They’d Much Rather Be Rich

1.

“I’ve been rich, and I’ve been poor,” the cabaret entertainer Sophie Tucker was once heard to say, famously adding, “and believe me, rich is better.” Avner Offer disagrees. In his view, the spread of affluence not only corrupts character, but has caused all these disorders and discontents:

family breakdown, addiction, stress, road and landscape congestion, obesity, poverty, denial of health care, mental disorder, violence, economic fraud, and insecurity.

He cites surveys in which today’s Americans declare themselves unhappier than their parents were. Young people who earlier heeded their elders are now prone to “intoxicating short-term dissipation.” Offer argues that advertising, by flaunting what we don’t have, is a major cause of malaise. His book’s most vivid examples come from the research at Duke University’s Hartman Center for Sales, Advertising, and Marketing. Recurrent pitches, for example, have insidious effects: “By saturating the public domain with false sincerity, advertising makes genuine sincerity more difficult.”

Moreover, he writes, “affluence breeds impatience,” whereas more modest degrees of wealth fostered “reciprocity and commitment.” Modern marriages are like products purchased at a mall: turn them in if they don’t work out. Using statistics from Nigeria and Lebanon, he finds a link between low incomes and family bonds. But he can also get the figures wrong, as when he writes that cohabiting couples have less sex than their married counterparts. In fact, the study he cites found the former to be considerably more active, which is what most of us might expect.¹

While Offer doesn’t define “affluence,” his book focuses on how rising income affects ordinary people. The average American family now has two and a half times the purchasing power of its 1947 counterpart. Affluence for such a family isn’t wealth; many have heavy debts and are unprepared for calamities. But they frequent suburban malls, crowd the nation’s airports, and are helping their children through college. Offer’s statistics suggest that at least two thirds of Americans are in this pool, whereas in 1947 only one in three were.

Early in The Challenge of Affluence, a predictable thought arises: weren’t indigence and diseases common in pre-affluent periods? Yet Offer, who is Oxford’s Chichele Professor of Economic History, says little about the past. In New York City, at the start of the last century, one fifth of all babies died before reaching the age of six. Tuberculosis was rampant in the tenements, and very often fatal. Altogether, fewer than 2 percent of New Yorkers survived to celebrate their seventieth birthday—the kind of fact Offer fails to consider. Yet on one count, Offer is correct: nuptials were taken seriously. The 1910 Census found only 8,292 divorced men and women, against the 1,805,335 who were married. Today’s divorce ratio is forty times higher.²

Offer’s chief concern isn’t with the very rich who have always lived lavishly. Rather, he focuses on how a half-century of abundance in the United States has fomented a “self-regarding individualism” in the new majority who now share in its largess. He concludes, contra Sophie Tucker, that more money in more pockets hasn’t increased the gross domestic happiness, although he grants that better-paid men and women exercise more and smoke less.

Strangely, The Challenge of Affluence has little to say about education and its outcomes. Yet his broad-based prosperity means that more young people can afford to finish high school and go on to college. These are purchases as much as SUVs, so I’ll be adding some observations on how affluence interacts with education.

I found it odd that in a book with some 1,500 footnotes, John Kenneth Galbraith’s The Affluent Society is cited only summarily and never quoted. Yet this was the book that got the subject started. Even in 1958, Galbraith could note that “more die in the United States of too much food than of too little.” He lamented that the country was devoting its new wealth to private purchases—massive homes, trophy cars, single season wardrobes—leaving little over for social purposes.

Galbraith wasn’t opposed to prosperity, only to how its fruits were being used. Each year, more countries come closer to the US in per capita wealth; but not all follow our model. The most recent United Nations study showed Norwegians only a few dollars behind the United States. Yet as can be seen on Table A, they distribute their affluence quite differently, and with differing outcomes. Owing to higher tax rates, individual Norwegians retain considerably less of what they earn. In return, they pay much less or nothing at all for health care, higher education, and other amenities that Americans have to buy. They also use their affluence to purchase more leisure, by choosing to work fewer hours. Less tangibly, their taxes help to build a society that imprisons only a tenth as many of its citizens as we feel we have to do. One reason may be that Norway’s take-home incomes are more equally spread, which means there are fewer have-nots. Granted, they have a much smaller population; however, because of an upsurge in immigration, it’s no longer so homogeneous. (Immigrants now account for 9 percent of Norway’s population.) Americans may claim that their geography creates a need for so many cars and utility vehicles. In fact, Norwegians are distributed much more widely through their terrain.

The original edition of The Affluent Society had a prescient chapter called “The Illusion of National Security.” According to a widely held view, the US prevailed in World War II by creating an industrial arsenal unmatched in combat history. Unfortunately, Galbraith wrote, that victory produced “the myth that military power is a function of economic output.”³ Hence the delusion that because we lead the world in production, we will also be first in force. As it turned out, we never traded shots with the Soviets; Korea ended in stalemate; high-tech weaponry didn’t prevail in Vietnam; and it surely hasn’t in Iraq. Moreover, civilian affluence—combined with the shift to an all-volunteer force—has depleted the number of youths who can be induced to serve as soldiers.

Rising real incomes, Offer concludes, lead to “self-defeating choices.” His examples range from undersaving and gambling to obesity and infidelity. He cites the less-affluent British, who show more patience and restraint, owing to their “class barriers,” which restrain personal aspirations. His basic criticism of Americans is that they have a greater sense of entitlement than their British cousins do. In fact, those feelings—coupled with a propensity for purchasing—have been around for a long time, including during the less prosperous periods Offer cites. Alexander Hamilton urged citizens to take a second job, “as a resource for multiplying their acquisitions or their enjoyments.” Somewhat later, Alexis de Tocqueville noted prosperity’s untoward effects, especially in “that strange melancholy which often haunts the inhabitants of democratic countries in the midst of their abundance.” Offer is convincing when he argues that the emphasis on acquisition serves to accentuate the poverty of the minorities left behind, whether in New York in 1900 or more recently in New Orleans following Hurricane Katrina. If American affluence goes back a long way, it also remains the overriding reason why so many people want to come here.

While psychology may be less methodical than economics, an analysis of the urge to spend needs to delve into people’s minds. I wish Offer had tried to say more about motives. All this purchasing involves more than keeping up with neighbors or impressing rivals we don’t like. Rather, Hamilton’s “acquisitions and enjoyments” help us to delineate who we are. Most of us, including philosophers and poets, use what we wear or where we take vacations to express or confirm our identities. But does this mean the richer we are, the more dimensions of experience we discover? Offer would say no. But of course he can’t know about the inner lives of many citizens. Who can?

2.

Claude Fischer and Michael Hout have written an imaginative chronicle of the century that just ended. While there are palpable differences in how the country looked in 1900 and 2000, they point to some striking similarities. Thus they show that in 1900, the top one fifth of families took in 55 percent of overall household income. By 1950, thanks to New Deal tax rates and public hostility to high salaries, for the most elite workers, that group’s share had declined to 43 percent of the total. But in 2005, the most recent figures, the top fifth’s share had risen to 50 percent, suggesting we’re approaching a new Gilded Age.

Even so, it’s worth noting that much of this upward flow is to the top 20 percent, so it means a fairly large stratum—some 23 million households with incomes starting at $92,000—is benefiting, not just the very rich. In fact, something similar was happening around 1900. A tier of professionals and managers was emerging, and their status was rewarded by higher pay. Most cities still have townhouses from that time, which included floors for live-in servants.⁴ Our current version of that class—corporate lawyers, cosmetic surgeons, hedge fund traders—make up today’s market for multi-million condominiums. The lower taxes for the highest tiers also resemble the McKinley era. Indeed, we’re outdoing that era: recent years have seen a larger share of the nation’s income accruing to the top 1 percent. And more affluence for them means less for others; the bottom fifth’s share has been declining for a generation. This is a disgraceful fact about which few of our leading politicians have anything to say.

But the proportion of Americans who have access to higher education has changed. In 1900, only 29,375 bachelors’ degrees were awarded nationwide, not even 2 percent of those of graduating age. By 2005, a total of 1,439,264 diplomas were awarded, which means 36 percent of younger Americans now have bachelor’s degrees. Fischer and Hout argue that the amount of schooling a person receives now overshadows nativity, race, or income as the nation’s prime divide. “Since midcentury,” they suggest, “education became a key sorter of Americans.” “Differences in living standards and lifestyles” between those with a bachelor’s degree and those without it “had widened greatly.” The years ahead, they say, will see a deep divide separating “educational haves and have-nots.” While this is a widely accepted view, it hasn’t had the scrutiny it needs. In particular, what actually occurs in college that gives it its added value?

3.

Deborah Rhode, who teaches at Stanford Law School, has written a spirited book on what students and parents are—and aren’t—getting for their investments in higher education. In her view, it isn’t very much. Much of what she says confirms familiar conclusions. We are told about professors who don’t teach, with classes given over to adjuncts and assistants. Schools are obsessed by a “pursuit of prestige,” based on luring high-scoring students and faculty luminaries. She is especially upset by undue pressures to publish, as well as recondite writing, trivial topics, and a fetish for footnotes. At times, Rhode seems to be saying that much of the research produced by academics isn’t really needed. Thus she cites studies of homosexual necrophilia in ducks and whether humans might swim faster in maple syrup. But then she hedges her contention by allowing there might be value in “readily parodied research,” and there’s also “a lack of consensus over what counts as quality.” Since no one wants to be charged with excessive skepticism, even necrophilic ducks end up accepted for publication.

Rhode is equally enigmatic about the quality of teaching; or, for that matter, what is actually happening in classrooms. With millions of students spending four or more years on campuses, she says, “it is striking how little information is available on what they receive.” Part of the problem is that almost all her sources are published studies. She might have learned more from sitting in on undergraduate classes, good, bad, and abysmal, and recounting what she saw. And from chatting with students, for their views on college teaching and learning. In Pursuit of Knowledge quotes the writings of dozens of professors and presidents, but at no time do we hear from college students themselves.

Rhode wants us to believe that most of today’s students are leaving college woefully unskilled. At least, this seems to be the purpose of an example she gives. Yet her use of it led me to wonder how well acquainted she is with current undergraduates. She writes:

A majority of individuals with college degrees were unable consistently and accurately to perform tasks such as calculating the change from $3 after buying a $.60 bowl of soup and a $1.95 sandwich.

I might have found this statement credible had it been about, say, fifth graders, who were unable to compute that they should have 45 cents back. In fact, the study she cites doesn’t have this soup-and-sandwich question. Rather, it posed a more advanced problem, about the cost of a delivery of heating oil, with a discount for early payment. As it happens, 84 percent of college seniors (graduates weren’t tested) answered this question correctly.⁵ It’s too easy—and unfair—to scoff at students. When they are given stimulating and supportive teachers, even middling pupils will put in much work and learn a great deal.

4.

Alvin Offer’s claim of rising affluence is also apparent in the cost of higher education; which, after all, is a consumption item, as well as an investment. As Table B shows, Stanford and Harvard charge almost three times as much in real dollars as they did a generation ago. Yale currently asks $33,030 simply for tuition, plus $10,000 for meals and a bed. Regional schools are not far behind. Whitman College in Washington has a sticker price of $30,806, and Earlham in Indiana wants $29,320. After allowing for scholarships and room for negotiating fees, even the richest institutions expect that at least half their students will pay the full tab. At Williams last year, 60 percent had families that apparently could.

In a new development, public colleges are soliciting out-of-state candidates, who are willing to pay three times the local rate. At the University of Virginia, non-residents are billed $25,945, and now make up 31 percent of the student body. They also comprise 35 percent at the University of Michigan, where they pay $29,131. These acceptances—last year they totaled 8,566 at Michigan—mean that fewer places are available for in-state applicants, whose families’ taxes helped to build these schools’ reputations.

Who can write these checks? An answer comes from the Internal Revenue Service, where figures for 2005 show it received 3,541,433 forms declaring incomes of over $200,000, the most ever in that bracket. While not all these households have children at college, parents at this income level often do, and hence form a pool of parents who can pay the full price. For a glimpse of where these dollars go, I’ve picked a liberal arts school—Williams College—which isn’t dwarfed by an expensive medical center or bowl-bound athletic teams.

• The current Williams directory lists 266 regular faculty members having professorial ranks, for a student body of 1,931. This works out to an impressive 7:1 ratio, and is what the college submits for the US News rankings. What could be added is that almost a third of its professors are on leave in a typical year. True, visiting teachers are sometimes hired to fill in; but that isn’t what parents think they are paying for.

• The average salary for its 125 full professors is now $122,300, up 36 percent in real dollars from 1985. Yet it’s not easy to show that these raises were needed to match outside offers or keep star scholars from leaving. The president of a kindred college told me he overpays his faculty in hopes that they’ll agree to take on more of the tasks he requests of them. A more plausible explanation is that colleges like Williams hope that generous pay will be taken as evidence of having a highly regarded faculty.

• Williams has thirty-two varsity teams, all of which play at other campuses, with travel, lodging, and equipment financed by tuition fees. The list includes volleyball, golf, and crew, as well as ice and field hockey, and alpine and nordic skiing. The athletics department has fifty-three coaches and a support staff of twenty-nine, twice the combined size of the physics, psychology, and chemistry departments. The football team has twelve coaches, while sociology and anthropology together are allotted seven professors.

• In place of its old in loco parentis role, Williams provides a new array of services. It has offices to deal with “community engagement” and “experiential education,” as well as a “spouse/ partner employment counselor,” a “babysitting coordinator,” and clinics to treat substance abuse and eating disorders. Fund-raising and alumni affairs have 75 people on their payrolls, double the teaching staffs for history, romance languages, and philosophy. Rationales can doubtless be given for these and other nonacademic activities. No one wants bulimia to go untreated, while the fund-raisers will say they more than pay their way by fattening the endowment. Still, almost three quarters of Williams staff are engaged in something other than instruction. Other colleges have similar ratios, and they largely explain why bills for a nine-month stay on a campus can exceed the median American salary ($40,698).

In Century of Difference, Fischer and Hout write that toward the end of the last century, access to higher education became narrower “mostly because the cost of college went up.” This is certainly so at selective schools, which have few low-income students. Only 10 percent of Yale’s students qualify for Pell Grants—federal grants that are reserved for college students from families with incomes less than $40,000—while at Princeton the proportion is 8 percent.⁶ Even so, each year sees a greater proportion of young Americans continuing their schooling. If we simply look at those aged twenty and twenty-one, in 1980 just about a quarter were in college, while almost half are today. But to do so, some 35 percent of undergraduates and 42 percent of graduate students are going into debt. The government will back loans up to $138,500 and increasing numbers are reaching that limit. Since so many Americans are investing in college degrees, it’s relevant to ask what they may expect as a return.

All told, holders of bachelor’s degrees are more likely to buy and read books, prefer complex music, foreign films, and public radio and television. It is tempting to argue that the college experience encourages these tastes; it’s what professors are there to do. We’re also told that undergraduates learn “critical thinking,” “cognitive skills,” even “moral reasoning.”⁷ If this is so, should we infer that they are more reflective than their agemates who start working after high school? (An alternative conclusion might be that they are more adept at using words.) Relative to the population, ten times as many adults have degrees as they did a century ago. Has this made us a more thoughtful nation? (Even earlier, Illinois farmers stood for hours taking in the Lincoln–Douglas debates.)

The high school–college divide helps to define the semblance of a class system in the US. The Bureau of Labor Statistics’ most recent count shows that our economy has 50.4 million “management, professional, and related occupations,” just over a third of the workforce, and basically equal to the college pool. Since we are talking about the jobs people hold, it should follow that they are proficient in certain tasks. True, most undergraduates major in applied fields, which now extend beyond engineering and accounting to sports management and crime scene investigations. Even so, it’s not clear how far what they learn in these programs helps them in their first job, since most of what they’ll be doing will be specific to that position. What can be said is that having majored in, say, fashion merchandising suggests a career commitment that Sears or Victoria’s Secret wants to see.

In fact, eligibility for professional and managerial positions hinges more on social and personal attributes than having taken specific courses. It is here that having been at college teaches young people to fit into middle-class milieus. Among the qualities are diction and demeanor, verbal fluency, a more polished presence, along with knowing how to analyze assignments and carry them out.

The figures in Table C show that holders of bachelor’s degrees overall make 70 percent more than their high school counterparts, and men and women with advanced degrees average almost 130 percent more. In a forty-year career, a bachelor’s degree will bring an added $903,320, while completing a graduate program has a $1,670,360 premium. (The disparities are actually greater, since earnings of high school graduates rise less over the years.) So the payoffs are considerable, even with today’s tuition costs.

Yet even more revealing than disparities in earnings, which are to be expected, is that the median incomes are so modest. After all, the bachelors’ median of $54,803 means half of them are making less, even fifteen or twenty years after college. With 1.4 million bachelor’s degrees being awarded each year, they are more likely to be from Eastern Kentucky and Southern Illinois than Columbia or Yale. The same holds for professions. The typical attorney’s law school was at West Virginia University or Loyola in Los Angeles. Most lawyers are on salaries, and their median is $89,856, which is more than engineers ($60,060), but not much ahead of pharmacists ($85,280). Higher education may make one respectably middle class, but for most it will mean not more than modest affluence. Even so, being able to attend college—and preparation for what it will demand—should be widely available. But its economic payoff will depend less on what is taught and learned there, and more on what part of the earnings pie will go to holders of degrees. If more software is sent to India for coding, fewer American programmers will be able to count on college-level salaries.

While few say so openly, parents who want top-tier degrees for their children hope it will help their social and economic ascent. Of course they want their offspring to be happy, but some success would be nice. (“What is Jennifer doing now?”) As it happens, we lack solid information on how graduates of selective schools fare. I’ve examined statements alumni have prepared for thirtieth and fortieth reunions, but thus far haven’t found much distinctive about their interests or careers. (Nor do the gifts they give to their college drives suggest unusual wealth.) To be sure, some years boast members noted for their scholarly and worldly success; but that should be expected with classes of 1,600 at Stanford and Harvard.

The most suggestive figures are to be found in a consulting firm’s compendium which gives the educational background of the chief executives of the country’s five hundred largest corporations. It turns out that only thirteen of them didn’t attend or finish college, which means a degree is expected even at the trainee level. Another eight are heirs in family enterprises (e.g., William Wrigley, Blake Nordstrom, John Marriott Jr.), leaving 479 who had completed college and more or less ascended on their own. Altogether, sixty-eight of the 479—14 percent—were graduates of twelve highly competitive colleges.⁸

Since this group confers less than 1 percent of all undergraduate degrees, it seems that having gone to one of them offers some kind of edge. But there’s another way to parse the percentages. Most of the other 411 chief executives went to less prestigious schools, like Worcester Polytechnic, Marymount College, and Idaho State. Yet as they made their climb, it seems likely that they passed colleagues who had gone to Dartmouth or Duke. So while an Ivy League degree may help in the early years of a career, its cachet tends to fade when more stringent tests are set.

What is worth emphasizing is that the 300,000 top Americans collectively have almost as much income as the bottom 150 million Americans—nearly half the population.⁹ This is a fact that one might think would be an issue in national politics, but there is little sign of this so far.