Family Money
2020-01-29
I was recently linked this comic ("Privileged Kids On A Plate", by Toby Morris). The person who linked it said that they felt like they understood the world a little better after reading it, that it was a way they hadn’t seen things before.
To me, this is just the first step on understanding how things work. So, I’m writing here to try and expand on it, and chart the course for others (not that anyone reads this).
Comic Premise
The comic lays out a basic well-trodden premise, summed up by Everlast in a song 20-some years ago - "where you end up usually depends on where you start." Maybe more specifically, it could be said like;
People whose parents were financially ready for children turn out better than people whose parents were not as able to provide for their children.
Look, let’s not try to get too deep in citations about this. The premise is arguable by some, but I’m not here to argue it. If someone read this comic and liked it, there’s no point in trying to correct that just yet. We’re going to extend from it, in a couple ways. Regardless of the accuracy of the comic, it’s usually the case that kids with richer parents come out better than kids from poorer backgrounds.
Why do poor kids have trouble?
In the comic, we see two social strata. Rich, and poor. How did those parents get that way? Why are the rich parents rich, and why can’t the poor ones do the same thing?
The comic is fairly strongly implying that wealth is almost exclusively generational - having rich parents makes you rich, and your kids will be rich, and so on. Having poor parents makes you poor, and your kids will be poor. The rate of this is known as social mobility - your ability to move up in class as you age. The whole premise of the American Dream is of social mobility and equality - everyone has the same rights, there are no ‘classes’ of people, anyone can make anything of themselves.
The comic contests this idea, by asserting that we don’t have much social mobility. Again, this is arguable - and the metrics for social mobility are a complicated topic. But for the purposes of this piece, let’s agree - social mobility is definitely down by some amount, this situation is more likely to happen.
So what limits social mobility? Everyone agrees that the limiter is opportunity - your ability to notice and pounce on ways to make yourself useful to others (getting paid in the process). For instance, if you were Arnold Schwartzenegger, could you become a millionaire selling bricks? The conclusion that everyone comes to is that kids today simply have less opportunity. Nobody disagrees about this. The disagreement comes from why and what to do about it.
Why is opportunity tightening?
I’d like to illustrate why with a story from my family.
My dad tried to start a brand-new sandwich shop north of Phoenix in the 2000s. He chose not to franchise - he wanted to blaze his own trail. He leased a location nearby to an office park, crafted a reasonable menu without too many crazy items, contracted designers for signs and pamphlets, had a small business advisor who got him in touch with all the right renovation contractors and city/county auditors - he did everything you’re supposed to do.
However, once you lease a site, you’re paying the price for it before your business opens. You just take the beating of property taxes and "rent" month after month until you make money.
First, he needed an architect to design the interior. Architects rarely design buildings, they’re more like lawyers for buildings. They know fire codes, safety codes, maximum occupancy calculations, minimum widths for doorways, things like this. Once an architect gives you the plans for a space that will comply with all legal requirements, you hire a contract crew to do the work - resurfacing, putting up walls, installing water systems for sprinklers, things like this. Then, you let the county know you’re ready for an inspector to come out and verify that you’re in compliance with all the right rules.
Inspectors don’t come out right away, though. There’s a limited number of inspectors, and they prioritize their work however they feel best. In this case, there was a mall going up just down the highway, and they were keen on approving that as quickly as possible, because it would bring in rather a lot of tax revenue. A little sandwich shop had no option but to wait. Paying leases the whole while.
Once the inspector came out, he found problems with a few things - stuff like the bar for a handicap bathroom being too high, or a grease trap being set too shallowly in the ground, things like that. Permits not granted. This required going back to the architect (or finding a new one who wouldn’t screw up), getting new plans, hiring a new contract crew, and having them do the modifications, repeating this process until everything checked out.
This took months.
Before opening, he had to hire and train staff. This means hiring people and paying them to learn how to make your food, for a couple weeks. And remember you’re not just paying the staff, you’re also paying payroll tax just for having staff. All the staff needed to be certified food handlers, too (not a super difficult process in most states, but it depends on how harsh the inspectors are about interrogating your staff).
Finally, opening day - he spent money on flyers, walked to businesses and asked them to swing by. And he actually did fairly well, his business was making more money than it took to run it at the end of the year; not something that happens often. But his reserve ran out, he’d already spent hundreds of thousands of dollars putting all this together, and he simply had nothing left to pay random expenses here or there - even though the business was profitable. He sold the company to pay off creditors and lost his business.
Why did this business fail? We can say it’s due to lack of planning, we could blame it on bad architects, or understaffed inspectors. We might even say it was doomed from the start - perhaps the location wasn’t perfect, or the process of picking contractors or architects was flawed. Maybe all of the above.
But you know, these sorts of reasons for failure didn’t exist in our grandparent’s time. This business would have succeeded in 1970, or 1930. The permits required, the taxes leveed, and number of people necessary, to get a sandwich shop off the ground has rocketed in the 20th century. Making a good sandwich is something we can all do if given a month of practice, but making money applying that skill is financially impossible for almost all of us.
Remember how the financial crisis of 2007 plunged the whole world into uncertainty, and afterwards the rules remained basically the same, and nobody went to prison, and today the same practices are in place?
Government overhead for the simplest jobs has skyrocketed, while government overhead for high-paying jobs has plummeted.
Take Home
If you make minimum wage in the United States ($7.50/hr), and you work 40hr/week, you are officially in the top 8% highest earners on Earth. The absolute minimum that an American can be paid makes them some of the richest people on the planet (and, coincidentally, in the history of the world). Is this because Americans are awesome workers? Not really. If you make minimum wage, you probably don’t feel very rich. You probably count dollars every day, deciding what you can and can’t afford.
The minimum wage in 1970 was \(1.00/hr for most jobs. That's about \)6.50 in 2019, so it’s relatively stable. Why is it that minimum wage earners in 1970 had an easier time? Because they kept more of it.
// note how marginal tax rate has gone up, commeasurate with tax bracket compression
// note medicare and social security increases
// see state income taxes
People take home much less of what they earned than they used to.
Priced Out
In 1970, almost everything you bought in America was made by Americans. From gasoline to screwdrivers, the notion of "buying American" didn’t exist, because you might as well say someone should "breathe oxygen". Today, everything is made overseas. Virtually nothing in your house is made by Americans.
This is known as "globalism" - it means that nations with extremely cheap labor (as China used to be, but Vietnam, Thailand, and Singapore currently are) can make a product, ship it to a dock, have longshoremen load it into a container ship, have that ship go across the pacific ocean, dock in the US, have longshoremen unload it, and pay truckers to move it to where it needs to go - cheaper than it costs to make it in the US. How the shit is this possible? Because those overseas workers are working for perhaps a dollar an hour. The extra cost is still worth it.
This is true of literally every industry - it’s simply too expensive to make things in the US, so nobody does it. The US therefore has very little manufacturing, very few maintenance men, very few metallurgists and not many welders. But we have a ton of salesmen, advertisers, executives, and artists - jobs that can’t easily be exported overseas (although China is doing a good job outcompeting the US in these jobs too).
Even if you wanted to be a welder, the competition is tight, and the money will never be very good. Forget about being a bricklayer like Arnold, or making shoes like the Nike guy - you physically cannot make the finances line up to do that.
If you know someone who owns a house, you probably know that they go to Home Depot a few times a year to pick up day laborers to do a job. Refinishing a deck, pulling stumps, mulching leaves, replacing fences, re-roofing, trimming trees, repainting the slats - there’s a million jobs to do, and the Home Depot guys do it cheaply. These guys take cash after the job is done, and for most of these jobs the cost of materials is at least 80% of the pricetag.
These are illegal immigrants, but in 1970 the same situation would have applied to a regular American. Anyone could be a handyman, offering their labor to those in the neighborhood, making a few bucks here or there. Even kids would do this - mowing lawns or hauling trash to the dump. Today, it’s financially impossible to be an American handyman, or small-town painter, or landscaper. You cost so much more than illegal immigrants, and you do the same job at the same quality. Why would anyone pay more for you, instead of them?
Illegal labor is so cheap because it largely doesn’t pay taxes. No payroll tax, no income tax, no "sales" tax on the job itself. But it’s also cheap because it doesn’t require licenses or inspections. No waiting on permits, no scheduling inspectors, no yearly renewals of licenses. You just do a job, and get paid.
Both of these forces have completely exhausted the American lower and middle class, and decimated opportunity. No longer can you get a job fixing fences while you consider what to do with your life - the only realistic career path for Americans is to go through college, get a degree, hope to establish contacts, and land a white-collar job. The cost of college, and how people pay for it, could be a piece all unto itself. Suffice to say it’s not cheap, but it’s the only option.
Back to the comic
This has been a long trip. Let’s revisit - the comic says that if you’re born poor, you’re screwed. That’s true. But it doesn’t say why, and the reasons why take thousands of words to explain. Why, you ask, have things gotten so bad?
Because this shit is complicated.
Year after year, Americans are told something to the effect of "we should have this be safer, or easier, or cheaper." It involves passing a law, levying a tax, and diverting money somewhere. It’s stated that this is a no-brainer, you’ll get safer food or better handicap accomodation for mere pennies off your paycheck.
And we’ve been adding costs like that for as long as the nation has been around - we’re now to the point where most of our paychecks go to these programs, and we have precious little for ourselves. We’re forced to take out loans to do basic things, and we’re encouraged to use credit cards to improve our credit score - even if we have cash to pay for something. Debt is the way around all of this, and it just means that all of our earnings go into payments and taxes. Nobody gets ahead. Nobody can find an opportunity.
It’s really easy to say "well i want my food made by people who know safe food handling", but what’s the cost of that? Is it really worth it? If it prevents you from vomiting once every couple years, is it worth the price? And worse, even if you think so, you’re demanding that everyone pay that price.
The comic understands we have less opportunity, it knows we make less than our grandparents and have little chance to live well by the sweat of our brow. But it seems to take the tack that we should be given things, it castigates those who say "handouts are bad", implying that it wants to give people more for free. But that’s not what we used to do, we used to be quite prosperous and innovative, and it wasn’t because of handouts.
That’s the difference
There’s a cultural battle today, over how to address our economic problems. We think we’re bitterly divided, but i don’t think we are - we actually agree on the symptoms of our problems, and we understand that it’s gotten worse over time. The difference between left and right isn’t based on ideology, it’s based on how much of the problem you understand.
The more right-leaning folks skew older, and we usually think of this as because they’re relics of a past time, clinging to old ways. But we forget that while age doesn’t guarantee wisdom, youth precludes wisdom. These older voters skew to the right not for some rose-tinted notion of the world they knew - but because they’ve had decades to gather context, understand the history, and identify problems in our society. They didn’t just make a webcomic about how things are bad - they know how they got bad in the first place.
Right-leaning ideas have the trouble that they seem sideways at first. If i told you that opportunity was down, and the answer was to stop giving out food handlers permits, you’d probably think i’m wacky. But as you start to understand how much the mountains of legislation stack the deck against regular people, it starts to become clear that the problem isn’t the rich as much as it is the laws. It’s not the players, it’s the rules of the game.
