The Rise of Power Couples and the 1%

The NY Times highlights that the 1% have graduate degrees and posits that hard work is why they have risen so high.  For a low price, it is also willing to tell you where you stand in your geographical location’s household income distribution.  As I read the article, I remembered the first paper that my wife and I wrote together.   Back in 2000, we published our paper on power-couples.     The NY Times reports a household income of roughly $400,000 is required to be in the vaunted top 1%.  If there is positive matching in the labor market, then two working $200,000 earners equals a 1% household.    How much of the rise in household income inequality is due to the combined rise of women’s rising labor force participation and positive assortment (Ivy League weddings) in the marriage market?    Here are some facts about “ever married” as a function of education.   I’m having trouble finding the facts concerning what % of people of different ages are currently married as a function of education.    The rise in the returns to skill, the migration of the skilled to the Superstar Cities and the pairing of these stars, and the decline in the propensity to be married at any point in time have all played a role in generating the household facts we now see.  So, if we outlawed marriage and every married household became two single people,  how much would inequality decline by?



Author: Matthew E. Kahn

Professor of Economics at UCLA.

22 thoughts on “The Rise of Power Couples and the 1%”

  1. I wonder what percentage of my Princeton 1985 graduating class has household income >$400,000…. Uninformed guess: 30%.

  2. The most telling thing I lesrned from the NYT site is how much richer the DC area is than almost all of the rest of the country, right down to “bottom 10%”. Ok, Stsmford CT is higher, but that’s not where policy is made.

    1. Ok, Stamford CT is higher, but that’s not where policy is made.

      That’s what Stamford CT would like you to think.

      1. J is right on. Two of the most powerful forces in finance–SAC Capital and UBS America–are headquartered in Stamford. UBS’s office contains the largest trading floor in the world.

        A lot of employees of New York City-based finance firms also live in or very near Stamford; it’s a major stop on the Metro North commuter rail (the former NY/NH line).

        So, yeah. Policy gets set there; it just isn’t the kind that shows up in the Congressional Record under its own name.

  3. I’ve been watching Downton Abbey, and it seems to give key insight into how Americans are able to buy into the fantasy that we live in a classless society. For, as it is said, individuals can succeed by merit, as opposed to inherited wealth and social status, and no one begrudges them for it. Yet while there may no longer be social stigma to upward class mobility, it is largely as determined as it has always been, even if there now exist many facilitating institutions and structures in society that encourage the leveraging of oneself upwards.

    Let me give an example. My daughter’s public (charter!) school, in a relatively posh neighborhood, your average parent is highly educated, well to do or both. At a recent gathering, I learned that one of my daughter’s playmates parents were both ophthalmologists. There are college professors, business owners, lawyers, etc. At a poor school down the street, the average parent might be a gardener, housecleaner, or cashier. The two worlds rarely meet. And why would they? Culturally, they have little in common. Their life experiences, interests, activities, etc. are likely very different. While it is in theory possible for one to rise or fall out of these class-oriented circles, it is the exception, often owing more to chance than anything else. Because these orientations are not static, but highly self-reinforcing.

    Starting at the earliest age (in utero, really, studies have shown), the children of these groups are groomed by their environment, through exposure to different varieties of parenting, cognitive activities, language skills, environmental stressors, expectations, norms, etc. My 4 year old daughter is just now really beginning to read, about nine months before her first day of kindergarten. She’s at about a first grade reading level. Her parents are not well-to do (one teacher’s salary!), but we both have graduate degrees, have traveled the world, are interested in world culture, philosophy, the arts, and generally things that will translate directly into highly leveragable human capital for our children. Furthermore, they are now being introduced into a peer community that has similar levels of capital.

    Our children have not inherited noble blood, nor vast land claims, nor social honoraries that entitle them to understood social privilege. Not literally. But if your look at the way reality actually plays out, if you draw the causal lines between what environmental grooming delivers to human development, there might as well be little difference.

    Children play a game called King of the Hill, in which those at the top fight to keep others down, while staying there themselves. In the rigid class systems of Downton Abbey, the business of actually fighting for one’s place was unnecessary: place was assumed. Yet while today place is not necessarily assumed, the systems of leverage upon which one reaches and stays on top are still almost as effective. Humans vary widely in their innate cognitive capacity. The lazy, the striving, the introverted, the sociable are born to rich and poor alike. Yet even if we were to assume that fairness might lie in some innate meritocratic value – “each according to his ability” – even if we were to admire such a system, it would bear little resemblance to that which we enjoy today. The well-born lazy tend to land on their feet, cushioned in their deficit to the degree that their inherited social and financial capital has been able to provide its own kind inertia. Likewise, the poor-born striver faces a million slings and arrows all conspiring to direct his inclinations toward more dubious opportunity. In my work with poor teens, I’ve come across more than a few young minds no doubt possessing some special spark, yet which rather than alighting a road to success, has instead lit a fuse of personal tragedy or ruinous disarray. (Of course, teasing out the origins of this mystical “spark” more often than not leads not to any special innate talent, but rather to some other secret cache of social capital, in the form of a supportive parent, a family tradition of determination, or good old fashion fortuitous circumstance that resulted in the child being able to grow that particularly fruitful set of neural connections.)

    “Capitalism: better than the rest”, may provide sufficient comfort to the more credulous and self-deceiving. Yet despite the objective truth of the phrase, capitalism remains an ugly facilitator of class entrenchment. We do our best to take off the rough edges (at least those of us with enough with enough skeptical inquiry and critical faculty to empathize with the plight of those pressed by position to the grinding wheel). And hindered as we are by those who would pretend the ugliness away, the problem seems to have no easy solution. At the end of the day the hill still exists, and it will always be in the interest of those of us who have been either born to scale it, or who have been born at its peak, to do whatever we can to say at the top. Be that as it may, we possess faculties sufficient to recognize our hypocrisy (oh, what good little boys and girls we have been, such hard workers we!), and at least attempt to not only attempt to smash down any extant barriers to class transcendence, but – and this now seems our most difficult challenge – to erect systems that empower those born into circumstances devoid of the requisite social capital to nourish their development.

    1. Excellent comment. There’s a numerous career paths that are essentially closed if you don’t make the correct series of choices between say, ages 16-23. Even the best intentioned working class parents are usually completely unaware of these clues and their kids often spend years fumbling in the dark, learning by trial and error what their more affluent peers were explicitly taught.

    2. “Our children have not inherited noble blood, nor vast land claims, nor social honoraries that entitle them to understood social privilege. Not literally. But if your look at the way reality actually plays out, if you draw the causal lines between what environmental grooming delivers to human development, there might as well be little difference.”

      I love these statements. They express the American Ideal to me. And for those people of all societies whose strengths are not academia, those who were not born at the peak or upper levels of the Hill; those not graced by the company of accomplished mentors -the guarantee of a basic standard of living in support of survival sufficient to enable social contribution. mutual respect, and acceptance – that basic human desire to participate with the group.

      Our difficult challenge includes a powerful contingent who resent even the ideas of sharing; i.e. food stamps, health care, housing, and public education- unless you’re in the military (willing to kill/die for the favor). It’s going to be tricky.

  4. BRFSS has current marital status and age. For 2005 you can get crosstabs off their ‘web-enabled analysis tool’ without even downloading the data.

    I don’t know how the formatting will hold up — you don’t have a preview button here

    Age 18 to 24 Age 25 to 29 Age 30 to 34 Age 35 to 39 Age 40 to 44 Age 45 to 49 Age 50 to 54 Age 55 to 59 Age 60 to 64 Age 65 to 69 Age 70 to 74 Age 75 to 79 Age 80 or older Row Total
    Married Column % 16.5 51.7 67.9 71.3 71.4 71.1 71.2 70.5 70.0 67.9 63.9 54.6 39.5 59.6
    Divorced Column % 0.9 3.9 6.0 8.8 10.9 13.3 14.3 15.4 14.0 12.3 9.6 7.2 4.5 9.0
    Widowed Column % 0.2 0.3 0.3 0.5 1.0 1.6 3.2 4.8 8.7 14.3 22.4 34.2 52.3 6.6
    Separated Column % 1.5 2.5 2.6 2.8 2.9 2.7 2.1 2.1 2.0 1.5 0.9 1.0 0.6 2.1
    Never married Column % 72.0 32.3 16.8 12.4 10.4 8.4 7.2 5.5 4.0 3.4 2.7 2.6 2.9 18.6
    A member of an unmarried couple Column % 9.1 9.4 6.4 4.2 3.4 2.9 2.1 1.7 1.1 0.6 0.4 0.4 0.2 4.1

    [Update by James Wimberley: Here’s what I think is Thomas’ table. Sorry that commenters can’t post images:]

  5. I forgot to add education. D’Oh. But they do have it at BRFSS. The table’s too big to be worth copying in, but the proportion of married people who are college graduates and the percentage who have post-graduate eduction (or vice versa) is pretty similar in the 25-44 and 45-64 age groups.

  6. So it’s not a 30 year war against the New Deal and working people, it’s just wives making too much money. Thanks, Tyler Cowen.

    1. chrismealy says:

      “So it’s not a 30 year war against the New Deal and working people, it’s just wives making too much money. Thanks, Tyler Cowen.”

      One of the recurring things about the right is just how deeply they resent social changes, even ones which have been around for decades (feminism) or generations (the New Deal).

      Mark Kleiman here once said that he had been told that Yale in the 70’s (where the Federalist Society originated) was full of ‘old turks and young fogies’. And that just keeps on being true.

      1. Well I don’t know what the percentages of libs and cons would have been at say, Harvard, back in the day.

        But if you read the alumni mag now, there are plentiful letters from men who graduated in the 50s and 60s who are still plenty steamed. It’s pretty amazing. They hate affirmative action and they think Summers got a raw deal.

  7. Hey, thanks for posing all those questions. You have shed a good deal of mystery on the topic of this blog post.

  8. > So, if we outlawed marriage and every married household became two single people, how much would inequality decline by?

    Is this supposed to be a serious question? And I really mean that.

  9. Interesting speculation and I can see where it comes from. But why don’t we rephrase it to something kind of like this: if we consider individual income rather than household income, and consider only those who have some income (or possibly also those who are looking for situations that will generate income, ie unemployed job-seekers), will the distribution of income differ in any significant way from the distribution of household income?

    I’d bet not. Vast numbers of two-earner couples (and even three- or more earner households) aren’t anywhere near the top 1%, so I don’t think it can be all that skewed by the number of high-income second earners.

  10. The addition effect (both keep high earnings) is counteracted by the slacker effect (at least one can afford to take it easy, look after the children, garden, write blog posts or The Extinction of Species, etc). Subsidising marriage is promoting shirking. Gradgrind-school plutocrat Republicans like Romney should oppose this shameful institution.

    1. Uh oh. You equated looking after children with taking it easy! You must be childless or have had staff (wife? nanny?)! Perhaps an overlooked factor in our consideration is uncompensated services within the family unit (childcare, elder care, domestic services, etc. ). Compensation might “up the game” of parenting, now that I think about it. There’s a vast difference between parenting and existing in close proximity to non-adults.

      Also, wouldn’t GDP double in correspondence to considering all incomes separately? At least at first? It probably doesn’t matter as GDP is a poor measure of broad economic realities.

      And then do we measure male positive assortment vs female positive assortment?

      Where are we in the propensity to marry scale now?

      1. “You equated looking after children with taking it easy!” I hoped the Extinction of Species among other things made the irony clear.
        I didn’t make up “shirking”. Tragically it’s standard talk among economists (38,500 hits in Google Scholar) for giving one’s home life a higher priority than one’s employer’s profits.
        You are right, abolishing marriage leads to a huge jump in GDP as childcare moves to the sacred market.

  11. After disposing of the absurdity that marital status has anything to do with household-counting, I think Eli’s comment is crucial for thinking about what inequality is for. Some of it is about propensity to consume and personal advantage, but a lot of it is about giving the next generation advantages over those who would otherwise be their peers.

    The “power couple” thing has a lot of factors that are difficult to tease out. On the one side there may be some slacker syndrome, but on the other there’s a huge amount of direct and indirect nepotism and influence-peddling. Certainly in the political world there’s a lot of money to be made by being the spouse of someone powerful, and when spouses work in the same field, they can often accomplish more helping each other than two individuals might working alone. Although this may “artificially” inflate inequality figures, the one thing that’s not an artifact is the way that the benefits keep flowing to a small, closely-connected group.

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