Its a summer Friday, which means that not a lot is going on. Indulge me while I go off on a bit of a digression.

Why? I have been thinking about various groups of people and how they benefit (or not) from society. What their participation levels are in government, the economy, and local communities. It is something I think about from time to time from a macro perspective. Perhaps its the Paul Ryan VEEP selection and all the insufferable Ayn Rand chatter that dredged this up.

Regardless, I have come to a few conclusions about this, and perhaps you might find my contextualization and random connections of interest.

When thinking about economic strata in the United States, I find it helps to break it down to six different levels. Broad classifications like Rich, Poor and Middle Class simply don’t cut it any more. From top to bottom, I find it looks something like this:

Top 0.1% — The mega wealthy, billionaires and 100 millionaires. They are small in actual number, but attract disproportionate mind share from public & media. Money simply does not restrict any activity or desire of this group (Sorry, top 1%, but you simply don’t have the goods for this strata).

Wealthy: Yes, the ordinary traditional wealthy. These folks who have a net worth north of $5-10 million dollars. They typically accumulate their money by owning their own businesses, or by being senior in public companies. Finances are a responsibility, not a burden to this class.

Comfortable Middle Class (formerly known as Upper Middle Class) are professionals in various field who make a good living, own their own homes (often outright) have savings, retirement accounts, good health insurance, etc.

Stressed Out Middle Class (formerly known as “Middle Class”): are the people may be making a decent to pretty good living, but no longer feel financially secure. Perhaps their jobs are at risk. They constantly stress about losing their health care insurance. They have little in the way of savings or retirement accounts. They are one major health event or divorce away from bankruptcy.

Working Poor: Performing menial jobs for not enough money to make ends meet. Receiving some form of government assistance. Still believe in the American Dream, though somewhat less than a decade ago. Much less economic mobility than prior generations.

Impoverished: Dead broke, no hope, ignored by politicians and society at large. Almost zero economic mobility.

What do these various strata mean for the long run? To be blunt, I am not sure.

During my last trip to Europe, I was aware of how modest the stress levels were, despite the EU crisis, the looming recession, collapse of the Euro, etc. Their extensive safety net meant that there was not a  “Stressed Out Middle Class” or even a “Working Poor.” If you have health care, retirement, education, unemployment and day care paid for by the state — and a 70+% tax rate — you don’t sweat minor issues like continental recessions.

In Helsinki, we got into a fascinating conversation within a small group of locals about that tax rate. The national and local income tax, real estate taxes, state sales tax, and then the VAT tax mean that a 70% tax rate (versus gross income) was pretty typical. That seemed astonishingly high to me. But someone pointed out that once you add in the costs of health care, student loans, retirement investments, etc. — all the things state pay for with that 70% rate — an American making less than $100k ended up with about the same 30% net as the Finns do.

The difference is we have more stress than they do.

There is a reason that the Nordic countries consistently rank as the happiest places in the world in annual surveys. Then again, the iPad — along with myriads other innovations — was invented in the US. Perhaps those stress levels have something to do with that . . .

Category: Economy, Psychology, Wages & Income

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

83 Responses to “Where Are You in the Economic Strata?”

  1. Chief Tomahawk says:

    And then when that 30% income has to go (disproportionately) towards $4 a gallon gasoline, one sees seemingly endless yard and garage sales every weekend in the working class neighborhoods of suburban Chicago.

  2. Note the Europeans pay ~ $12 / gallon

  3. Chad says:

    The Fins are doing something right. They are near the top of most social measures including education. I also like how they do traffic tickets, which are a percent of your income. Maybe happy medium between us and them?

  4. wcvarones says:

    During my last trip to Europe, I was aware of how modest the stress levels were, despite the EU crisis, the looming recession, collapse of the Euro, etc. Their extensive safety net meant that there was not a ”Stressed Out Middle Class” or even a “Working Poor.”

    You might want to tell that to the Greeks and Italians.

  5. Over the past year, I have been in Berlin, London Copenhagen, St. Petersburg, and Rome — but nowhere in Greece, Spain or Portugal.

    PS: I linked to the WaPo “Economic Suicide” article Wednesday. The full article suggests this is more about Mental health problems than cuts to social safety net. Still, Greek suicides up 19% since 2008 is nothing to sneeze at.

  6. sajithsankar says:

    Barry, just because iPads were invented here does not mean that the Nordic countries are bad in terms of inventions/ innovations. Remember Nokia, Ikea, ABBA, etc. It is better to have the 70% tax rate than myriads of business schools/ universities charge exorbitant fees, doctor’s charges out of control, drugs out of control, deteriorating schools (Finnish teachers and schools are the best in the world), guns easily available, 2 and 20, less and less research, $2 bn spent on elections with 1% folks winning and the common man getting screwed etc. The kind of advertising I see on the medical industry – doctors, ortho procedures, BOGO for Lasik etc – is sickening. A doctor is someone who has a dedication to serve people and cure their sickness – that is all gone. It is better to do to the finance industry here that Sweden did to their banks. Salaries have gone out of control.

  7. giacman says:

    Baltics are not Europe..


    BR: Finland uses the Euro . . .

  8. Orange14 says:

    BR-Very cogent observations. Your top two categories represent probably 1.5% of the total US population (if that, I’m not sure what the true number of category 2 is). The rest of us (though I’m in the upper part of #3) end up being stressed at some point or other in our careers. What is amazing to me is how many folks in these latter four categories vote against their financial self-interests. I remember the tuition payment for my two kids (made the mistake of telling them that they could go to any college they wanted) which in the aggregate after the trivial scholarship money amounted to over $300,000 for two BA degrees at private universities (tuition and all other related expenses). We were fortunate to be able to do this and no loans for the kids were required.

    My gut feeling is that this is going to be a watershed election as the long term demographics are running against the Republican party (white male portion of the electorate is shrinking dramatically). The Republicans have this one shot this year to get their agenda passed.

  9. [...] Barry on where you are on the economic strata.  (TBP) [...]

  10. adbutler007 says:

    Let’s take it up a level.

    What is the purpose of an economy? Does an economy serve to maximize production, or happiness? The Nordic countries and a variety of other countries around the world to varying degrees, obviously prioritize health, happiness and well being over competition (and its corollary innovation) and productivity. This order of priorities is anathema to Americans, which is no doubt why they have the highest income per capita (or near to it), but also the highest gini coefficient in the developed world (by over 20%).

    Oh, and socialism for the rich certainly exaggerates the concentration of wealth at the top vs. the bottom.

    Without American risk-taking, the rest of the world would have far fewer truly important solutions to humanitarian problems in a wide variety of fields. For example, the vast majority of new pharmaceutical compounds emerge from U.S. biotech. This is important.

    The question is, to what degree would be require so many new treatments for diabetes, heart disease, cancer, insomnia, depression, anxiety, obesity, cosmetic issues, aging, etc. if we re-engineered economies to facilitate health and happiness rather than productivity and growth at all costs?

    Just sayin…


    BR: You raise some valid points, but I take issue with your claim that “this order of priorities is anathema to Americans.” I do not believe it has been remotely discussed. That is not an accident — it is not in the interests of corporate owned media in general and Fox News in particular to have that philosophical discussion. And I say that comfortably esconced in the 1% . . .

  11. lunartop says:

    Given the stats on social mobility in the US (poor), the persistence of the illusion that is “The American Dream” is quite surprising. It is however a very useful illusion for those higher up, as it seems to lead those lower down to continue to vote against their own interests.

  12. Aspirational voting” is something that always perplexed me.

    Maybe I will be wealthy one day, so I am against the estate tax” is something that i find astounding . . .

  13. Neil C Denver says:

    Some reasons for lower stress rates for Nordic might include:

    - Low population growth rates (less demand for new housing stock)

    - Greater productivity per capita

    - More homogenous populations (less social conflict)

  14. mst says:

    Barry…thank you for your thoughts and reflections. I remember before the market corrections of 2007, I would look at the people riding the morning and evening bus with me and know that the economy was on the “cliff.” I pulled my investments out. What I saw on the bus were the macro economic policies effecting my local “micro” community. Most riders on the bus had minimum or no jobs while less than 10% had careers on level 3 & 4.
    And your observation concerning the stressed out middle class person is correct. During this time, I went through a divorce. The legal fight nearly….nearly brought me to bankruptcy. The fight was centered on my rights to be with my daughter. Thousands and thousands of dollar for fees. In the end, she is with me. I am straddled with divorce payments. Bankruptcy was (and still is) an option. But at the end of the day…simplicity wins out. My daughter is in my life….I am in her life.
    LOL….I have done those same calculations which your european friends have done when discussing the tax rate. Sometimes, I will explain the “actual” living expense (or living tax) to people who are non-american and living in Asia. Very simple arithmetic. Their prior views of most Americans being wealthy are erased. Now, they see America’s appetite to privatize social programs.

    But again, these are views from my micro world.

  15. super_trooper says:

    “But someone pointed out that once you add in the costs of health care, student loans, retirement investments, etc. — all the things state pay for with that 70% rate — an American making less than $100k ended up with about the same 30% net as the Finns do.”

    I heard that argument many times when I lived in Scandinavia. However, a big part comes from employer’s health/retirements contributions (>50% on top of your salary). Most employer also provides you with a pension. Sweden privitized social security in the 90s which is a ticking bomb for those born in the 60′s and 70′s. So even that part of the world will face major challenges paying for retirement (and especially those who may have been out of work for many years) but nothing like the middle class and below in US.
    One can complain about “socialised medicine” but no citizen of a rich country files for bankrupcy due to health issues, except US citizens.

  16. Jim67545 says:

    There have been times when this country has pulled together for a common good. WWII is certainly an example. This country pulled together during the depression to keep the poorest from starving to death and create some kind of work via WPA and the other make work (but build infrastructure) projects.

    This sense of common purpose and common advancement as AMERICANS seems to have disappeared. Certainly there is little congressional support. We all supposedly love this country but how many would so much as cross the street to do something for it? We think of the USA as the government, who we disrespect. But, the USA is the land and seas that we as citizens (in a sense) own and everything in, on or under that land.

    So absent any common national sense of purpose it’s every man for himself. This, of course, benefits those with the power and position to benefit themselves disproportionately. It stretches and then pulls the society apart as the society loses its cohesion and sense of national purpose. We are so f__ked.

  17. dsawy says:

    Having worked in Silicon Valley in the 90′s, which seemed overrun with Europeans on work visas (and within 2 years, green cards), it was fascinating to get into this exact conversation and comparison with them at the lunch table.

    They’d point out everything that BR just did. They’d claim that they had such a better quality of life, much better medical care, lower stress, shorter workweeks (typical SillyValley workweek is 60+ hours), more vacation every year, blah, blah, blah. Of course, they’d leave out all the little euro-foibles along the way… like the wars they’re constantly having, etc. And they’d leave out the contribution the US made to their economic situation with our defense spending on their behalf. Never mind those details, I’d just let them prattle on in their Euro-smugness way for a little bit.

    Then I’d ask them: “So…. why are you here then?”

    And they’d get mad and leave the table.

    Quality entertainment.

  18. OK Avenger says:

    I would be happy with just going back to the pre-1980 American public finance regime.

  19. danm says:

    You put the 0.1% but it would have been even more illuminating had you also put % beside all the other categories and maybe compare how these have changed over the last 30-40 years.

    I think a lot of Americans don’t yet realize how the concentration of wealth has evolved over the last few decades.

    Not so long ago, if you had no money, you got no credit and you paid everything cash. Everyone had a pretty good idea of where they fit in the pecking order. Today, with credit, most people have no clear idea of who is in debt vs. who has positive net worth… it’s a moving target that increases the stress factor and the sinking feeling of falling behing everyone else.

  20. machinehead says:

    ‘If you have health care, retirement, education, unemployment and day care paid for by the state — and a 70+% tax rate — you don’t sweat minor issues like continental recessions.’

    IF THIS MODEL IS SUSTAINABLE. And the evidence is right in our faces that it isn’t. Kinda like touting the yield pickup on AAA-rated mortgage CDOs in 2006.

    After all, if the European model is so great, why aren’t you living there already???


    BR: The European problems were not caused by their safety net, it was caused by a combination of the Great Recession and their silly system of monetary but not fiscal union. Although these facts do not fit your narrative, don’t let that stop you from drawing overbroad conclusions . . .

  21. A says:

    The definition of lunacy: voting for either political party, while expecting a different result.

  22. constantnormal says:

    I was (briefly) struck dumb by how closely your perception of the “economic strata” mirrors my own. The only comment I have to add to your excellently painted picture is that the strata shift a bit when we look at retirees.

    An awful lot of Bananamericans in the “Comfortable Middle Class” and below have woefully inadequate retirement preparation, and will find (are finding) that their standard of living takes a HUGE hit upon retirement.

    Why does this matter? It wouldn’t, except for the huge demographic cohort represented by the boomers, and the tail-wagging-the-dog effect they have had on our society/economy all their lives. It’s going to put a serious kink in our politics, and do nothing but raise the level of stress in our society, as the workers struggle to support the non-workers.

    Note to the peanut gallery: “struck dumb” is different from “just plain dumb”, I have been both at various times, and will likely continue that way into the future, but “struck dumb” is exceedingly rare for me.

  23. gman says:

    “Then I’d ask them: “So…. why are you here then?”
    And they’d get mad and leave the table.
    Quality entertainment.”

    Silly ..why do americans (i have many friend who do it) work all over the globe?

    “After all, if the European model is so great, why aren’t you living there already???”

    These are stupid versions of “america love it or leave it”. If one really cares about ones own country one should look around the world for way to tweak US to make it better.

    “IF THIS MODEL IS SUSTAINABLE. And the evidence is right in our faces that it isn’t. Kinda like touting the yield pickup on AAA-rated mortgage CDOs in 2006.” …you must not be aware of situation in either the German speaking or Scandinavian nations.

  24. ella says:

    In 2009 a family member had hip replacement surgery that was first develop in Europe 40 years ago. It is still new to the states. AMIS works with a specially designed surgical table that does not cut muscle. Complete surgery took 40 minutes. Hospital stay 1 – 2 days. Restrictions after surgery, don’t bend over for a couple of weeks and don’t do anything that causes a lot of pain. Driving in 2 weeks. Contrast with all other hip replacement surgery in US, with several days in the hospital, recovery with special potty chairs, restrictions on sitting, devices to pull up socks and physical therapy.

    Taking care of people seems more important than inventing I-Pads. But maybe I have different values.

  25. TLH says:

    Stress goes down as education goes up. Is this strictly monetary? The US is doing a poor job on education. For the amount of money spent we are not getting our money’s worth. A school district in Texas recently spent $60 million on a football stadium. That is the education level of our elected officials.

  26. DeDude says:

    The fear that if we don’t put some people in total despair and poverty then nobody will be productive is a myth. The kind of person who is just fine with his/her basic survival being covered (and then he/she would stop working), is not the type of person who makes real revolutionary progress in anything (or add much value to society, regardless). The drive that get people to take chances and do great new things has nothing to do with fear of not having enough money to survive, it is actually the opposite. If people in a stable job with health insurance fear losing all income (or desperately need the insurance because a spouse or child has a chronic illness), they are less likely to quit their job and pursue their own ideas. The reason America is doing pretty well on innovation is not because of our 3’rd world social system, it is in spite of it.

  27. BennyProfane says:

    Comfortably stressed, here.

  28. Bokolis says:

    Although I can define it to my satisfaction, I’m not sure economic situation can delineate between “comfortable” and “stressed out.” I think there is a group in between the two- in which a large percentage of us reside- where we live on a sliding scale between comfortable and stressed out, all in our heads and far less about money than we perceive.

    I am more stressed out (than when I was in eyeball-level debt) about money precisely because I now have money (and assets) to defend. I am comfortable- broke or not- because I am self-assured.

    Said more bluntly, because I like whothefcuk I am and despite what I think it means for the greater populace, I don’t believe the outcomes of elections- if a Consitently Underhanded Neurotic Termite like Bloomberg hasn’t fcuked my spit up, I could give a fcuk about Obama and Romney- and most other stuff play any significant factor in determining my lot in life.

    I don’t know how y’all feel about yo’selves.

    While there is something to be gained from considering the European perspective, it is hard to get past that they are playing chess without a clock.

  29. I could have broken this into 10 or more gradations, but I thought 6 was plenty for a Friday morning.

    It would be intereiitng to plot these on a scatter graph, with the 6 gradations as major distributions, and the levels in between showing as lesser peaks on the graph

  30. RW says:

    “Aspirational voting”

    This may be what a lot of folks say when asked why they voted the way the did but it seems more likely it is a rationalization for the far more common tribal impulses; e.g., in voting the interests of the patron, the powerful person(s) or clan representing tribe or community, I am confirming identity and showing solidarity.

  31. b_thunder says:

    BR: ““Aspirational voting” is something that always perplexed me. “ — bulls-eye!

    The ”Stressed Out Middle Class” and the “Working Poor.” — these 2 groups are the majority of USA residents and they’ve been brainwashed/indoctrinated to vote against what’s best for them! Or to be more precise, since Reagan neither of the major political parties really represent the middle class folks who do not contribute financially to the campaigns.

    I’ve got a proposal for Romney/Ryan: If they think that “job creators” are overtaxed, if they believe that higher taxes make people less “hungry” to achieve, if they think it would be just fine that if Ryan’s tax reforms was enacted in 2009, Romney’s 2010 *total* tax would be under 1% (not 13% that he paid), than the Ryan’s plan doesn’t go far enough!
    This is my plan: why not “incentivize” the bottom of the income pyramid to work harder/better/more and tax them (at the bottom) at 35%, and reduce tax rate “progressively” as their income grows? Say, 35% rate on $7/hour burger flippers, 25% on cab drivers, 15% on Google engineers, 10% on jr. traders at 2nd tier firms. Once you’ve cleared $500k – the rest of your income is tax free! What can be better incentive to make more $$$? I think GOP should give me a speaking role and promote my plan at their convention!

    As for the Dems – well, the Obama/Geithner/Barnanke economic repression regime caused 93% of all income gains to flow to the top 1%, up from mid-60s during GW Bush years. My parent’s retirement savings earn 0.2%, far less than the “worst case” scenario they were planning for. Thank you, Ben!

  32. danm says:

    The drive that get people to take chances and do great new things has nothing to do with fear of not having enough money to survive, it is actually the opposite.
    My house is paid off = I can now start a company.

    I have a huge mortgage = I need a safe corporate job and I remain a serf.

  33. I have a mortgage and I started a company . . . Had no interest in being a corporate serf!

  34. BITFU Search Engine says:

    According to polls taken from 2005 to 2011, these were the happiest countries:

    8.New Zealand

    Plot the happiness scales of these countries and then do 2 overlays….

    1st Overlay: Income Equality (ie Gini Coefficient or some other equality metric). Yes, you would find a high correlation between happiness and equality.

    Now do a 2nd and far more controversial Overlay on this happiness plot: Racial Homogeneity. I think you’ll find the correlation much tighter.

    So what do we conclude? Certainly not that racial purity is the path to happiness! [I would imagine that the lowest ranked countries in terms of happiness are also quite homogenous.]

    But don’t get too carried away with income-equality measures. Hell, Ethiopia and Pakistan rank much better than the US in terms of this metric.

    It doesn’t mean that the overall wealth of the country and income distribution are not important. Of course they are… But it’s complicated. And yes, the pressures of racial integration also play a role; this is messy. The Nordic Countries and Japan (which all rank very well in terms of income-equality) simply have not had these issues. They are not relevant when discussing the U.S.

    The simple “income-equality and happiness” comparisons are misleading, too reductive and downright dangerous. If you’re not careful one could just as easily conclude that the path for country-wide happiness is “racial purity”.

  35. Julia Chestnut says:

    Funny, I was having this exact discussion with someone yesterday. It comes down to whether you think that the risk involved in a life without safety nets is worth the stress and/or is likely to pay off for you. I am, like you, constantly amazed by people’s view of that calculation in their lives. I would have to attribute it to Dunning-Kruger or something: the very people least likely to rise above the mean and succeed in the cut-throat world that is the U.S. are exactly those who are most confident about the benefit of cutting throats. Like the old saying goes, “If you don’t know who the mark at the table is, you are the mark.” It seems to me that most people simply never learn.

    Worse, there is a kind of pervasive, knowing sarcasm about the situation instead of any honest appraisal and attack on it that I am certain is caustic. I even see a kind of sarcastic attitude in children’s cartoons and things now that used to take themselves seriously – as though the only response to a world set up like this one is a kind of detached negativism from the cradle up.

    It is exactly that attitude that I find most damaging. We’re all supposed to laugh about the poisons of this system and culture like it’s an inside joke, most likely because it keeps people from noticing how horrible their lives really are compared to what they could be somewhere else. God forbid we should actually have an honest dialogue about these things.

  36. faulkner says:

    Barry, thanks for this. I think the unasked question is, What is a society for? Not that long ago, the answer was for royalty and aristocracy – which is still evident in many parts of the world along with its secular form – plutocracy. We’re not out of the woods on any of these yet.

    Certain social histories of northern Europe suggests they avoided these in favor of the people. However, social history along with sociology and other studies of societies have fallen out of favor in the US (and interestingly out of funding). Instead individual psychology is emphasized to the point of fMRIs.

    All this suggests an orientation of minds whether deliberate or not.

  37. danm says:

    One thing I have noticed is that most people do not stop to think about where they fall within these categories.

    I have chosen to live in a category below and I am surrounded by people carrying the debt load of the category aboove. And many probably think I am a loser because I am not showcasing the symbols of success. It’s sad because this is what causes sickness, divorce, stress, road rage…

    Since most people are financially illiterate, they do not have the financial acumen to carry the debt loads they have been alloted. Credit for most is not a tool that will help them build something but a weapon they use to shoot themselves in the foot.

  38. sajithsankar says:

    Totally agree with TLH. What I do not fathom is why we have all these school boards for each county – one for the entire country is enough – anyway it is one language or maybe one per state. There is a lot of flab that can be removed – which means a lot of people without jobs, but still all this can be governed without flab? Why do we have state regulation for insurance/ medical insurance/ telecom, except for state officials to make money? In some cases we regulate too much and others we do not – witness the case of the farmer who was arrested recently for rainwater harvesting, while we do not know what is happening in derivatives or food industry. When you have 100s of cities in a state and each city can set their salaries as they deem right, u will have many more Bell Counties.

  39. AHodge says:

    right on
    i just met some finns last year and attended a scandi conference
    there the finnish central bank governor impressed me as one of the finest govt officials i have ever been privileged to meet.
    also the vice chair of the swedish central bank who also had the plus of being jawdropping smokin hot
    im hanging out with a finish belg couple and just started with a portugese GF who i will stay with next week in brussels
    europe as my friends agree is regrettably making a complete hash of their downturn,
    except for the scandis and baltics who will be max clever i think at minimizing the contagion
    scandi corporations are lightly taxed and in many respects more “free” than US corps
    their rules are mostly whats actually needed
    to reign in greed/ abuse of power and maintain healthy competition
    society cares there is less need for those at the margin to feel threatened-they are statistically “happier”
    the taxes are all on individuals and progressive on the rich, so there is evasion
    if you dont like being a CEO or rich there you can leave

  40. vngalasso says:

    Great post Barry! I just wrote a blog post looking directly at the Ryan selection and how the election is being constructed around this issue of economic fairness. Please have a look

  41. The Retired CNBC Sucks says:

    I always enjoy it when Barry touts Europe a little bit and all the American chest-thumpers come out bashing the sustainability of European socialism and why all the Euro entrepreneurs wind up in Silicon Valley.

    Real U.S. debt is $70 trillion to $200 trillion, depending on how you factor total liabilities, and that is just at the federal level. This is no problem as long as foreigners happily fund our debt to sustain their own development (through the accumulation of our paper assets), but that will end at some point. Politically, we can never resolve our fiscal situation. We have a less-than-harmonious (and increasingly less so) melting pot, a cultural predisposition toward violence, and we are in no position to pay our police in many cities. I personally don’t see any crises in the 2010s (hopefully), but those 2020s, 2030s, and 2040s are sure going to be interesting.

    Let’s see how the whole movie plays out before making any judgments about the superiority of any system, shall we?

  42. I could move to Europe if I wanted to . . .

  43. Bridget says:

    Residents of the major European countries will be just as stressed as the Greeks once the borrowing party comes to an end. As will we. And the longer the party continues, the worse it’s going to be.

    Finland has, what, 5 million very homogeneous people? Maybe a bit less stressful all around.

  44. 5 million tall, fit, beautiful blonde people

  45. giacman says:

    According to wikipedia ( northern european countries have much more suicides then US or the rest of Europe. If you would consider these data relatively to the per capita GDP they would probably be the top ranking together with Japan and Korea.

    So what defines a functioning economy, or a preferable society to live in?

  46. wally says:

    “Note the Europeans pay ~ $12 / gallon”

    Not a problem when you can walk or bike to shop and work and when you have great, inexpensive transportation to almost anywhere you want to go.

    Again, an example of quality of life being placed ahead of the “right” of some individuals to plunder the rest.

  47. “…but I thought 6 was plenty…”

    yes, for now..

    soon enough, though, as long as ‘We’ keep up with our Fantasy Football Leagues, you’ll need, only, to discuss 3 …

    1/9/90 (no, it isn’t “a Date”..)

  48. Ben Dover says:

    BR, your points are interesting to ponder. I was admit-ably a little surprised by the level of happiness/ utility quoted for the Nordic countries, I had been under the impression that because of the lower hours of sunlight in those countries the suicide rates were higher. Perhaps a ‘survivor-ship’ bias… literally ……sorry that was distasteful.

    Someone mentioned above about the definition of lunacy being: voting for either party and expecting different results. I would have to agree. When I look at Romney and Obama’s policies I really don’t see that much distinction between the two men, they are divided on healthcare sure, but ultimately we know the real problem is spending and how that affects costs in healthcare and other places. Neither candidates will introduce meaningful reform. I think the main disagreement between the parties is who feels better suited to preside over a large. powerful federal government, which is a real shame. I’ll vote in the coming election, but honestly I wish it I felt like it was at least a choice between the worst of two evils, I think it’s more like my wife asking me about whether her wedding dress should be “bone white” or “ivory” ….you mean to tell me there is F***-ing difference here??

    I think we allow ourselves to be polarized by political arguments, while the policy itself is mostly constructed to keep those currently in power, in power. In my mind these people are the Huns -divide and conquer are their methods.

  49. DeDude says:

    The suggestion that somehow the Nordic countries are monogenic racially harmonic countries is completely false. Remember that luni who killed almost 100 kids up in Norway. His main complaint was that the left had opened his country to accepting muslims and other “different” types of people. All the Nordic countries have substantial numbers of people who have immigrated from “different” places whether it is skin color, religion or culture. And they all are dealing with the predicted issues of isolation vs. integration. Because they do not have a “melting pot” tradition such as the US they actually have a lot worse problems with that than we have here.

  50. slowkarma says:

    There’s a psychological questions buried in all of this, and that is, “What kind of person are you?”

    If I were a fairly mellow middle-income American working in the bowels of a large company, or a mailman, I’d of course prefer a European-type situation of long, guaranteed vacations, male pregnancy leaves, cradle-to-grave medical insurance, and the rest. There is nothing in that American’s psychological makeup that plays to ambition or creativity; you’re playing to contentedness.

    But I’m not. I’m essentially a small businessman who has done well, but it’s been a struggle, and despite the struggle, I’ve enjoyed it — I’m 68 and still working every day. I would not be happy if I had to pay 70% in taxes so that other people could be content in not working much. So, call me selfish. But to tell the truth, if I simply gave it up and quit, which is a temptation that’s always out there, there are a number of other people who are more interested in contentedness, who’d be quite a bit less content with me gone, and not providing them with income.

    When I see people working very hard, at anything, I feel a kinship with them, and I don’t care if it’s carrying bricks or shoveling concrete. I suspect that’s true of a lot of the “working rich,” like successful surgeons, lawyers, building contractors, salesmen and so on. The people we tend to disdain are those who refuse to work, because they’ve made the calculation that they can do almost as well by not working as they would if they worked, and those who make their money through what amount to scams (which includes many of the richest.)

    It’s no where near as simple as cutting people into tranches based on income. There’s a lot more going on. And frankly, even at 68, the idea of being “content” does not interest me.

  51. Funny, I linked to this article today, and I thought of it as a sort of “Journey Is the thing”

    The Chase Is the Thing and the Thing Is the Chase: Learning to Love Failure (SplitSider)

  52. formerlawyer says:

    @BITFU Search Engine Says:

    Canada is not a homogeous nation.

    In 2006 the Census took a survey of Canadians ethnic origins – 70% identified as white.

    In contrast in 2010 the US Census said 80% of us identified as white.

    Is it the 10% difference that leads to the the difference in happiness rankings? Or is it Canada’s universal health care and/or social safety net?

    To me, arguments about the lack of homogenity in the US making it different – smack of racism (not that you are a racist as the last sentence in your comment says) but the argument is the presence of “others” changes the US problems. It may be true – it may not be (my belief), but if that is one of the problems then identifty what other countries were sucessful why and how but don’t reject comparisons out of hand.

  53. [...] strata and stress.  (Big Picture also The [...]

  54. achudy says:

    This seems to miss the other 1/2 of the taxation question, which is how is the money currently coming into the US system spent?

    For my age (26) I’m solidy in the upper middle class, comfortable position. I have no desire to pay additional taxes because it seems to me that the vast majority of it is wasted on foreign wars, the military industrial complex and then a whole host of corrupt domestic dealings. The Nordic countries you name don’t have these absurd military expenditures.

    If our current spending was intelligent and well managed and simply lacked for funds I would be happy to throw in another few percentage points, but since I don’t see that happening I would prefer to use it for what I see as productive uses versus what the government does.


    BR: That is a discussion of en entirely different subject matter, and not remotely what this post is about.


  55. Uchicagoman says:

    I have always liked my Volvos!
    Just bought an new S60 T5.

  56. bartoncreek says:

    Nordic countries, liberal utopia’s, where you get taxed like crazy and everything is great for you and your few million homogenius neighbors all supported by the Oil wealth and Technology you are selling to the other few billion people in the world.

    Then you have African countries, those wonderful capitalist utopia’s where there are no taxes and every man for himself. Forcing people at gun point to remain in the mine to support the warlords who are selling their plutonium and gold to the other few billion people in the world.

    Then you have the US in the middle of it all going back and forth every ten years between a paid for welfare state and a go at your own pace warlord system. All while the majority of the population watches and bitches about this or that in middlesome medicore work while the happiest in our society are at the bottom or climbed themselves up to the top. Why? Because they know where they are at. Either deciding to not take part in the system and be poor accepting what is handed out or taking advantage of the mobility and wakeing up every day working with purpose!

  57. RC says:

    It is astonishing that Republicans are against this very very Republican idea of everyone being forced to buy health insurance to reduce the cost of insurance. The idea came out of CATO institute for god sake.

    If we just remove this healthcare danger that many are forced to deal with, we will free people from a lot of stress and unleash a new wave of incredible innovation that only America is capable of.

  58. SecondLook says:

    What is interesting is the real distribution of wealth, and the public’s perception of how it’s distributed.

    According to a study done in 2010:

    Actual percentage of wealth owned by the top 20%: Approx 85% of total wealth
    Popular estimate: Approx. 58%

    Actual percentage of wealth owned by the second 20%: Approx 10% of total wealth
    Popular estimate: Approx. 20%

    Actual percentage of wealth owned by the middle 20%: Approx 4% of total wealth
    Popular estimate: Approx. 12%

    Actual percentage of wealth owned by the bottom 40%: Approx 1% of total wealth
    Popular estimate: Approx. 10%

    To sum it up, the public thinks that the core middle class (the 2nd and 3rd quintiles) controls about a 1/3 of total wealth, when they actually have 1/7.
    They seriously underestimate how much wealth is concentrated in the top 20%, and by an order of magnitude overestimate what the bottom 40% have in assets.

    This misconception is the fatal flaw in debates about economic inequality in the United States.

    By the way, those numbers confirm what Pareto observed back in 1897 when he did a study of wealth distribution – his 80/20 rule, regardless of what kind of society, from industrial Britain to semi-feudal Russia.
    Follow up studies over the decades have supported that wealth seems to naturally fall in that level of distribution. The following quote is the consensus opinion among economists that have looked into the subject.

    “The finding suggests that the basic inequality in wealth distribution seen in most societies may have little to do with differences in the backgrounds and talents of their citizens.”
    — Mark Buchanan

    If we wished to do so, through various policies we could alter the ratios to something like 70/25/5, but that seems to be the best we could do.
    Acknowledging that wealth seems to be invariably skewed would be a significant step to dealing with various social and political issues…

  59. That is the Dan Ariely and Michael Norton paper “Building a Better America – One Wealth Quintile at a Time”, Perspectives on Psychological Science, January 2011 6: 9-12

    We referenced it way back in October 2010: Estimates of Wealth Distribution Are Widely Wrong

  60. Glen says:

    I’m somewhere between comfortable middle class and stressed middle class. I did 15 years for God and country with the USN and have since worked in private industry. I’ve been lucky enough to find a company which still creates real non-military goods in the US and is a major exporter of those goods to the rest of the world. I should have a semi-comfortable retirement assuming the pensions I have earned are not stripped, my small investments in Wall St have largely been wiped out.

    I’ve watched what’s happen since 1998 or so with a growing sense that our country is in a race to the bottom which cannot end well. We have bought into some myths that are very destructive. As an engineer, I can tell you that outsourcing manufacturing generally leads to outsourcing the expertise required for that manufacturing. Our country has instead concentrated on the FIRE sector of the economy, one which does not create real wealth, but seems to function best by concentrating wealth into a smaller and smaller group (this seems logical since we have less real wealth being created) or creates toxic debt through the use of fraud and corruption.

    I do not see out political system performing as a counterbalance against this trend since it appears that the truly wealthy have bought the political process. Anybody who did not see that clearly with the collapse and bailout of the FIRE sector in 2008 has to be either rich or deluded. Obama clearly miss an opportunity for the “Hope and Change” that he promised. I fear our next collapse can only be worse.

    What amazes me is those people who vote against their own economic interest, and I don’t mean the Joe-six-pack that watches the MSM all day and is concerned that the government will take his Medicare, I mean the comfortable middle class to the wealthy. These people generally figure that the game is rigged, but rigged in their favor so all is OK. Who will they sell their goods and services to if there is no middle class? The game is rigged, but certainly not in their favor. We will ultimately become a very stratified society with nothing but a very small group of very wealthy and then everybody else. (Did Monopoly not teach people how this works out? There is only one winner.)

    As much as people will show up here and bash your comments on the EU, I think your points are valid. People with less concerns about their own health care will be more entrepreneurial, and small business relieve of the burdens of providing health care will be more able to grow. Keeping higher educational costs low, and having national industrial policies which grow and sustain key industries represents a willingness to make the long term investments which resulting real growth, rather than tying all to next quarters numbers (and jugging those numbers to make them look good while the company goes under). Perhaps this is why data indicates that the American dream of rags to riches is now happening more often in the EU, and other parts of the world. Yet, the EU seems to be on the verge of walking away from those policies so who knows.

    As to whether those polices are sustainable in the long run, all I can say is that these are certainly more sustainable than giving tens of trillions to failed FIRE sector companies without enacting any corporate or regulatory reform. At the risk of referring the obvious to long time readers of this blog:

    I would suggest to you that the bailouts we are still currently engaged in are utterly unsustainable.

  61. DiggidyDan says:

    Mark E Hoffer is spot on. . .1/9/90 is the goal, with divide and conquer tactics, propaganda and misinformation (to the point of politicians and moneyed interests defining the curriculum of schools in the best manner to churn out brainwashed indebted slave labor), and bread and circus material to distract us from the truth (drama, “reality” tv, sports, religion anybody?). It’s all rather obvious. Societies naturally tend to do this over the long run, until they reach the tipping point and things indeed get “real” as in 1776 and 1789.

    One of the few bright spots I see left is the trend of the internet opening up the opportunities of low or no cost knowledge to break the cycle and allow those who care to learn to do so without incurring the burdensome debt typically required for an “official” education. Knowledge is power, and one of the few avenues for us “stressed out middle class” indentured servants to claw our way out.

    I hope companies begin to see certificates for open course work in a comparable light to an official degree when weighing an individuals skills and employability.

  62. lonr505 says:

    “I have always liked my Volvos!
    Just bought an new S60 T5.”

    Volvo is Chinese-owned. and the S60 was built in Belgium. You bought Sino-Swedish marketing.

  63. bear_in_mind says:

    Hi Barry,

    Well, I’m going to have to pen a more eloquent post when I have access to my desktop and WiFi, but I have to posit that your framing around, “Almost zero economic mobility” now applies to AT LEAST the bottom three categories you illustrated, and likely bleeds into the bottom third to half of the fourth category. Recent research pretty clearly illustrates this phenomenon (for later post). Also, to your comment(s) about ‘voting against one’s own interests’ and ‘identifying with the uber-rich’ (paraphrasing here), these are both symptomatic of the effectiveness of advertising and/or propaganda, much of which is DEEPLY rooted in cognitive science and linguistics research. Look at the “i” meme (iPod, iPhone). I thought they were hopelessly clunky and awkward phrases, but the “i” motif in a society deeply rooted in individualism tropes and mythology was a master stroke. It’s Freud’s preoccupation with “self”… and not surprisingly, this focus on “self” correlates with the nutty ‘objectivist’ thinking of Ayn Rand acolytes. I’ll add boring blather over the weekend. Thanks again for you thoughts and ideas — agree or disagree, it’s great stuff!

  64. socaljoe says:

    Reminds me of my experience in East Germany. When the wall came down it brought with it freedom, opportunity, and material wealth… but also personal responsibility. A lot of East Germans missed the good old days when they didn’t have any economic worries. You just did what you were told and the nanny state would provide a basic subsistence. An entire generation grew up under this system and they were comfortable with it. No question the overall stress level was lower on average. I suppose which system offers more happiness depends on whether you prefer freedom, opportunity, and material wealth or freedom from stress and worry.

  65. RC:
    It was the Heritage Foundation, not CATO. There is a difference, however subtle, between the two places.

  66. RC says:

    Still a conservative think tank, not Center For American Progress or Brookings…
    My point is still valid that the individual mandate is a product of conservative idea factory yet for purely political reasons Republicans are distancing themselves from it.

  67. Frilton Miedman says:

    I’m definitely in the “stressed out” category, I’m afloat, but fully aware of the devastation the impending sequester will reap on the economy….pinching pennies & watching my bills, I have a family to fend for.

    Most notable comment on this thread, BR’s “aspirational voting”, absolutely true.

    I can’t even begin to guess how many clients I may lose as a small biz in coming months, directly or indirectly, whom derive a livelihood through the plethora of jobs & government contracts that are about to be cut, I attribute this directly to all the “aspirational voters” in 2010, whack-jobs put into office via Karl Rove, Dave Koch and Rupert Murdoch, brainwashed by the Fox empire.

    The one true problem we have – bribery, special interests engaging in “Buckley V Valeo” form of “free speech”,.

    The obvious, money is the primary motive for most political decisions in America now, not “we the people”.

    I can’t put into words the levels of frustration I’ve gone through trying to explain to some people that America is a Democracy, the wealthy aren’t the best rulers by default just because wealth alone symbolizes greater intellect, ability or leadership.

    If that were true, the heads of Drug cartels that torture, rape and kill would rule the world and we’d all live better lives under their reign.

  68. Giovanni says:

    Aspirational voting is a bubble that grew out of a thriving middle class (which is on it’s last legs) and was inflated the media marketing engendered me, me, me, more, more, more culture. Like all bubbles it will collapse quickly when it goes and woe unto us all when that happens. I wonder if the .1% are consciously riding the country to the ground and believe they can hop off at the last moment or whether they truly just don’t get it.

  69. louis says:

    Remember when you had to take a number at the Butcher shop?

    Today that takes place at the Gun Counter of the Bass Pro Shop.

  70. sellstop says:

    Lots of comments about our debt situation to the point that it seems a bad time to be contemplating a European style socialism. Socialism as practiced in parts of Europe, high taxes with commensurate high common benefits, is a buffer against the boom and bust economic cycles we see in the purer capitalist economies. As long as the taxes and the spending are equal there is no government debt. Our govt. debt has worked its way into our economy over the last 40 years or so and has been snared by the business enterprises. The boom in real estate, stock markets and bond markets would not be so pronounced, and may not have happened in a subdued and balanced socialist system. The money leftover for speculation would not be there. Nor would the need to speculate. Nor would there be the stress.
    But after 40 or so years of government debt spending, which is precisely the same as economic stimulus, we now have debts to pay down.
    So now we say that we can’t afford to implement the same system that would have prevented many of our woes.
    Along the same vein: What if we implement a system of vouchers for Medicare? Say the govt. hands money to private citizens and they go to private insurers for coverage. I bet they have to pay more out of pocket. And what about when their coverage is not adequate? I’ll bet you dollars to donuts that those same insurance lobbyists who are so concerned over “big government” now will then lobby for a bigger voucher for the citizen. That is how American capitalism works!


  71. victor says:

    To those bashing capitalism relative to “happiness” I remind them: capitalism, an ECONOMIC ONLY system may make you free and may make you rich but happy NO. Want happiness? a mate (soul and otherwise), a priest/rabbi/whatever, even a hobby, even work, work even in the Gulag (see One day in the life of Ivan Denisovich by Solzhenitsyn) may, just may make you happy and guaranteed not for long.

    About the 6 strata above: a) there will always be strata regardless of social engineering efforts and b) it would be nice to be able to separate the “deserving” from the “undeserving” in the higher strata and also as a society to limit the number of those who are in the bottom stratum because of their own irresponsible behaviour/actions vs. the true unfortunate ones.

  72. Dow says:

    Some of the commentary really got under my skin.

    I deeply resent the assumption that those of us who are not comfortably ensconced in the upper echelons of ‘$ociety’ have not taken risks. The belief that we’re sucking on some corporate tit because we’re afraid to go it alone and start our own businesses is insulting.

    From the Census Bureau: About three quarters of all U.S. business firms have no payroll. Most are self-employed persons operating unincorporated businesses, and may or may not be the owner’s principal source of income. Because nonemployers account for only about 3.4 percent of business receipts, they are not included in most business statistics, for example, most reports from the Economic Census.

    Just because our businesses aren’t raking in the millions is no reason to insult small business owners.

    The question that really needs to be asked is how many entrepreneurs are sitting on the sidelines because they can’t swing the expense of starting their own business. That’s not fear. That’s fiscal reality. Not everyone can just ‘sell some bonds’ or borrow from their parents when they’re struggling financially.

  73. Eurobob says:

    Kudos on a fine column. I am an American who has lived in Belgium for 4 + years I can offer some anecdotal confirmation. I am working on an EU contract, not a fat American expat contract, so I pay all the taxes, and am on the health and retirement programs. For those of us in Northern Europe, your read on the situation is quite accurate. I am single, but if I had a family, the benefits are even greater. When everyone pays into the system, its amazing what can be provided to the society. (granted, we appreciate you yanks paying for all of defense spending, so we can invest our taxes in nice bike paths and public swimming pools). Routinely, I am often offered jobs back in the states that would bring me more net cash/month, but have no desire to return because I see the cost/benefit of the life as a decrease in ‘quality’ as defined by the various factors you mention. When I go back to the states, I simply shocked by the level of poverty I see…when I lived there, I didn’t notice it so much. Distance brings perspective, I suppose.

  74. postpartisandepression says:

    Interesting post and spot on about how much better off most europeans are – too bad most americans just don’t get it.

    Based on your analysis though only people in the lower 3 categories would be “stressed” enough to produce all those fine inventions. Don’t think the data support that. At least one recent example being Mark Zuckerberg – who attended Harvard – probably an indication he was not amongst the “stressed” middle class. In addition what does this do to the idea that we need to lower taxes on the upper two categories because those are the “job creators”.

  75. Its not that most Europeans are better off, its merely a different system that works well as a point of comparison.

  76. FrViper says:

    Finland had a serious drinking problem – had ‘gardens’ by the liquer stores for drunks to sleep it off. On happiness they have a serious Sami nation issues – they were the homeless beggars in the streets.

  77. victor says:

    Comparisons between USA and Scandinavian countries, for that matter any country with hastily drawn conclusions often “they are better off” in happiness, social safety nets, income/wealth inequality, etc are nice conversation subjects. Similarities only go so far and special features prevail: size, demographics, history, geography, social/political/economic conditions. USA falls in the category of ” a world by itself”, just like Russia, China, India, Brazil. Then there are so many special situations: from La belle France to say Israel all the way to the absurd, say the break away territory of Transdniestria. I went there in 2009, stay away but even there you can find things that are better than in the US. In his memoirs Churchill remembers Stalin saying to him in 1942: “The Germans are finding out that Russia is not Belgium”. Even comparing USA with the EU, or perhaps with the Euro-zone within EU runs into apple to oranges problems in my opinion. I’ m not sure I’m saying this right, please allow.

  78. Lukey says:

    If it is simply a case of becoming like Scandinavia to be happy and succeed with a socialist model, why don’t Greece and Spain and Italy just emulate Finland or Sweden and be done with their economic problems? It should be simple, no? I mean, some of the folks here assume we in America can do it – if it is really that easy, why don’t the failed socialist nations simply fix their social and economic models to become more “Scandinavian?” And, if it turns out you can’t “fix” a broken socialist state simply by following the Swedish recipe, doesn’t that call into question the notion that we can succeed in doing it here?

  79. LukeP says:

    In my opinion, aspirational voting is the consequence of a rational dedication to ethics based upon false assumptions of what is ethical. As I see it, there are two forms of income. The first type of income is generated through productive achievement that benefits others and grows the economic pie – this is the symbiotic relationship between labor and capital. The second type of income is generated through rent-seeking behavior that simply alters the flow of money, but does not grow the economic pie – examples of this include fractional-reserve banking and the land increment of rent. It is in the interests of bankers and landlords to masquerade as capitalists, but they are not capitalists (since they don’t grow the capital stock) – they are rent-seekers.

    Republicans are people who correctly see the benefits of capitalism (the expansion of the capital stock that adds value to labor), but they are fooled into thinking bankers and landlords are capitalists. Democrats are people who correctly see the evils of wealthy rent-seeking individuals, but they incorrectly attribute rent-seeking to capitalism. In my opinion, Democrats would be wise to change their target from “the 1%”, which may include capitalists that help others (Apple is not the problem), and focus their attention specifically on the rent-seekers (banking is the problem). By using this strategy, Democrats can align themselves with Republican voters who support productive capitalist activities, while at the same time exposing the rent-seekers who masquerade as capitalists. In my experience, Republicans are increasingly skeptical of banking. They are starting to get that banking is different from other capitalist activities. There is a real opportunity for Democrats, but they’ve got to be sure they select the correct bogeyman.

  80. victor says:

    1) kudos to LukeP but the R’s have opposed Dodd-Frank which has got to be a step in the right direction and have also foolishly opposed Elisabeth Warren’s intended job in the Admin. as Consumer Protector extraordinaire, a job she was supremely qualified for. Both positions will come back to haunt the republicans including their dogged insistence to not repeal the Bush tax cuts for the wealthy as well as aligning themselves with Big Oil reg. their admittedly limited tax breaks.

    2) From BR: “But someone pointed out that once you add in the costs of health care, student loans, retirement investments, etc. — all the things state pay for with that 70% rate — an American making less than $100k ended up with about the same 30% net as the Finns do”. Very good observation indeed, applies to the non-wealthy here. Now if we could just reform our tax code which has gotten to be so corrupted that even if the tax rates go up, this code now guarantees that most of the benefits will go to the WEALTHY with a few crumbs reserved for the lower strata; I know this sounds counter-intuitive.

  81. Excellent discussion on a fascinating subject matter . . .

  82. Defining Quality says:

    ….. and yet you will not talk about the corrupting power of the “small in actual number” ultra wealthy!
    The only reason Billionaire$ and CentaMillionaire$ exist anywhere in the world is because the consumers allow them to exist. It is the consumer that pays all taxes and it is the consumer that pays for all corruption!
    We need to tax Greed out of existence!
    But just like fight club – we don”t ever talk about it!

  83. achudy says:

    No need to be rude. I didn’t soapbox on your blog. My post was quite short.

    The point of the post seemed to be higher taxes for better social programs and a social safety net. I was just pointing out many Americans seem to not want the higher taxes because they don’t think the social programs and safety net would improve.