22min chapter

The Bridge to China cover image

Are the poor in America being left behind?

The Bridge to China

CHAPTER

The Impact of High Inflation and Unemployment Numbers

They discuss the impact of high inflation on the economy and the misleading nature of unemployment numbers. They also examine low-paying service jobs and the global wealth disparity.

00:00
Speaker 1
Well, but I think what you were saying makes sense, right? High inflation. Well, if only Europe could still buy oil and other, you know, gas and other things they must need from somewhere closer than from the US. I think prices would be cheaper. Yeah. And I think Biden, President Biden wasn't really lying when he said that the economy was roaring. The numbers are good, but it's only roaring for a very small percent of the population. Well, yeah, well, with unemployment, when people stop looking for a job, I think it's after either three or six months, they stop counting them as unemployed. So if someone's just laying flat right in America, and they're just like hanging out in their mom's house and living there because they've given up on working a service job where people treat them like crap for minimum wage, then they are not counted if they stop looking for a job. Okay. So they're not even like figured into the whole scene. Yeah. So you could say, oh, unemployment's great when it's actually not because there are a lot of service jobs that can't find applicants right now. And there's a reason for that. They're not paying them well. And also, this is a global phenomenon where everywhere we hear that, you know, the economy is declining and not just in one or a few countries is like global. But then at the same time, the world's richest man is the head of LV, which is the luxury brand. Does that make sense to people? Of course, that points out the problem we have, right? How wealth is divided, not just in America, but also around the globe. So it's not just inflation. I wanted to talk about the class divide here because the thinking affects a lot of people. And you know I love statistics and this is from statistic. So I have a graph here from statistic and this is 2021 versus 1970, you know, aggregate income in three classes, low income, middle income and high income. The share of people in 1970 who were considered low income was 25% of the population of the United States. But now it is 29% of the population of the United States. So we have an increase in 4% of the population who are now identified as low income. That is roughly 20 million more people who are no longer part of the middle class. They drop down to lower income class. That's correct. Yeah. Okay. But there are expect some changes in the high income bracket to possibly the number has become the high income bracket. Interestingly, the share of people went up. Okay. So instead of 14% of people being identified as high income, now there are 21%. But they also changed the metric. And now that 21 this gets, I think a lot of people mad that 21% of people in America who are identified as high income have 50% of all income. They own 50%. Yeah. So 21% own 50% of America as well. You know what? That's actually lower than I expected. I think they probably own more. And also one interesting thing that, you know, you can take this as a joke if you want. We know that all kinds of lists like say Forbes list to richest people around the world. Yeah. But it turned out, well, that these are actually not the richest people in the world. We don't even know about the richest people in the world because they're not on the list. Really? And those are the ones. How are they not on the list? I'm confused. Well, they are the richest. And they're so rich that they won't even mess with us. You know, they're not even counted as part of our population. I know what you mean. But you can. I was learning about how to hide your income so that you didn't have to pay taxes. I don't do this, but I was curious about how it's done. So you create like an offshore bank account that is a trust fund. And then that trust fund is delegated to like a bank manager who gives you a certain amount of money at certain times. And like base and that money isn't actually yours. It's controlled by like a business that's a shell corporate. It's really complicated. So actually, they're all kinds of money. Yeah. Isn't technically even theirs. It's just. The one is the really, really wealthy people like who control, I don't know, a huge percentage of the world's wealth. They are invisible. Okay. The ones we can see, they are very wealthy in our eyes, but they are not the wealthiest. But you know, imagine being wealthy enough to be able to build an invisibility club. They could be standing right here. And you're most speaking of class. This is a huge topic. And I have a book called class, a guide through the American status system by Paul Fassil, who used to teach in you, Penn. Have you heard of this book? I haven't heard of this book, but I've heard a lot about class in America. Yeah, I think it came out in the 80s, 1983 first copy. And do you mind share a few paragraphs about class? Please do. Please do. Because how do you define class, right? Some people defined it as income, but it turned out that people are different in different classes might define it differently. So here's a few paragraphs from page 16. He said, actually, you reveal a great deal about your social class by the amount of annoyance or fury you feel when the subject is brought up. A tendency to get very anxious suggests that you are middle class and nervous about slipping down a run or two. On the other hand, upper class people love the topic to come up. The more attention paid to the matter, the better off they seem to be. Politarians generally don't mind discussions of the subject because they know they can do little to alter their class identity. And thus the whole class matter is likely to seem like a joke to them. The upper classes, factuous in their empty aristocratic pretentiousness, the middle's loathsome in their anxious gentility. It is the middle class that is highly class sensitive and sometimes class scared to death. Now, just as you mentioned, about 4% of the US population fell from the middle to the lower class. And I think more people are very anxious about if that will happen to them. And also another interesting paragraph. If you reveal your class by your outreach at the very topic, you reveal it also, by the way, you define the thing that is outraging you. At the bottom, people tend to believe that class is defined by the amount of money you have. In the middle, people grant that money has something to do with it, but think education and the kind of work you do, all the most equally important. And you're the top people perceive that taste, values, ideas, style, and behavior are indispensable criteria of class, regardless of money or occupation or education. Interesting, huh? If I'm scraping by lower middle class person, but I go to this symphony, then I'm high class. That's fantastic. Great. They may I'm off to the National Center for the Performing Arts. Okay. Okay. And that you will be like eating toast for the next two weeks to make up for the money. So by just by the way, how you define class, you know, which class you belong to can reveal a lot about which class you actually belong to. But I think that's kind of a people don't talk about this a lot in the US, at least not when I was living there, right? People sort of like the people we have with this sort of no, like either sort of in the middle class or the people who are really rich. They're obviously in the upper class, but I guess so people it's not really part of daily conversation. Do you think I actually was really interesting. I was used to sit in a cafe with my dad and they would talk about class all the time. What? But what was really interesting is that they didn't really know about which party represented what clearly, you know, they weren't like they didn't have a time they were working class real workers. They didn't really have time to sit around and discuss the nuances of it. So they would end up agreeing with things that both parties said at different points or different philosophies, different ideologies and they didn't even know where they were coming from more like speculations. This is not fair that the system was not fair. There was a, there was a clear sense of these working class people, you know, construction workers, plumbers, framers, people who worked hard, you know, 50 hours a week, really hard laborers. They knew that it wasn't fair that some people had everything and other people had nothing. But from my understanding, I heard that let's say construction workers are actually paid relatively well, but like, you know, not super high wages, but decent. That's yeah, that's middle class. If you're making minimum wage full time, you are lower class. As most states, you can't afford your deciding which bills you can afford to pay and which ones maybe you can't pay this month or you're deciding which meals to skip or you're figuring out, you know, what's the cheapest possible meal that I can have for the next week. And before I reward myself with one day of fast food or something. So the day after opera for Jason. So for construction workers, they are essentially, you know, middle class, the working class, working middle class. And also from this book class on page 18, something special about America is as it should be a serious subject in America, especially because here we lack a convenient system of inherited titles, ranks and honors. And each generation has to define the hierarchies all over again. And speaking of generations, I think when we talk about class is not a one generation topic. But usually we are talking about, we're actually talking about social mobility across generations, because changing of class, it takes time. And I think that's something I understood, you know, just in recent years, how hard it is to actually, you know, go up because we most people are talking about, you know, how to go up the ladder along the social class, instead of going down for their kids. Yeah, I want my kids to be better off than me. Right. And there's so many, you know, a lot of discussions regarding this in a Chinese society too. People devote so much to education, right. And they kind of want to equip their child, their children with whatever they can so that they can go up social mobility wise. So that's the key here. And the something rather strange we have been witnessing in the US is that it's getting harder for the younger generation to make it, you know, to achieve the standard of living of their parents. And when I first read that a few years ago, I was literally shocked. I couldn't believe it because born in this age in China, born in the 1980s, we are the generation where we witnessed how the country became stronger and stronger. And also it was, you know, my, these three generations, my grandparents, my mom and my generation. This is the time of the greatest social mobility in China. My grandparents, you know, and also my parents when they were younger were farmers. If it was not because of a revolution back in the days in China, the founding of the new China and the changing of the land ownership. You know, my parents would still be farming and I'm probably still in a farm somewhere. But because of all the changes in the social, I guess, in the society, everything kind of went back to level ground again. And my parents, kids from the countryside had better chances in education. And my, you know, they end up my aunts and uncles, the whole generation, a lot of them who studied hard all went to universities. And I was from a farmer family and really, really good universities because of the Gao Kao system, you know, it's completely oblivious to who you are, where you are from. It just checks your score number. So they really made it. And then of course they had even opportunities to study abroad and, you know, which made my life starting a whole lot higher. So, you know, thinking about social mobility, and I was thinking about this whole class topic, I kind of went back and thought a little bit about Chinese history, contemporary Chinese history, and all those revolutions and things kind of made more sense to me now. Because sometimes it takes that kind of power of change to redivide resources so that people at the bottom would have a chance of making it, you know, on their way out. Have I been digressing too much? No, I mean, it makes a lot of sense. And it's much richer and more complicated than I expected for a conversation to go. You're listening to the bridge. Obviously, we had a similar period in the 1940s and 50s and 60s in the United States when the United States came into its own. But during my lifetime, there was an enormous pressure in my generation on people to go to university. And that was going to be the way that millions of people changed their class identities. Right. And instead, a lot of these people came out and now there's $2 trillion student loan problem and people are drowning in debt who worked really hard, got straight A's and got into the best programs. And so I think what's bizarre is that two things. Number one, people worked really hard to try to change their class and it didn't work. And number two, a lot of people started talking about redefining class as a consequence of education. So, oh, you have a bachelor's degree. Now you're a middle class, even though that same person with a bachelor's degree can't afford to pay their bills, just like someone who's, you know, lower middle class and about to become homeless. They're in the same exact situation owing to the fact that they have to pay like a $1,000 bill on top of rent every single month. So it's very interesting that the ability to change your status in the United States was defined in the 1980s and the 1990s, 4 millions of Americans. And then those millions of Americans took those steps, ended up not moving forward in, you know, the chain of wealth. That's an interesting twist because from what I read, there is a clear division of income, you know, between the parts of population who had a bachelor's degree and who do not have a bachelor's degree. That's like a huge defining point, but then exactly, they have to pay it out. Yes, they are weighed down by. So I guess that points to some problems with, but of course we know that how expensive higher education it is in the US. If you treat it like a business, right, because in China, in our minds, education shouldn't be treated as a business. Yeah, in the US. You know, they shouldn't function with pure capitalistic means of maximizing profit, but that's the whole other topic. But thinking of social mobility and class, I had a few thoughts about the US. Why I think sometimes the phenomena we're seeing, how it's getting harder to move up for a lot of people at, you know, lower or even stay at middle class. I think first of all, in a more pure capitalistic society, it is just natural that wealth and resources, they get sucked upwards. But that's the word is called siphoning. But it's like, there's a straw sucking wealth resources all the way to the top. This is from Ronald Reagan, supply side economics. Well, this is part of the problem. It is basically science. You know, this, if you have a more pure capitalistic system, this is how it's going to work. It will aggregate naturally upwards. And then, but to balance that in a lot of other countries, a lot of other societies, you have the government, right? Redistribute the wealth through a tax system. Yeah. The problem in recent years, at least in the US is that the tax system is rigged toward the rich. You know, the rich end up paying such a smaller percentage through all kinds of ways. Then like common workers, which does not make sense. And it's because the people in power, they are, I guess they're not prone to redividing that wealth. I agree with you that it does not make sense, but they do have arguments on how they try to justify it. So the rich who hired all their own lawyers and PR people and by politicians, the arguments that they distribute to the population is, oh, if the rich are taxed less, they will keep their businesses in the United States. They will stay in the United States as opposed to going somewhere where the taxes are lower. And the consequence will be that they spend more and hire more people in the United States. Don't punish us rich people or will run away. That's the primary argument that they put forward when the middle class and the lower class are like, we want to raise taxes on the rich. The rich will just say, well, if you tax us, we'll just leave. You know, in the very famous book, capitalism, in the book, capital in the 21st century, after, I don't know, 500 to 800 pages, the conclusion is that we should have a global tax on the rich so that no matter where they go for it. Yeah, me too. So let's do it. I'm just stating my thoughts on why things are not working in this regard in the US. So the tax system is a problem so that wealth can be redistributed fairly. And then another problem, I think, is the education system. I mean, the public education system, not like all over the country, but in a fair, I guess, amount of public schools, the situation can be quite frustrating. Right. And it's not something that can be easily fixed by putting more money into the system, although that probably will help because it's related to other social issues. Like if you are, there are a lot of single parent families, a lot of family domestic violence, and also on top of that, you have guns and drugs. It's hard for kids to concentrate. And it's hard for, you know, families who are not doing well to support their children to move out of that hole, right, to go out. And also something with the way welfare is distributed in the US is that a lot of times, the inside gets just in a form of money, right? Let's say for schools, they'll give you money for what, like more iPads, new systems, new boards and new computers. But that's actually not the most important part. You know, they need to pay teachers more. They need to change the whole, I guess, living and studying environment for the kids. It's not something that can be easily solved with just dumping more money into the system, although I think teachers can truly be paid better. And also when it comes to higher education. Now, this is something dressily different from between the US and China is that college entrance to really, really top schools in the US can be influenced by, let's say, donations, right, or connections. If your father donated a whole building to this particular school, I guess you, Jason, getting into, you know, Harvard or Princeton might not be too big of a problem, right? So that's something that can be. This is actually on this point, there's a debate at Harvard. There are several different debates about admission at Harvard all the time because so many people are incredibly invested in getting into this one institution. And there's one that's going on about race, but there's also another one going on about, I can't remember the word exactly, but it's, I think, it's a little bit different. I don't know if you're going to get into Harvard or Harvard, but it's, I think it's heritage. So your dad went to Harvard or your mom went to Harvard. So you have a much higher probability of getting into Harvard owing to the fact that you have someone in your family who already went. And they're actually now considering removing this so that even if your dad got into Harvard, it should have no bearing on whether or not you get in because they do ask you on the application form. So you have anyone in the family, like your cousin, your parents, your sister who went to this school, they will usually ask you, right? Yeah. So that is another creating a system of people who are all at granted access because they had a grandfather or something who got into Harvard. It's not fair. It's just something extra because there's no set system here in China. The college entrance exam is rather rigid. I mean, it's been criticized for years and decades for how rigid it is, how, you know, inflexible, but there is a reason for that because you can't tweak the system. I appreciate the system in China a lot. You know, we should also point out, just like in the United States, where certain minorities are given an advantage that in China, that is true also. If you are from certain minority groups or maybe it's all of them or you're from certain poor regions, you actually get bumps on your score. Your Gao Kao is gets added to so that you have a higher probability of getting into a better university. Right. Maybe like by a few points or a few, I don't know, it's not like you get lumped like a hundred more. It's not night and day, but it definitely does help. So if you studied hard and you got a pretty good score, now you have a very good score. Yeah, but it's true that the method is so that the whole country is more balanced, right? Like the more populated provinces might have few more people who enter, you know, better universities, because there's just so many more people. Anyhow, so this could two completely different systems for entering. Well, interestingly, America doesn't have a system. It's too fluid. America's system is that so too many loophole. Every university university system or state system makes its own rules. So that's something else. And also something I found quite interesting is how we think about it. Almost everything can be bought and sold in the US, even government official posts now or influenced. You know, it's interesting that you brought this up because I understand both sides. I'd like to. I know we're going to demolish this because I think we should. And it's awful that they're able to do it. But I actually had someone explain to me why it is that lobbying, which is illegal in other countries, is legal openly in the United States. They explained it like this.

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