Social Science for the Bottom Half

I’ve opted for focus on the bottom 50% of wage earners as a useful rule of thumb.

Free-market capitalism serves the majority well but leaves many people on the sidelines. The task for any capitalist with empathy is to intervene in the economy with a light touch. Help the poor without ruining the game for everybody. It’s an old, centrist approach in American politics: Pro-growth Progressivism from one direction, Compassionate Conservatism on the other side.

That said, as a social tinkerer, who should I focus on? The rich don’t need or want more government programs; it’s the poor I am designing for. This fact is true no matter one’s estimation of existing government anti-poverty programs. Learning about the “other half” empowers you to help via smart interventions and/or reduce harm of others’ dumb interventions.

We’re familiar with some statistics about America overall. Median household income is almost $70,000. 65% of people own their homes. The country is about 60% White. Woman start having kids around 30.

A different nation emerges when we focus on the bottom half of America. Whereas median means 50th percentile for all of America, we can study the central tendency of this half of America using the 25th percentile. Household income at America’s 25th percentile is $33,000. Effective tax rates and benefit availability gyrate wildly at this lower end of the income distribution as earnings shift, inducing stark strategic earning choices. The poorer half of Americans control only 2% of wealth. Lives are shorter and causes of death are different. These folks are more racially diverse, and children are born earlier. Educational achievement happens differently.

Coming Apart: The State of White America, 1960–2010 is perhaps the strongest book recommendation I can make to any reader of this blog. The author contrasts 50 years of social trends for low-educated, low-income America against those of high-educated, high-income America. Basically, well-to-do Americans have kept it together, while community and family life has disintegrated for the rest. It’s Trump’s “American carnage” neatly summarized in statistics.¹

Focusing on rich people is easier and often more fun. They appear in the media, control companies and governments, and do interesting things. Also, many readers of this blog are likely highly educated and live in fancy cities. Like anybody, we want to feel normal and middle class, so we rationalize overfocus on people with similar backgrounds to ours.

Another danger is narrow focus on current income level. Income levels follow typical patterns over a lifetime. Most people start poor at 18 and get steadily richer until retirement, after which income falls off in older age. A more interesting quantity would be expected lifetime income—which is obviously harder to examine. Focusing only on today’s very low earners produces a mixed group of young adults, folks who are currently down on their luck, and those in lifelong poverty. Exclusive focus on wage income also fails to account for government benefits, which can vary widely among low earners. While learning about very poor people is useful for specific applications, I’ve opted for focus on the bottom 50% of wage earners as a useful rule of thumb.