2011 December 08 Thursday
America's Most Affluent Concentrating Into Fewer Places

The wealthiest neighborhoods are growing in population as America increasingly breaks up into zones based around economic class.

As the income gap has grown, America's wealthy families seem to be concentrating in the most-affluent neighborhoods

The article also reports that the poorest neighborhoods are becoming more purely poor. People are stratifying into economic classes. Liberal elites have helped accelerate this process by promoting immigration policies that brought in lots of poor people and drove down incomes at the bottom. This has increased concentrations of poor people. A poor person is better off around more affluent people. So this demographic change increasing the ranks of the poor has also effectively has raised the costs of being poor.

There's less of a shared national experience because people differ for more overlapping reasons. This means less feeling of common interests and, not surprisingly, every class moves away from the classes beneath it. This isn't just a migration of the very rich away from everyone else.

While many zip codes in the U.S. have been battered by the economic downturn, neighborhoods around Palo Alto are among a small group of expanding rich areas. In a new OECD report, the top 10 percent of the country?s income earners made nearly 15 times more than the bottom 10 percent in 2008, up from a multiple of 12 in the mid-1990s. As is often the case, the rich are grouping near golf courses, beaches, upscale boutiques, and schools.

People raising kids are going to try to live as close to the most successful as possible. Living near more successful people means sending your kids to schools who have fewer children of the poor and dysfunctional.

If you want to see how much income inequality is mapping to divisions between neighborhoods by income check out these graphics from the New York Times on Philadelphia and surrounding counties in 1970, 1990, and 2007. Note how the higher and lower income levels are growing and separating from each other while the middle income areas are shrinking.

American living standards in decline:

Nationwide, median household income fell to $51,914, a $2,678 drop over the decade when adjusted for inflation. Black households lost the most, with median household income falling 8 percent to $35,194. Hispanics reported $41,354, a 5.5 percent drop. The figure for white, non-Hispanic households fell to $56,466, a 4.3 percent decrease over the decade. Asian households reported $68,950, a 2.2 percent gain.

The middle is shrinking. My advice: try harder. Try to learn more. Look for a better job. Look for ways to excel in your current job. Create a bigger buffer between you and personal poverty and between you and the swelling ranks of the poor.

Update: Half Sigma's response to this post got me to thinking: We are looking at market failure. There's a clear large unmet need for cheaper ways for smarter people to raise families and get their kids well educated while living near dumber and poorer people. That need is only going to rise in the next couple of decades. So I'm wondering: how to do this?

I'm not talking about how multi-millionaires can raise their kids. They can afford private schools and tutors. It is the highly skilled husband-wife team that met at a first or second tier college or even a better state school that I'm thinking of. How can they separate their kids from the kids of single moms who made babies with 2 or 3 men? How to get their kids away from these lower class women who manage to get housing vouchers that put them in apartments or run down houses in the same school district? Seriously, the upper middle class (i.e. the people who still can afford to live middle class lifestyles) needs to be able to create safe and cheap environments for child raising.

I don't see telecommuting as an answer. Brainy people need to be geographically concentrated. A different solution is needed. So here are some ideas to create livable towns for smart people with children:

  • Break towns up into smaller towns in order to create smaller school districts. If that suburban neighborhood can get itself put into a different school district than all those apartments on the other side of the highway then lots of smarter kids don't go to school with lots of dumber kids.
  • Strategically convert certain apartment complexes in select towns into retirement communities. Suddenly no supply of dumb kids to mess up the local school. Hey, the ranks of the elderly are swelling and expensive. At least use them as buffers between the smart and the dumb kids. Don't waste the elderly in pure old communities in Florida. Get them into apartment complexes near engineering families in tech centers.
  • In key towns that are attempting to shift the balance of power against the poor claim budget problems and get rid of free ride school rides.
  • More zoning ordinances that limit the number of people per dwelling.
  • Get apartment building owners in key towns to require large deposits. The poor and the voucher programs won't come up with cash.

I welcome more ideas on this subject.

Share |      By Randall Parker at 2011 December 08 10:20 PM  Economics Living Standards


Comments
Kudzu Bob said at December 9, 2011 10:29 AM:

Your advice is sound as far as it goes, which is to say not very. But if this country turns into a Third World country, I doubt that in the ensuing chaos even your very intelligent readers will manage to hang onto their lucrative professions and gated communities. As for myself, I value some things more than money, and will do what I can to fight this allegedly inevitable future.

Lou Pagnucco said at December 9, 2011 10:47 AM:

We have ring-side seats to watch the U.S.'s rapid descent into a dysfunctional dystopia.

solaris said at December 9, 2011 1:30 PM:

>"My advice: try harder. Try to learn more."

Running faster on the hamster wheel is not really a solution to the systemic problem we've created for ourselves. The true solution has to be political, social, and cultural. The current so-called "elite" has to be either re-educated or replaced. Idiotic notions of "free trade" have to be discredited.

solaris said at December 9, 2011 1:41 PM:

>"Liberal elites have helped accelerate this process by promoting immigration policies that brought in lots of poor people and drove down incomes at the bottom."

What's missing in this analysis is any account of the "American people". There was a time when everybody gave at least lip-service to the idea that the well-being of the "American people" was the goal of all good policy. These days it is rare to even get lip-service, and the liberals and libertarians are open in their contempt for the very notion of an historic American people. To them the "American people" means whoever happens to be in America at any particular instant, and even that largely meaningless concept does not loom large in their thinking. Left-wing elites and right-wing elites both seek to further the best interests of the current left and right elites, and rarely even pretend to care about anybody else.

This won't end well.

chris said at December 10, 2011 12:56 AM:

Or you could just enforce freedom of association which would necessarily include the freedom to dissociate from others. That is restrict who can and can't enter a community.

bbartlog said at December 10, 2011 8:47 AM:

There's a community of brick houses in Pittsburgh called Chatham Village. My mother-in-law lives there. I don't know exactly what the legalities of homeownership are, but it's structured as an association of some sort, where in order to join (and buy a house) you have to be voted in by a majority of existing members. By some curious happenstance there are are no NAM members/residents whatever (heck, so far as I know there may be no Asians or Jews either). On the downside it is these days mostly old people, not because they're opposed to families with kids I think but because the nature of the housing stock is incompatible with modern ideas about the kind of space you need to raise a family.
Anyway, I'm surprised that that model is not more common. Granted you end up having to deal with a powerful homeowner association but in a lot of places this would still be a win. I expect however that if it became widespread you would see legal challenges, since the disparate impact of voting members in is quite clear.

HC said at December 10, 2011 9:43 AM:

This isn't about brains or class it's about race. This sort of thing wouldn't have been needed 75 years ago (30 P.A.H. - Pre-American Holocaust). While the rich had private schools for the most part both the wealthy and the brainy sent their kids to the local public schools with satisfactory results. Nor were gated communities deemed necessary. My advice: stop angling for the best ways to profit on genocide against your own people and call a spade a spade.

Abelard Lindsey said at December 10, 2011 10:27 AM:

I don't see telecommuting as an answer. Brainy people need to be geographically concentrated. A different solution is needed. So here are some ideas to create livable towns for smart people with children:

Creating smaller school districts will not work because of political push-back from city and state governments (which tend to be dominated by PC cadres). One solution, if possible for these people, is to relocate to the "whitopias" such as Boise, Idaho or Spokane, Washington. Besides, homes are cheaper in these places. Homes that sell for $350K in Spokane would cost $1 million in places like SoCal.

Kudzu Bob said at December 11, 2011 4:26 PM:

"One solution, if possible for these people, is to relocate to the 'whitopias' such as Boise, Idaho or Spokane, Washington."

That is a postponement, not a solution. What happens when there are no more whitopia in which to hide?

Randall Parker said at December 12, 2011 8:20 PM:

solaris,

I doubt the "American people" are going to really wake up and fight for a fairer order. To the extent that they wake up and get angry they'll fight over the wrong issues and for changes that do not address root causes of decline.

As someone who has spent a lot of time and energy trying to wake up people when I tell you to try harder to further your own economic interests it is in part because I am convinced that we aren't going to suddenly get our elites reined in to work toward what is best for the commonwealth.

To put it another way: We've got mass media that program people into pretty foolish factions. Some people watch Fox News and think they are really hearing the good guys fight the bad guys. But they are still tools getting used by more sophisticated people.

You want to make America a better place? Too bad The ship is going to slowly go down. Build yourself a life raft.

Kudzu Bob,

I hear the (probably quite left wing) Don Henley singing "there is no new frontier". We've got to develop the means to protect ourselves at small scale. The whole country isn't going to turn around.

Look, you guys are so scared of TPTB that you won't even post under your real names. You think we are going to get people organized when people are either scared or brainwashed? Nope, not gonna happen. Writing as the real name me I see very few doing the same. Everyone is too independent and yet scared and isolated.

Lono said at December 14, 2011 8:30 AM:

Randall,

I don't know that fighting for our country - and our own self-interest - is necessarily mutually exclusive.

I am certainly becoming more cynical with age - however - as I clearly have overestimated the ability of even those with unusually high IQ's to remotely recognize the big picture.

(their emotions all too often keep them blinded to the truth - no matter what evidence is on offer)

I still believe that establishing a reasonably separate society comprised of ethical and intellectual elite could provide opportunities to create a new, reasoned, and substantial political power - on this planet - as we approach the technological singularity.

Anyone who is interested in providing time, thought, or resources towards this goal can contact me at mensacontact att yahoo dotte com.

Ross Noble said at December 24, 2011 8:34 PM:

Our decline is purely economic. A good example of economic mechanism in miniature is Asus computers. Asustek would make a component for Dell, and then the next year would make a board, and then climb up the ladder further to the motherboard. In each case, Asus would tell Dell accountants they can make the part cheaper. Simple cost accounting, as taught in our schools, does not account for all the variables. Simple cost accounting is like a horse with blinders. The accountants would convince Dell management that it was cheaper to outsource the work. And for awhile, Dell managment and their accountants are vindicated as profits rise and shareholders are made happy. But, eventually Asus doesn't bother with Dell anymore, and they go straight to Best Buy and offer to sell a whole computer 30% cheaper than Dell. Cost accounting methods cannot deal with these realities. In other words, information encoded in cost accounting is too simple, and turns accountants into simpletons. How does it feel now Dell? You have given away your core competencies and have a hollowed out business model, all of this in pursuit of cost reduction.

The combination of dollar as reserve and the internet, has short circuited mainstreet industry. It used to be that an inventor/entrepreneur would come up with an idea, and said idea would be made into a product. That product would have investment and production cycles within our economy. Labor and the middle class would support the infrastructure and learn how to make it better and cheaper. In this case cost accounting works, because industry exists within the framework of American law.
The invention, investment and productization cycle could take 20 years, and during this interim wealth is generated benefiting the poor and middle class.

Dollar as reserve currency insures that that tariffs remain low. China pegs the Yuan to low exchange rates, insuring that labor arbitrage occurs. Labor arbitrage is where industry outsources knowledge and jobs, in order to take advantage of the "cheaper labor." This arbitrage allows wall street and industry captains to slice off the delta in wages as profit to their companies. They are heros for awhile, and we the buying public are made zeros as the jobs disappear. Eventually, the companies are turned into zombies as they have actually given away real wealth, the historical knowledge, and other myriad factors not accounted for by simple cost accounting.

Dollar as reserve, and going off of Gold has created a T Bill economy. Deficit dollars spent on our military, and dollars that leave our economy in trade imbalance, tend to return and get locked up as T Bills. This takes dollars off the market, making the dollar more valuable than it should be #supply and demand#. This hollows out mainstreet as they become uncompetitive due to the unnaturally high dollar. Again, simple cost accounting does not account for money manipulation in exchange flows. If money is to serve as an information unit necessary for simple cost accounting, then our money situation needs to be dealt with. It is job number 1 and any politician that doesn't talk about money reform is clueless.

So, how come we have a Mexinvasion and surging classes of the poor and ignorant. The Mexinvasion is due to Nafta and dollar dependency, as I've discussed here previously #REN#. The other piece is that Mexico is a Statist Oligarchy, run by the rich. Mexican's are kept in peasant status, as is typical of feudal oligarchies. When they come to America, their debt peon serf mentality is a mismatch to our still industrial #but declining# base. Mexicans and other third world types are an attempt to counter the wage arbitrage of Asian outsourcing. Our internal industry attempts to compete by bringing in slave labor. Unfortunately, this slave class labor has costs that are not accounted for in simple accounting. The additional costs include medical, school, and other social costs passed onto tax paying Americans.

The notion that we have to continually invent, and pass our jobs to Chinese, or immigrate slave labor, is buried in our economics. Specifically, dollar as reserve and deficit spending overseas is creating these circumstances. The internet allows high speed passing of information and know how. Industry captains think they are doing the right thing, given their simple cost accounting models. But, they are wrong.

In a real economy, we would have used capital to improve our labor. We would have automated with robots and machine vision etc., thus preserving our industry and know how. That has been short circuited, and now our poor and middle class have little opportunity to help create new industry and better themselves.

I reject the notion that we should segregate ourselves as our decline is inevitable. The actual fixes to make America work again are fairly simple.



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