The TUC’s Nigel Stanley points out that “middle Britain” is a lot poorer than the right-wing media make out. This tendency to exaggerate the incomes of “middle Britain” has some pernicious effects.
The obvious one is that it allows the rich to deceive others (and themselves) into believing that they are ordinary people, and victims of “NuLabour attacks on the middle class” rather than what they really are - a privileged elite; a salary of £50,000 puts one in the top 10% of earners.
However, I suspect the tendency to over-estimate “middle England” incomes has (at least) four adverse effects upon those on truly middle incomes, namely:
1. Lower self-esteem. Our estimates of self-worth are connected to our income - they call them “earnings” for a reason. And we measure this worth relative to other people; it’s for this reason that income is a positional (pdf) good (pdf). This means that if we over-estimate median incomes, we’ll under-estimate how well we are doing, and so feel worth less.
2. Over-ambition. If workers feel they are earning less than others, they’ll make more effort to climb the greasy pole. This isn’t just aesthetically unpleasant; as Mill said, “I am not charmed with the ideal of life held out by those who think that the normal state of human beings is that of struggling to get on.” It could also be counter-productive in aggregate. This paper shows that workers who seek promotion naturally invest in those skills which their managers can more easily evaluate. This can lead to over-investment in general managerial or salesmanship skills, and under-investment in technical geeky skills which bosses can’t understand. The upshot can be lower aggregate productivity.
3. Excessive debt and consumption. Robert H. Frank has written extensively about how perceptions of others’ wealth cause people to spend more on conspicuous consumption - bigger cars and houses - and so get into bigger debt. Spending is contagious. The more we over-estimate the Jones’ incomes, the more we’ll struggle to keep up with them.
4. Crime. When people think there’s money around, they become more selfish. So if they over-estimate others’ incomes they might become more mean-spirited and even prone to crime. Those MPs who fiddled their expenses did so in part because they thought (wrongly) that an income of £60,000 wasn’t much.
Now, I’m not saying these are large effects - just that they might be non-zero. If so, the persistent over-estimate of “middle England” incomes might be nastier than generally supposed.
The obvious one is that it allows the rich to deceive others (and themselves) into believing that they are ordinary people, and victims of “NuLabour attacks on the middle class” rather than what they really are - a privileged elite; a salary of £50,000 puts one in the top 10% of earners.
However, I suspect the tendency to over-estimate “middle England” incomes has (at least) four adverse effects upon those on truly middle incomes, namely:
1. Lower self-esteem. Our estimates of self-worth are connected to our income - they call them “earnings” for a reason. And we measure this worth relative to other people; it’s for this reason that income is a positional (pdf) good (pdf). This means that if we over-estimate median incomes, we’ll under-estimate how well we are doing, and so feel worth less.
2. Over-ambition. If workers feel they are earning less than others, they’ll make more effort to climb the greasy pole. This isn’t just aesthetically unpleasant; as Mill said, “I am not charmed with the ideal of life held out by those who think that the normal state of human beings is that of struggling to get on.” It could also be counter-productive in aggregate. This paper shows that workers who seek promotion naturally invest in those skills which their managers can more easily evaluate. This can lead to over-investment in general managerial or salesmanship skills, and under-investment in technical geeky skills which bosses can’t understand. The upshot can be lower aggregate productivity.
3. Excessive debt and consumption. Robert H. Frank has written extensively about how perceptions of others’ wealth cause people to spend more on conspicuous consumption - bigger cars and houses - and so get into bigger debt. Spending is contagious. The more we over-estimate the Jones’ incomes, the more we’ll struggle to keep up with them.
4. Crime. When people think there’s money around, they become more selfish. So if they over-estimate others’ incomes they might become more mean-spirited and even prone to crime. Those MPs who fiddled their expenses did so in part because they thought (wrongly) that an income of £60,000 wasn’t much.
Now, I’m not saying these are large effects - just that they might be non-zero. If so, the persistent over-estimate of “middle England” incomes might be nastier than generally supposed.
I agree with you in the main, so this is just a quibble: don't earnings need to be adjusted by age? If I'm 20 and earning £20k, that's a very different thing from being 45 and doing so, yet both individuals would be given the same place in the income distribution according to this approach.
Using an unadjusted measure, you always make older people look richer than they really are.
Age adjusted earnings would be a better approximation of life time earnings, which is really what matters when it comes to what house you can afford, pension, helping your kids etc.
Posted by: Luis Enrique | May 29, 2009 at 01:49 PM
"really what matters .... helping your kids": surely Chris disapproves of "helping your kids" - it's privilege, innit?
Posted by: dearieme | May 29, 2009 at 02:01 PM
It may also have the political effect of 'privatising' problems: if several people are all in trouble for similar reasons, but they each think the others are fine, then they may come to see their problem as an individual matter, rather than something affecting them along with others.
Posted by: Alderson Warm-Fork | May 30, 2009 at 01:31 PM
Are these really adverse effects? Apart from Number 4, these could all be considered drivers for increased productivity. (Even if not for increased utility.)
The fundamental problem, which I think you have addressed before, is that people mean different things by Middle England. Is it median earners? Or is it the layer between the toffs and poor, with the poor making up 90% of the population. Middle England is not necssarily in the middle.
Posted by: Bruce | June 01, 2009 at 01:53 PM
Middle England is a political concept; as such it exists solely for political purposes, notably pleasing the foreign-owned rightwing media and apologising for Tony Blair within the Labour Party. The lack of any meaningful definition only boosts its mythic force and enhances the power of the caste who are privileged to declare it.
Its reflection of objective reality, or otherwise, is of the most pathetic unimportance.
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