August 18th, 2020

Lamp Effect


Standard postwar theories of class composition in the global north emphasized occupational differences between employers, blue collar, and white collar workers. But deindustrialization, and the army of underpaid service workers it generated, has increasingly muddied these categories.

In a 2018 article, MORITZ KUHN, MORITZ SCHULARICK, and ULRIKE STEINS redraw these distinctions for the era of asset ownership. Using household-level archival data from the Survey of Consumer Finances, they argue that portfolio composition and asset prices, rather than income or occupation, are the defining features of class in the contemporary economic landscape.

From the paper:

"A channel that has attracted little scrutiny so far has played a central role in the evolution of wealth inequality in postwar America: asset price changes induce shifts in the wealth distribution because the composition and leverage of household portfolios differ systematically along the wealth distribution. While the portfolios of rich households are dominated by corporate and noncorporate equity, the portfolio of a typical middle-class household is highly concentrated in residential real estate and, at the same time, highly leveraged. These portfolio differences are persistent over time.

An important upshot is that the top and the middle of the distribution are affected differentially by changes in equity and house prices. Housing booms lead to substantial wealth gains for leveraged middle-class households and tend to decrease wealth inequality, all else equal. Stock market booms primarily boost the wealth of households at the top of the wealth distribution as their portfolios are dominated by listed and unlisted business equity. Portfolio heterogeneity thus gives rise to a race between the housing market and the stock market in shaping the wealth distribution. A second consequence of pronounced portfolio heterogeneity is that asset price movements can introduce a wedge within the evolution of the income and wealth distribution. For instance, rising asset prices can mitigate the effects that low income growth and declining savings rates have on wealth accumulation."

Link to the piece.

  • "Of course, income from work remains vitally important for many people as a way to access subsistence goods, but by itself it is less and less able to serve as the basis of what most people would consider a middle-class lifestyle." In the LARB, an excerpt from Lisa Adkins, Melinda Cooper, and Martijn Konings' forthcoming book, The Asset Economy. Link.
  • "I discuss three clusters of class analyses, each associated with a different strand of sociological theory. The first identifies classes with the material life conditions of individuals; the second focuses on the ways in which social positions afford some people control over economic resources; the third considers how economic positions accord some people power over the lives of others." Erik Olin Wright in 2009. Link.
  • "Wright’s class scheme is based on the premise of a free market system and private production organizations under advanced capitalism; however, the mode of production in transitional China is a complex hybrid." Xin Liu on "Class structure and income inequality in transitional China." Link. And Alejandro Portes and Kelly Hoffman analyze changing social structures across Latin America. Link. And a brand new Göran Therborn article on the "Dreams and Nightmares of the World's Middle Classes." Link.
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