This essay was written by Singularity Institute president Michael Vassar, and edited by me.
I think that the structure of how the well-being of different classes in the US has changed since 1900 is complicated, but if we focus on the right things, we can come up with a reasonably accurate assessment of how it has changed.
Over the last 100 years, the lives of the people in the bottom 1% or so of the class structure haven’t changed much, relative to the rest of the population. Back then, people in this class were on the streets, or occasionally in prison or mental institutions; now they are in prison, or occasionally on the streets or in mental institutions. In 1978 the difference between prisons and mental institutions was smaller. Life in prisons, mental institutions, and on the street has gotten better, but I doubt it has improved as much as average life has.
For the next 29%, commonly referred to as ‘the poor’, things have clearly gotten much better (relative to the rest of society) in the last 100 years, and much worse in the last 30. I think it’s worth mentioning, though, that in the past, class mobility (from this class up) was much lower for non-whites than it is today, due to the higher prevalance of racism. For whites, mobility from this class up to the middle class has become even easier than it was, but making the transition was easy 100 years ago too. The incentive to do so has shrunk greatly, so I would expect this transition to be less common nowadays, even though it is easier. Upward mobility into the upper middle and upper classes has become much harder for whites in the last 60 years, largely because of the declining relative quality of non-elite education.
Relative to 100 years ago, the next 50%, the middle class, have become more like the rich (more luxury goods, lots of stuff), and relative to 30 years ago slightly more like the poor (low security, low political power and sense of power, and less experienced freedom due to rigid career and education tracking). Much more importantly, however, what was a relatively homogeneous group 30 or 100 years ago has become extremely differentiated. The difference in people’s standards of living over any percentile gap within this range is either the greatest since Malthusian conditions ended, or the greatest in all of human history. People frequently compare themselves to their neighbors and their families, so I think that this gap in inequality is the basis of the visceral experience of growing inequality in the lives of most people within this class.
The main cause of this extreme growth in inequality, as in the Malthusian period, is the existence of high Ricardo rents. At a very rough estimate, between 1978 and 2008, the quality adjusted cost of most discretionary spending fell by 80%, but the total of all fixed costs (lead rent and mortgage payments, and of course medical care) rose by 30%. Obviously, this hits people with incomes slightly below the mean much harder than people with incomes slightly above the mean. Simultaneously, income variation within the ‘middle middle class’ has increased, greatly aggravating the problem. The net result is greatly increased competition within this demographic, and an increased sense of unfairness, due to the apparent arbitrariness and zero-sum nature of consequential outcomes.
Depending on the other factors in their lives, the next 19% of the population, commonly known as the ‘upper middle class’, may today live quite similarly to the groups on either side of themselves, but there is much less practical economic welfare driven difference in the lives of the members of this group than among the ‘middle middle class’. Like the poor, life has gotten much better for this group relative to the rest of society over the last century, but while the possibility of envy of the upper class ruining their lives greatly decreased between 100 and 30 years ago, it has gone back up in the last 30 years, as the cost of maintaining association with the rich, and thus of maintaining membership in high status circles, has once again become potentially ruinous for them.
A critical problem facing this class is downward generational mobility, the classic problem of elites under Malthusian conditions. Members of the upper middle class generally have enough capital to maintain themselves, but not enough to survive division between children. They have responded to this by reducing their number of children to 0-2, but because so much of the capital required by members of the upper middle class is human capital, which is dependent upon genetics and other external factors, this strategy is only partially effective. Prior to 20 years ago, most professionals could fairly confidently and rationally expect that their children would be able, with reasonable effort, to become professionals themselves. This is clearly no longer the case. 100 years ago they couldn’t afford to live like their social betters, but could easily sire social equals; today it is the reverse, and their situation 30 years ago might be twice as much like today as it was like 90 years ago.
Practical differences in wealth-related welfare among the top 1% have essentially disappeared over the last century, with a small but significant fraction of this change in the last 30 years. Over the last century as a whole, hereditary status has become less important, but over the past 30 years specifically, status due to money (as opposed to birth or power) has become more important. However, members of this group have enough money to provide group membership to any ordinary number of offspring, if only they invest it at a reasonable rate of return and are not ruinously wasteful. Increasingly, more than two children is becoming the norm among members of this group. The loss of practical, hedonism-driven reasons for preferring billionaire status to ‘merely’ top percentile status is probably related to the astonishing increase in income inequality within this group, as larger and larger cash incentives have become necessary to motivate productive work from the members of this group. One unfortunate consequence of this is industrial decline. It is irrational for people to build capital-intensive new companies if the only people who can attempt to do so are the rich, and if doing so requires great effort and very substantial risk of serious economic loss. Another cost comes from empire building, as we increasingly face a world where the merely avaricious are displaced in top executive positions by the gamblers, power-mad, and of course the extremely civic minded.