The Meritocracy Trap

by Daniel Markovits

  House prices and rents follow suit. The thought that a house in an elite part of Boston, New York, San Francisco, or Washington, or for that matter in Palo Alto, would cost just twice the price of the median new house in the country—or in St. Clair Shores—has become laughable. Even renting in these places is now out of reach of the middle class: rents in Los Angeles, San Francisco, Miami, and New York now cost 49, 47, 44.5, and 41 percent of the highly inflated incomes in those cities (up from 34.1, 24.7, 26.5, 23.7 percent as recently as 2000). For every 1 percent rise in the ratio of college graduates to nongraduates in a city, rents increase by 0.6 percent. The middle class simply cannot afford elite cities today.

  Indeed, geographic isolation by class proceeds in a finer grain still, as the rich and the rest are increasingly separated even within cities. In 1970, nearly two-thirds of Americans lived in middle-class neighborhoods; today, only two-fifths do; and over the same period, the shares of Americans living in rich and poor neighborhoods both doubled. More generally, both the rich and the poor have become substantially more concentrated by census tract over the past forty years: demographic measures of residential segregation by income and education have increased by at least 25 and 100 percent respectively since 1970. Even mixed neighborhoods have become less mixed: between 1970 and 1990, the shares of neighbors of the average poor family that were also poor and of the average rich family that were also rich doubled and increased by one-fifth, respectively.

  Socioeconomic segregation is especially extreme at the very top of the distribution. In New York’s Upper East Side, the share of adults with college degrees more than tripled between 1960 and 2006, reaching 74 percent. Similarly, among the 9.1 million Americans aged twenty-five and over who live in the top 5 percent of zip codes by income and education, 63 percent have BAs, and the median annual household income is $141,000. The next neighborhoods over extend the isolation of the elite. Nearly 80 percent of the residents of zip codes in the top 5 percent by income and education live in clusters of such zip codes, and the average neighborhood that borders such an elite zip code is itself in the 86th percentile by income and education. Moreover, the association between the elite and certain neighborhoods holds in both directions: recall that half of Harvard, Princeton, and Yale college alumni live in the richest and most educated 5 percent of zip codes. Elite professional school graduates live in more prosperous places still. Three-fifths of Harvard Business School alumni live in top 5 percent zip codes.

  Physical segregation catalyzes other varieties of segregation. Education and income jointly feed back into amenities and quality of life more generally—to give the cultural divergence just described a geographic cast. The richest, best-educated cities boast dramatically longer life expectancies, lower crime rates, less pollution, and more political clout. Perhaps most important, meritocratic parents use economic segregation to insulate themselves and their children from the disorder and disruption that have become facts of life among the less stable families that make up the rest of society. The 90 percent of children in elite zip codes who grow up in enduring marriages, with both biological parents present, have virtually no friends and neighbors who do not. The gates and guards that control crime in rich neighborhoods might receive the lion’s share of attention from those who lament inequality. But the most consequential mechanisms of elite self-segregation deploy not security guards but rather rents and house prices.

  It is difficult to aggregate all these effects into a single composite, but according to one estimate, neighborhood quality and other amenities associated with rich, well-educated cities push inequality of well-being a further 30 percent higher than inequality of dollar income. Economic inequality produces entirely distinct ecosystems for the rich and the rest. Small wonder then that not just the facts of geographic mobility but also the reasons behind it have changed: whereas Americans used to move to cities seeking better weather, they now move expressly to be around others like themselves.

  Finally, these effects reach across not just facets of life but also generations. Poor neighborhoods obstruct and rich neighborhoods facilitate the training that children require to join the elite as adults. The effects, once again, are substantial and apply across the income distribution. At the bottom, upward mobility is highest in cities that still disperse poor families among middle-class and rich ones, in mixed-income neighborhoods of just the sort that are generally disappearing. And higher up the distribution, rich neighborhoods support the extraordinary top/middle per-pupil expenditure gaps documented earlier, which underwrite the enormous skew to wealth among students at elite colleges and universities.

  Each city and each neighborhood reprises these trends in a distinctive way, refracting patterns that arise generally through its own sense of place. But unlike at midcentury, data concerning income and caste now capture and determine a great deal about a place. Even towns that have remained middle class, like St. Clair Shores, have become distinctively rather than generically so—literally remarkable for having few really rich and few really poor residents. And most towns have moved either up or down the caste order, to become identified as rich or poor. Economic trends, not quirks of personality, now determine what places are like.

  Overbrook Street, as it happens, has followed the same path as Palo Alto. Today, median annual household income in the Sigmona Park zip code exceeds $100,000, and 60 percent of adults in the neighborhood are college educated. Overbrook Street houses lawyers, doctors, and elite government workers.

  FITZGERALD AND HEMINGWAY REDUX

  Midcentury American culture did not allow the economic distinctions between their families to make a great difference to the lived experience of Bill Clinton’s and George Bush’s childhoods—rather, they shared a middle-class society, with each other and with most of the rest of their generation.

  By contrast, the lives of Bill’s daughter, Chelsea, and George’s daughters, Barbara and Jenna, have been determined by their families’ now-shared eliteness, making them unrecognizable to middle-class children today, and equally so to the elite of their parents’ generation.

  Chelsea Clinton attended an elite private high school (the last child before her to be raised in the White House, Jimmy Carter’s daughter Amy, attended public school) and then Stanford, Columbia, and Oxford Universities. After finishing her studies, she worked for the management consultancy McKinsey & Company and the private equity and distressed securities investment firm Avenue Capital Group. Chelsea’s husband—the son of two members of the House of Representatives who had been friendly with her parents in Washington—also graduated from Stanford and Oxford and then worked for Goldman Sachs before starting his own hedge fund. The couple met at a Renaissance weekend on Hilton Head Island; they married at Astor Court, a fifty-acre Beaux-Arts estate built on a bluff overlooking the Hudson River during the last gilded age (Chelsea wore a Vera Wang gown); and they spent over $10 million on an apartment (unsurprisingly, in Manhattan).

  Barbara Bush graduated from Yale University and has worked for design museums and international development organizations. Jenna Bush has also worked for international charities, publishing a book about her work, as well as serving as a news correspondent for NBC. Jenna’s husband—whose father has been, variously, assistant secretary of education, lieutenant governor of Virginia, and chairman of the Virginia Republican Party—works for Kohlberg Kravis Roberts, a leading private equity firm specializing in leveraged buyouts. The couple were married at a stone altar and cross specially commissioned for the occasion.

  None of the Clinton or Bush children has ever lived in a middle-class setting. And just as Bill Clinton and George Bush exemplified midcentury America, so the younger Clinton and Bushes reflect their generation and the new age: they are typical of the elite today, at most an extreme case of a broader trend, and not in any way exceptional.

  Meritocratic inequality’s effects on the lives of the rich and the rest are no longer limited to income and wealth,
understood as abstract dollar sums. Instead, meritocracy constitutes a caste system, which partitions the rich and the rest into separate and alien life-worlds. Unsurprisingly, when the rich and the rest work, marry, parent, worship, and assemble differently, a vast gulf opens up between them—separating them not just in their outer habits but also in their inner lives, giving them different hopes and fears. Less educated Americans display lower trust, lower participation in civic life, and greater pessimism about the future than their more educated counterparts, and these differences are greater in the United States than in most (and along some dimensions virtually all) other advanced economies.

  The few class migrants who cross the meritocratic divide today reveal its enormous size, and the strains of foreignness touch both the grand arcs and the petty details of their lives. Even inside elite colleges, students from poorer backgrounds marry at lower rates than students from richer ones, for example. And work-study jobs, which typically require scholarship students to perform conventionally working-class tasks, are experienced as petty indignities. (The affront is intensified by the fact that elite student bodies skew so dramatically toward wealth that many financial aid recipients come from households sufficiently wealthy that the work-study jobs fall outside not just their aspirations but their past experience of class.) A student receiving financial aid from Yale College recently complained that “Yale has the ability to make people do unpleasant things and be thankful for it—office jobs, library jobs all of which I have held unwillingly but inevitably because I am not rich enough to own even my own time.” The self-absorbed, even churlish tone of the complaint only emphasizes the student’s impossible class position: as an outsider who cannot (yet) afford the life she is expected, by both her teachers and her peers, to lead.

  Affinity groups—Yale Law School’s is called “First Generation Professionals”—try to absorb the strains of this dilemma. But meritocracy possesses such ideological power that these groups cannot decide whether they aim to bring down the class structure or to ease their members’ paths into the elite. The universities face the mirror image of this problem: they wish to affirm the backgrounds of their working- and middle-class students; but unlike for other minorities, they cannot credibly aim to dismantle the meritocratic hierarchy whose constitution is their core mission.

  The meritocratic closure of the elite has become so pervasive that class migrants must now define themselves in terms of their relationship to it (as neither Bill Clinton nor George Bush ever needed to). As one college graduate remarked after returning home to his noncollege community, “I feel like I have changed sides in some very important game.”

  The metaphor of changing sides captures the essence of the lived experience of comprehensive inequality. Because meritocracy permits no overlap between the lives of the rich and the rest, there can be no middle ground for the classes to share, or even on which they might meet.

  A final and more literal measure of comprehensive inequality looks to the health and longevity of the rich and the rest as they live on either side of it. These data cannot sustain a precise metric, of course, but they do yield “a good general indicator of accumulated advantage.” Medical data draw meritocratic privilege’s bottom line.

  The rich and educated report massively lower rates of health-related limits on physical activity, difficulty seeing, heart disease, psychological distress, obesity, and generalized unwellness than both the poor and the middle class (and the rich/middle-class gaps are comparable to the middle-class/poor gaps). Elite Americans also smoke at massively lower rates than others—the percentage of smokers among Americans who have attended some college is roughly half that among Americans with a high school education only and among high school dropouts (and the last two percentages are virtually identical). Moreover, when they do get sick, elite Americans increasingly receive different and even separate health care, not just from the poor but also from the middle class. Even teeth now signal income and status, much as height did in the ancien régime. Rich Americans spend more than $1 billion each year on cosmetic dentistry, even as not just poor but also middle-class Americans increasingly rely on charity dental clinics (and even hospital emergency rooms), so that one out of five Americans over sixty-five has no real teeth left. Good teeth have thus become what one middle-class patient at a charity clinic recently called a “telltale, visible sign of wealth.”

  These and other differences in health produce enormous and increasing differences in life expectancy. Between 1999 and 2003, midlife mortality among middle-aged white non-Hispanic Americans with a high school education or less rose, even as mortality among people with some college but no degree held steady and mortality among those with a BA or more continued to fall. Indeed, mortality among less educated Americans rose so steeply that it outweighed falling mortality among the educated, so that mortality overall rose by about half a percent a year, reversing two decades of 2 percent annual mortality declines.

  More broadly, between 1980 and 2010, the life expectancy (at age fifty) of the bottom two quintiles of the income distribution remained flat or fell slightly for men and declined significantly for women (including by nearly four years for women in the bottom quintile), the life expectancy of the middle two quintiles rose for men and remained flat or even fell slightly for women, and the life expectancy of the top quintile rose steeply for both men and women. The gap between life expectancy in the top and in the bottom two quintiles grew by about seven years for men (from five years to twelve years) and by about nine years for women (from four years to thirteen years).

  Moreover, even within the elite, the very rich live longer than their merely rich counterparts, and even this very-rich/merely-rich gap has been growing. For both men and women, the differences in life expectancy at twenty-five between people with BAs or more education and people with some college but no BA exceed the gaps between people with some college and those with a high school degree only. Indeed, for both men and women, mortality rates are markedly lower among the top 1 percent by wealth than among the top 5 percent and lower among the top 5 percent than among the top 10 percent. These gaps have been growing, with the top-1/top-10-percent gap roughly doubling between the early 1980s and the mid-2000s.

  Finally, and inevitably given where the rich and the rest live, these trends take on a geographic cast: the gap in life expectancy (at birth) between a rich state such as Connecticut and a poor state such as Mississippi is now nearly six years; and even as life spans increase steadily in rich places, those in poor places decline. The life span of women in eastern Kentucky, for example, fell by over a year between 2007 and 2011.

  To grasp the size of this aggregated meritocratic advantage, consider that the gap between life expectancy in the United States and Nicaragua is about four years, and that curing all cancers would also increase life expectancy by only the same amount.

  Although Hemingway may have won the argument with Fitzgerald at midcentury, meritocratic inequality increasingly vindicates Fitzgerald’s view. A lifestyle runs through the body of the person who lives it, as the flesh surrounds us with its own decisions. Today, the very bodies of the rich are different from the rest.

  The difference is so large that the rich and the rest might as well live in separate countries.

  EIGHT

  SNOWBALL INEQUALITY

  Beginning in the 1970s, the American middle class, caught short by stagnating wages, ran out of income and began borrowing to fund its lifestyle.

  Even as the median wage stagnated, social and economic imperatives insisted that middle-class consumption must keep rising. Deep-rooted ideals of national progress created a felt need for each new generation of Americans to be better off than the one before. And rising middle-class consumption remained necessary to sustain the aggregate demand on which employment and growth in a consumer economy depend. At the same time, the Reagan Revolution flatly rejected outright redistribution from the rich to the middle class, and taxes in
fact became less progressive.

  The collision between the overwhelming imperative to boost middle-class consumption above the levels that might be sustained by stagnant wages and the implacable objection to outright redistribution left few alternatives open. A person who does not increase her income can increase consumption only using funds that she steals, begs, or borrows. And where widespread theft is out of the question, and private charity has reached its outer limits, the meeting of the unbending constraint that taxes must become less rather than more progressive and the insistent demand that median consumption must increase even as median incomes stagnate effectively required expanding private borrowing. At the same time, rising top incomes produced excess savings in the new economic elite, which generated a ready supply of lending, even from rich people who were ideologically opposed to outright redistribution. Where stagnant incomes confront an imperative to sustain rising consumption without redistribution, debt follows inexorably—by an almost actuarial logic. In this way, rising economic inequality dramatically increased the demand for financial engineering, and the new demand (alongside other causes) made finance grow rapidly.

  Government actively supported both sides of this equation, in gross and in fine. Loose monetary policy, a tolerance for asset bubbles, and promises to protect investors when the bubbles burst all generally promoted debt-financed middle-class consumption. Other policies pursued the same goal in specific contexts. The Clinton administration, for example, changed federal mortgage policy in order to promote “financing strategies fueled by the creativity and resources of the private and public sectors” that could “address . . . financial barriers to homeownership.” The government was particularly motivated to encourage borrowing by people who “lack . . . cash available to accumulate the required down payment” and “do not have sufficient available income to make the monthly payments” on traditional loans.