economic outcomes compared to the present day. But, the fact that we can’t provide decent livelihoods to so many of low to moderately high IQs is, as previously noted, my candidate for the true culprit here.

#21 Comment By Laurie On August 12, 2017 @ 9:11 am

School choice would give children from disadvantaged backgrounds the same opportunity to attend a good school––a large step toward equal opportunity.

No, no, and no. Please see the research about the benefits of charters and vouchers. There is no magic wand that makes “choice” fix deep inequalities.Charters and vouchers have not shown significant improvement for the students they are supposed to help. Why not help make existing public schools better? Or why not focus on helping parents more during children’s early developing years?

#22 Comment By Kurt Gayle On August 12, 2017 @ 10:12 am

Amelia Irvine says that “a study at the Columbia School of Social Work found that parenting behavior, namely maternal warmth and sensitivity, to be the most important factor of the gap between upper middle class children and bottom-income quintile children.”

This statement is a distortion of the central findings of the 2011 Waldfogel-Washbrook study: “Parenting style emerges as the single largest domain explaining the poorer cognitive performance of low-income children relative to middle-income children, accounting for 21% of the gap in literacy (2.67 points of the raw 12.68 point gap), 19% of the gap in mathematics, and 33% of the gap in language (Table 1). A particularly important factor included in the parenting style domain is maternal sensitivity and responsiveness (what is sometimes called nurturance), which is assessed in the US data by observing mothers interacting with their young children. The home learning environment is the second most important set of factors in explaining income-related gaps in school readiness. This domain is related to parenting style and we therefore include it under the overall rubric of parenting. It includes parents’ teaching behaviors in the home as well as their provision of learning materials and literacy activities, including books and CDs, computer access, TV watching, library visits, and classes. Together these aspects of the home learning environment account for between 16 and 21 percent of the gap in cognitive school readiness between low-income children and their middle income peers…Conclusion:…Researchers and policymakers have begun to focus more attention on the sizable income-related gaps in school readiness that exist even before children enter school…Income-related differences in parenting style and the home learning environment appear to be the strongest predictors, together accounting for between a third and a half of the income-related gaps in cognitive performance between low-income and middle-income children in our decomposition using the US data. Other explanatory factors include differences in maternal health and health behaviors, child health, early childhood care and education, maternal education and other demographic differences, and income itself.”

#23 Comment By wojtek On August 12, 2017 @ 6:37 pm

“37 percent of children raised by families in the top 20 percent of incomes remain there as adults, while at least a third of children raised in the bottom 20 percent stay there.”

To better understand, let’s rephrase it:
– 63% of children from top 20% families have their financial status decline as they grow up;
– 67% of children from bottom 20% families advance financially at they grow up.

#24 Comment By EliteCommInc. On August 13, 2017 @ 5:39 pm

This is a pretty standard response by republicans and democrats alike. But it really misses the mark. The problem is not wealthy people sending their children to elite schools or others having children out of wedlock. That is not the concern regarding the income gap.

Nope. The issue is that wealth is being leveraged to manipulate the system to benefit the same wealthy players.

Bailout
Banking policy of reduced penalty for being over leveraged
The insider influence and vote buying
the nature of the relationship quid pro quo between politicians and the wealthy
The revolving door of the elite polity and academia that is perpetuated by the same.

Having skipped these areas of analysis your article does not shed much light on why the income gap matters. Instead, you write and article that suggests that its merely poor jealously and stupidity at play. I may be jealous, and no doubt many think me stupid. But the reason the income gap matters is that the majority influence, that other 80% is being shut out in various ways that have nothing to do with jealously or poor personal decisions.

The system structure is being unfairly and unwisely bent.

I don’t like butting heads with people who’s wealth and influence can crush me like a bug and has. But stand on the above I must,

I guess that only reflects my pension for stupidity.

#25 Comment By EliteCommInc. On August 13, 2017 @ 5:42 pm

There was a time, when I acquiesced to the powerful, wealthy and elite, but I am afraid their pudding has no proof that either wealth, education, or power is a must for sound management.

#26 Comment By Jason Argo On August 13, 2017 @ 6:15 pm

What a ridiculous article. Certainly not “conservative”.

“Equality” is not and never has been any sort of conservative (or Christian) concern, especially not in the USA. Our concern here, for both libertarians and classical conservatives (even including racial conservatives), has been with LIBERTY (racialists recognize the need for that liberty to be racially BOUNDED – the Framers wee concerned with liberty for White men). The FedGov has no business involving itself in social outcomes. It’s only concern should be to act as a neutral arbiter of disputes. Of course, in a free society there will arise over time a genetic-based cultural/class elite. So what? This is only a problem if it is allowed to calcify itself via coercive legislation.

#27 Comment By grumpy realist On August 13, 2017 @ 6:50 pm

This is why I would prefer that Affirmative Action be replaced with something else based on the social/financial class of the applicant. Give extra brownie points to a kid from a working-class background in West Virginia. Such a system would still provide a lot of support for minorities, but at least poor white kids would get their chance.

(I’d also like to get rid of legacy admissions, but that’s probably fruitless to hope for.)

#28 Comment By ZGler On August 14, 2017 @ 5:21 pm

I thought the comment about birth control was interesting in a conservative publication. Preventing unwanted births does promote upward mobility.

The truth of the matter is that most poor women do not just adopt-out unwanted children (as the religious right proposes). Once one has carried a pregnancy and given birth, there is a lot of emotional attachment involved.
They raise them in disadvantaged circumstances and the whole family suffers economically.

Supporting free and low-cost birth control (and not just condoms which are only 85% effective, but the most-effective birth control like injected contraceptives and IUDs) is a win-win unless you are 1) against birth control for religious reasons and need to impose your religion on others or 2)opposed to any “freebies” for poor people even if they are supports which ultimately save tax dollars or 3) think that unwanted pregnancy is an appropriate punishment for sex, even sex within marriage where birth control (mostly condoms due to their abysmal 85% success rate)failed.

#29 Comment By EliteCommInc. On August 15, 2017 @ 9:49 pm

“The FedGov has no business involving itself in social outcomes.”

Totally false. The purpose of government is to be the neutral arbiter. In other words, one goes to the government to redress a grievance.

I am sure you know article of the constitution that refers. It’s interesting to note where in the amendments it exists.

As a conservative, I have never not considered the issue of equality. I find your comment peculiar in light of the our governing document, meant to insure equal liberties — and I consider that means liberty from government, as well.

#30 Comment By EliteCommInc. On August 15, 2017 @ 9:55 pm

“Supporting free and low-cost birth control . . .”

Clearly self responsibility is important in these issues. And as that is the case, I would not support any support for private behavior. Better to cease child support beyond one such incident.

I would support the use of birth control — especially celibacy, but not at tax payer expense. Note all of the referenced protections exist now. i am unclear what barrier to incentive exists now.