America’s top public enemy right now is billionaires. Regardless of party affiliation, the majority of voters believe that the rich have too much influence and that the wealth gap is a serious issue.
To be fair, it appears that many individuals are experiencing anxiety and unhappiness as a result of this economy, but neither Elon Musk nor Mark Zuckerberg are to blame. The upper middle class is to blame, if anyone is. In other words, you are the one reading this—or, now that I think about it, authoring it. We. The issue is us.
The emergence of the upper middle class over the past few decades is an underappreciated tale. The US had a strong middle class and a bell-shaped national income distribution in the 1960s and 1970s. Since then, many families have joined the ranks of the wealthy, which has eroded the middle class rather than making them poorer.
As more households earned more than the median income, the income distribution’s form changed: the curve flattened as a result of the increased number of higher earners.
This corresponds to incomes ranging from $150,000 to $300,000, or even $400,000 if you reside in a costly city. A tiny percentage of Americans also got extremely wealthy. The top 1%, and particularly the 0.01%, became even more isolated from the rest of the population.
For the most part, this is a good development. Some Americans grew extremely wealthy, many more became prosperous, and the number of impoverished Americans decreased. However, because the economy has not completely adapted to this new income distribution, it feels like a crisis.
Too many wealthy people are pursuing a small number of luxury products and services that seem like necessities: city apartments, a top-tier university education, lavish vacations, cutting-edge medical treatment, tickets to concerts and sporting events, and so on.
Think about housing. One common explanation for the 70% increase in property prices since the 1980s is a shortage of supply. Research indicates that there are more wealthy purchasers whose wealth has increased more quickly than the number of available properties, even though supply is undoubtedly a problem.
According to another study, rising incomes can account for a large portion of the rise in housing costs in urban areas between 2000 and 2020. Increases in income also account for the larger and more upscale dwellings.
Of course, none of this lowers the cost of anything. You can be outbid for a home you desire, have to settle for a smaller, less feature-rich property, or perhaps there is not anything on the market at all if you do not belong to the new mass affluent class. You may find it difficult to find a home you can afford, even if you are mass affluent or on the verge of becoming so.
This same dynamic contributes to the feeling of high cost associated with so much else. There is a market for $1,000 Taylor Swift tickets because many families are willing and able to pay that much for an event with a limited number of seats, despite the fact that it is simple to blame algorithms and the secondary market for pricey concert tickets.
Increased demand for less discretionary products and services, like private schools (or residences in communities with outstanding public schools) or even health care, results in higher pricing.
Since they are not mass affluent and more of the economy is now focused on goods and services that are above their price range, some people are actually having trouble affording things. Rich people who are upset when their expectations do not meet reality are less worthy of pity, while they are still sympathetic in other ways.
With $300,000, a family would think they should be able to buy a lovely house in a fancy neighborhood, send their children to a private school, and enjoy pleasant trips. However, it is not in a lot of US regions.
The disparity between wealthy demand and supply will most likely resolve itself. Elitism’s accoutrements will either become less prevalent or the market will figure out a way to provide more expensive high-end goods and services, possibly through technology. Some people will then lower their expectations by relocating to a less expensive place, going on less expensive holidays, or cooking more at home.
Economies change over time. The distribution of resources may become unbalanced if they change rapidly. Sometimes the market corrects itself, and other times the government intervenes. When the disgruntled mass affluent resort to populism, which pledges to solve the issue through industrial policy, price restrictions, or punitive taxes on the very rich, that likelihood decreases. This will worsen the issue by reducing innovation and causing shortages.
