The reason I think this status issue is important is already in the title of the OP: it says ‘collapsing middle class’. The story suggests, to me, that what is changing is not so much the (real or nominal ) income of middle class people, but that the the income required to consider yourself middle class is rising faster than that of the people.

So some people are in the same income percentile as their parents, and they are richer than their parents were at their age, in the sense that they have better machines and more luxurious holidays. But they are somehow no longer in the same social position as their parents.

I don’t know if that is what is really happening, as I am looking from a distance. But whatever IS happening, there are signs that it is starting in Europe too.

Yeah, maybe we do.

And note that this group [academics] is relatively strong in decoupling income and success. For plumbers, or managers, or shopkeepers, having a high income is a good measure of success.

Perhaps that’s true about academics, but it also seems to me that though they show less money obsession than others, they do seem more obsessed with status. Academic institutions are large organizations with clear hierarchies, and lots of competitive, zero-sum games (starting with tenure).

As for plumbers, managers, and shopkeepers—you’ve included two categories of independent business people (plumbers and shopkeepers) and managers—who are typically employees in large organizations. These people are not the same. For independent businesspeople, a main source of satisfaction is the independence itself. I’ve known people running small businesses who are highly resistant to returning to life as a ‘wage slave’ with a boss—even when that would mean more money and greater security. Which is yet another example of a disconnect between money and status.

I did not wish to imply some one-dimensional,ladder-like status concept. Perhaps social standing is a better term for what I had in mind. In this context, income is surely not the single main driver of, by lack of better terms, status. But I do think it is to a very large extent an ‘enabler’, in the sense that every social group has some rough minimum income that is needed to be comfortable.

Second, my point is not mainly about conspicuous consumption as meant to impress others. The main audience is not a peer group or something, but the buyer self. And here the important point is perhaps not so much having the object, as the being able to to have it. And this effect works much stronger the other way round: if someone is no longer able to afford the luxuries of a certain social standing, it hurts harder than just the loss of the luxuries themselves.

In your example, it is clear that having a truck is not something standard in the social class of academics, call it the class of highly specialized skilled workers. Not having a truck doesn’t hurt. On the other hand, being able to travel to exotic locations, to buy any book you want to read, and especially being able to take a lower-paying but interesting job while still not having to worry about cash are important. Sure, they are pleasant, but they are also social markers.

And note that this group is relatively strong in decoupling income and success. For plumbers, or managers, or shopkeepers, having a high income is a good measure of success.

I haven’t seen anyone argue that status doesn’t matter at all—that would be contrary to human nature. The argument is that there is no single dimension of status on which all people can be ranked; instead there are many niches where one can derive status, with new niches developing all the time (especially in a quickly evolving, heterogeneous culture). And status is fuzzy—even in a particular domain, there is no clear ‘pecking order’ upon which all observers agree. It’s just not like the status hierarchy in a troop of baboons where every baboon knows who’s above him and who is below.

Next, status is not a direct function of money. Yes, money is a source of status, but so are attractiveness, intelligence, learnedness, wit, athletic ability, musical ability, artistry, craftsmanship, sociability, leadership abilities, empathy, and so on.

And most importantly, people care about and take pleasure in many, many things that aren’t status-related.

I think it is an observable fact that many people do care about status, that status is highly (but far from fully) related to income, and that as a result people value an income that buys them certain things, even if they would not put much value on those things intrinsically.

I disagree about your assessment about the strength of the relationship between income and status, and as for conspicuous consumption—I think that varies a lot. Certainly there are people who are highly invested in maximizing their incomes and conspicuous consumption. But those people are a minority.

We all also know many people did not enter the highest-paying professions available to them. That group includes, for example, virtually all academics. Many, perhaps most academics would have made more money if they had gone into plumbing, but how many of them regret not having become plumbers, feel lower in status than the guy who comes to clean out their drains, and envy the shiny 3/4-ton, quad-cab, 4 wheel drive pickup he drives?

Roughly speaking, Warren divides household expenses into two categories: the ones that the household can easily reduce when they’re going through a rough patch (appliances, entertainment, toys of all varieties, even food—- in the first world, at least, going to cheaper cuts of meat, and so forth) and the ones that they can’t easily reduce (house payments, gas for the car, health insurance premiums, etc.). The former category is what’s going by “discretionary” here.

What resolves the apparent paradox is two trends that have been happening at the same time. On the one hand, the mix of household expenditures has shifted. Using Warren’s figures, the 1970 family spent roughly half of its income on expenses that it couldn’t easily reduce, but now, it’s more like 75%. On the other hand, the price of toys has gone down, so that 25% of family income buys a lot more toys.

The upshot: the 2005 family can afford gadgets that the 1970 family couldn’t dream of. But what they can’t afford is a 35% drop in income. For the 1970 family, that’s an inconvenience. For the 2005 family, it’s a calamity—- they’re materially better off, so long as the income keeps coming in, but they’re far less secure.

(That’s a hopefully accurate paraphrase of about five minutes of Warren’s talk; there’s somewhat more at my original blog post.)

But none of the various discussions I’ve seen about how we’re allegedly worse off than in the 1970’s mentions ‘two incomes with shorter hours’ but rather just compares modern living with the supposedly superior situation in the 70’s where the typical family had one (male) breadwinner. That it could be about ‘two incomes with shorter hours’ suggestion has come up here only in response to my complaint.

Actually, somehow Warren manages to mention the idea of “plenty of vacations” (i.e., shorter work hours) for a two-earner family without any prompting from you.

Of course, even if everybody were talking only about the ideal of a one-earner family, the 70’s are mentioned simply as proof that the such a society is feasible economically. The implication that the earner should be the male is your own.

How is that different from giving people status based their income?

Note that I am not arguing in favor of or against income-based hierarchy. I think it is an observable fact that many people do care about status, that status is highly (but far from fully) related to income, and that as a result people value an income that buys them certain things, even if they would not put much value on those things intrinsically.

I also do not believe status is entirely a zero-sum game. More specifically, I fear that strong income inequality leads to a situation of stratification, where people from lower ranking groups get less chances in life.

But none of the various discussions I’ve seen about how we’re allegedly worse off than in the 1970’s mentions ‘two incomes with shorter hours’ but rather just compares modern living with the supposedly superior situation in the 70’s where the typical family had one (male) breadwinner. That it could be about ‘two incomes with shorter hours’ suggestion has come up here only in response to my complaint.

abb1: So, despite all the technical advances, it shouldn’t be too difficult to figure out what a 1970 family needs to spend to get roughly the equivalent of entertainment and travel in 2005, right?

To get the 2005 equivalent in entertainment and travel would have cost the 1970 family a fortune. Airline travel was rare and expensive, but 2005-style home entertainment was out of this world. If you wanted to watch a Hollywood movie at home, you had to be a millionaire with your own Hollywood-mogul style screening room. By the end of the 70’s, you could buy a VCR, but the players cost hundreds (of 1970s dollars) and the movies were mostly $50 or more (again, in 1970s dollars).

Great Zamfir: But I think the more important effect is the status consumption effect. Every time people mention LCD TVs as an example how modern gadgets are so much better for the same money, I can’t help thinking that a 1970 family was probably exactly as a happy with their mid-range TV then as a modern family is with their mid-range TV now.

Another question—when did lefties decide that what really matters in life is status? I don’t know about you, but my life is richer and more interesting now that I can run down to the video store and borrow almost any film for the 1970s equivalent of 50 cents. There’s no status bump from owning a DVD player and a Blockbuster membership—that’s not what it’s about. Contrast this with the 1970s. In 1975 NBC paid millions (of 1970s dollars) to show ‘Gone With The Wind’ on TV for the first time. They showed it over two nights, and it was a HUGE event. The two nights were the highest rated programs in history at that point. It’s hard now to remember such a time existed, but until the late 1970s, most movies tended to disappear from public view after their initial distribution (unless you were lucky enough to live near a revivial house).

In the same way, the Internet similarly makes life richer and more interesting without any status effects. If it’ll help, think in terms of a public library. There’s no status effect from having a library card—it’s about the books (I think even lefties would agree that public libraries are not about status, right?)

There are also no status benefits from having a GPS in your car, but you don’t get lost. There are no status effects from having a cell-phone, but you can reach your friends and family members. No status effects from owning a digital camera, but you have the pictures.

One of the reasons that I am not a lefty is the pervasive and unattractive idea that all the fruits of human ingenuity make us no better off because we’re left in the same position in the ‘great chain of status’ and that’s what matters the most. Bleech.

But stronger, I think ‘envy’ and other derogatory terms are not justified. Every society confers some status on their people, and ours ( American, European, perhaps ‘modern’ in general) puts a lot of weight on income.

For all its weaknesses, it is probably fairer than status based on your parents, or your warrior skills, or your Party rank, and it is definitely more productive.

Look how much of the ‘middle class basics’ in this debate are about children: it is about families, about education, but also in general about an income security that is especially important to parents.

I think it is quite reasonable to say that what people are (rightly) fearing is not so much inequality, but stratified inequality, where the income and status of parents will determine that of their children.

So, if someone could go on a certain holiday in 1970, and their children can afford the same holiday now except for lower status attached to it, than they have lost something real, perhaps just as real as the holiday itself.

But I think the more important effect is the status consumption effect. Every time people mention LCD TVs as an example how modern gadgets are so much better for the same money, I can’t help thinking that a 1970 family was probably exactly as a happy with their mid-range TV then as a modern family is with their mid-range TV now. No matter that a mid-range TV is better nowadays.
Same of course for driving/flying holidays.

It’s easy to dismiss this as trivial, but to a very deep level people do not have middle-class incomes to buy middle class stuff, but they buy middle-class stuff to show ( mostly to themselves) , that they have middle class incomes. Of course this applies to every other class too.

Actually, I take it back, it doesn’t have to be too subjective. People consume electronics not because they want electronics but as means to the end – entertainment, for example. And they don’t want to sit inside airplanes, they want to get from point A to point B. So, despite all the technical advances, it shouldn’t be too difficult to figure out what a 1970 family needs to spend to get roughly the equivalent of entertainment and travel in 2005, right?