The Meritocracy Trap

by Daniel Markovits

  effortfully cultivate their fame: Kim Kardashian sleeps with her BlackBerry and iPhone, wakes at 6 a.m., and sets almost immediately to work. See Kim Kardashian, interview with Charlotte Cowles, “Exclusive: 24 Hours with Kim Kardashian,” Harper’s Bazaar, April 14, 2005, accessed August 12, 2018, www.harpersbazaar.com/culture/features/a10567/kim-kardashian-0515/.

  the time divide: See Jacobs and Gerson, The Time Divide.

  According to one measure: Kuhn and Lozano, “The Expanding Work Week?,” 311. The data come from the U.S. Census, and the share working over forty-eight hours rose from 15.4 percent to 23.3 percent.

  between 1980 and 2005: Kuhn and Lozano, “The Expanding Work Week?,” 312. The data come from the U.S. Census and the American Community Survey, and the share working over forty-eight hours rose from 16.6 percent to 24.3 percent.

  increased by roughly half: See Jacobs and Gerson, The Time Divide, 50. For couples with children, the percentage rose from 8.2 to 12.2 percent. For childless couples, the percentage nearly doubled, rising from 9.5 to 17.5 percent. Jacobs and Gerson also report that between 1970 and 2000, the percentage of families working one hundred hours or more per week tripled, from 3.1 percent to 9.3 percent (p. 43), and that the percentage of husbands and wives working one hundred hours or more rose from 8.7 percent to 14.5 percent (p. 45).

  leisure: Leisure, as it is used in the data reported here, includes directly recreational activities and also some activities—such as sleeping, eating, and personal care—that involve relatively little burden and contribute indirectly to well-being. Market work and leisure therefore do not exhaust the activities that people engage in or the hours that they devote to them. A third category, nonmarket work, refers to nonrecreational activities that are nevertheless not performed for pay. Domestic chores and (some) childcare are the most notable components of nonmarket work. Although the text will occasionally refer to trends in nonmarket work, the larger argument focuses its principal attention on labor sold in the market, for pay.

  For more on conceptualizing leisure, see Mark Aguiar and Erik Hurst, “Measuring Trends in Leisure: The Allocation of Time over Five Decades,” Quarterly Journal of Economics 122, no. 3 (August 2007): 969–1006. Hereafter cited as Aguiar and Hurst, “Measuring Trends in Leisure.” Lonnie Golden, “A Brief History of Long Work Time and the Contemporary Sources of Overwork,” Journal of Business Ethics 84 (Supp. 2) (January 2009): 217–27. Hereafter cited as Golden, “A Brief History of Long Work Time.” Orazio P. Attanasio and Luigi Pistaferri, “Consumption Inequality,” Journal of Economic Perspectives 30, no. 2 (April 2016): 3. Hereafter cited as Attanasio and Pistaferri, “Consumption Inequality.”

  between 1965 and 2003: Aguiar and Hurst, “Measuring Trends in Leisure,” 971.

  Moreover, income inequality: Might these results be mere artifacts of changing work and pay patterns not across but rather within individual workers? More specifically, might they show only that the representative worker supplies roughly the same total labor over longer periods but concentrates this labor in shorter periods of more intense work punctuated by longer periods of unemployment? The data clearly reject this alternative explanation. The same workers who earned increasingly higher wages and worked increasingly longer hours over the years in question also became increasingly less likely to become unemployed. See Kuhn and Lozano, “The Expanding Work Week?,” 321–22.

  less educated workers: See Kuhn and Lozano, “The Expanding Work Week?,” 312. See also Fighting for Time: Shifting Boundaries of Work and Social Life, ed. Cynthia Fuchs Epstein and Arne L. Kalleberg (New York: Russell Sage Foundation, 2004).

  Dividing the population by education levels rather than by hourly wages produces results analogous to those in the main text. Both the absolute association between hours and earnings and the increase in the association between 1980 and 2000 were higher for salaried, typically better-educated, than for hourly, typically worse-educated, workers. See Kuhn and Lozano, “The Expanding Work Week?,” 331, Figure 5. Education correlates to lifetime and not just hourly earnings. The connection between education and hours thus reinforces the point, made earlier, that the new association between high incomes and long hours arises across workers, over their entire lifetimes, rather than within workers who alternate periods that combine high income and long hours with periods of low income and idleness.

  The match between: See Kuhn and Lozano, “The Expanding Work Week?,” 331, Figure 5.

  roughly one in seven: See Kuhn and Lozano, “The Expanding Work Week?,” 317, Table 1, and 318, Figure 3.

  the bottom wage earner: See Kuhn and Lozano, “The Expanding Work Week?,” 317, Table 1.

  loss of leisure: Aguiar and Hurst, “Measuring Trends in Leisure,” 992, Table V, 995, Table VII.

  still notable for women: In 1993, for example, roughly 25 percent of women managers worked forty-nine or more hours per week, compared with about 9 percent of women laborers, and female college graduates have experienced a very modest increase in leisure since the 1960s (although this increase is much smaller than the increase experienced by uneducated women and much, much less than the time freed up by labor-saving domestic devices). See Philip L. Rones, Randy E. Ilg, and Jennifer M. Gardner, “Trends in Hours of Work Since the Mid-1970s,” Monthly Labor Review (April 1997): 9. For the claim about women’s leisure, see Aguiar and Hurst, “Measuring Trends in Leisure,” 992, Table V.

  the bottom quintile: See Stuart Butler, “Can the American Dream Be Saved?,” National Affairs 14 (Winter 2013): 40–57, 42. The exact numbers are 74.1 percent for the top quintile and 4.5 percent for the bottom quintile. Butler takes his data from U.S. Census Bureau, Current Population Survey (CPS) Annual Social and Economic (ASEC) Supplement, at U.S. Census Bureau, “HINC-01. Selected Characteristics of Households by Total Money Income,” accessed August 12, 2018, www.census.gov/data/tables/time-series/demo/income-poverty/cps-hinc/hinc-01.2016.html. Taking the top quintile of households in 2010 to be at $100,000 or more (24,421 out of 119,927 households), 18,111 households, so 74.1 percent, had two or more earners. Taking the bottom quintile to be at $19,999 or less (23,892 out of 119,927 households), 1,085 households, so 4.5 percent, had two or more earners.

  worked outside the home: See Chinhui Juhn and Simon Potter, “Changes in Labor Force Participation in the United States,” Journal of Economic Perspectives 20, no. 3 (Summer 2003): 27–46, 33, Table 2, which used data from the March CPS survey.

  their husbands had lost: Veblen, Theory of the Leisure Class, 81.

  how data on work hours are collected: Intensive and highly reliable in-person interviews conducted by the Federal Reserve Bank, in connection with its Survey on Consumer Finance, confirm the explosion of elite work effort. The interviews are structured, serious, and probing, and the survey oversamples the richest households, and for both reasons, the survey presents an unusually authoritative measure of elite work. According to the survey, the average total hours worked in households in the top 1 percent of the income distribution grew by 9.5 hours per week between 1983 and 2010. Over the same period, the percentage of households in this elite group whose hardest-working member put in more than fifty hours per week grew by 16 percentage points, rising from 46 percent to 62 percent (so that by 2010, the median 1 percent household contained a fifty-hour worker). Over the same period, the share of households with a fifty-plus-hour worker fell with every step down the income distribution, until only 4 percent of households in the bottom quintile of the income distribution had a member regularly working more than fifty hours per week. See Board of Governors of the Federal Reserve System, “Survey of Consumer Finances,” www.federalreserve.gov/econres/scfindex.htm.

  about 1.5 million households: In 2014, the minimum income for tax units in the top 1 percent of the income distribution was $477,514. That year, 148,646,000 tax returns were filed. See Facundo Alvaredo et al., World Inequality Database, distributed by WID.world, accessed August 23, 2018, https:/
/wid.world/data/ (see “Pre-Tax National Income Threshold,” wid.world code tptinc992j, and “Number of Tax Returns,” wid.world code ntaxre999t).

  vice presidents or above: An October 2018 search of the D&B Hoovers database of business professionals turned up 241,113 workers at S&P 1500 companies under the categories Board of Directors, Directors, Executive Vice Presidents, Senior Officers C-level, Senior Vice Presidents, and Vice Presidents. (D&B Hoovers is a database commonly used for sales leads and marketing containing over 125 million [125,533,312] employee contacts ranging from nonmanagerial to the board of directors representing over 140 million firms [141,266,092]. The company answered an inquiry from the author confirming that each employee contact appears in its database only once, so that the search does not double-count.) The search turned up a further 398,087 Managers or Supervisors. The search downloaded the S&P 1500 constituents for 2017 from Compustat. DUNS numbers were matched by suppling Mergent with CUSIPs to generate the corresponding DUNS. A list of the S&P 1500 DUNS was uploaded in the D&B Hoovers and searched using the criteria for “Contact Level” under the search category of “Contact Type.” There were 1,511 companies in the “S&P 1500” data set, on account of changes in the registry’s composition over the course of the year.

  professionals in the finance sector: The Financial Industry Regulatory Authority records over 630,132 registered financial representatives in the United States in 2017. See Financial Industry Regulatory Authority, “Statistics,” accessed August 15, 2018, www.finra.org/newsroom/statistics#currentmonth. And the Bureau of Labor Statistics reports that as of May 2018, more than 250,000 people worked in supervisory roles in the broad “Securities, Commodity Contracts, and Other Financial Investments and Related Activities” industry category. See Bureau of Labor Statistics, “Industries at a Glance: Securities, Commodity Contracts, and Other Financial Investments and Related Activities,” accessed August 15, 2018, www.bls.gov/iag/tgs/iag523.htm#about. Reached by subtracting employment numbers for production and nonsupervisory employees from full employment numbers. The average hourly earnings in this sector, according to the BLS, is $54, for annual earnings of about $100,000. The supervisory employees may reasonably be thought to earn well above average wages, and given that they represent only about one-third of the total employees, this makes it reasonable to suppose that they earn in the neighborhood of the 1 percent threshold.

  the top five management consultancies: The top five consulting firms are McKinsey & Company, the Boston Consulting Group, Inc., Bain & Company, Deloitte Consulting LLP, and Oliver Wyman, according to Phil Stott, “Vault’s Top 50 Consulting Firms for 2018,” Vault, August 22, 2017, accessed August 15, 2018, www.vault.com/blog/consult-this-consulting-careers-news-and-views/2018-vault-consulting-rankings. McKinsey employed 23,000 people in 2017. “McKinsey & Company: Overview,” Vault, accessed August 15, 2018, www.vault.com/company-profiles/management-strategy/mckinsey-company/company-overview.aspx. Boston Consulting employed 14,000. “The Boston Consulting Group: Overview,” Vault, accessed August 15, 2018. www.vault.com/company-profiles/management-strategy/the-boston-consulting-group,-inc/company-overview.aspx. Bain employed 7,000. “Bain & Company: Overview,” Vault, accessed August 15, 2018, www.vault.com/company-profiles/management-strategy/bain-company/company-overview.aspx. Deloitte employed 40,513. “Deloitte Consulting LLP: Overview,” Vault, accessed August 15, 2018, www.vault.com/company-profiles/management-strategy/deloitte-consulting-llp/company-overview.aspx. Oliver Wyman employed 4,500. “Oliver Wyman: Overview,” Vault, accessed August 15, 2018, www.vault.com/company-profiles/management-strategy/oliver-wyman/company-overview.aspx. If two-thirds of these are professionals, this is a total of about 60,000.

  partners at law firms: In 2018, all but twelve of the AmLaw 200 had profits per partner above $475,000, the rough cutoff for top-1-percent income. See Ben Seal, “The 2018 Am Law Second Hundred: A to Z,” American Lawyer, May 22, 2018, accessed August 23, 2018, www.law.com/americanlawyer/2018/05/22/the-2018-am-law-second-hundred-at-a-glance/, and Gina Passarella Cipriani, “The 2018 Am Law 100 Ranked by: Profits per Equity Partner,” American Lawyer, April 24, 2018, accessed August 23, 2018, www.law.com/americanlawyer/2018/04/24/the-2018-am-law-100-ranked-by-profits-per-equity-partner/. And according to the American Lawyer “2012 Global 100: Profits Per Partner” list, the 75 U.S. firms in the Global 100 averaged 209 partners each: “The 2012 Global 100: Profits Per Partner,” American Lawyer, September 28, 2012, accessed August 23, 2018, www.americanlawyer.com/PubArticleTAL.jsp?id=1202571229443&The_2012_Global_100_Profits_Per_Partner&slreturn=20130225100009.

  If the remaining 45 firms were the same size, this would yield 25,000 equity partners at firms whose per-partner profit exceeded $400,000 in 2012.

  specialist doctors: According to data from Redi-Direct, the number of specialist doctors in the United States was 501,296 as of March 2018. “Professionally Active Physicians,” Henry J. Kaiser Family Foundation, March 2018, accessed August 15, 2018, www.kff.org/other/state-indicator/total-active-physicians/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D.

  of 1 percent households overall: More intensive and precise studies similarly reduce the composition of still narrower elites to known and named jobs. Steven Kaplan and Joshua Rauh, for example (using methods that they repeatedly admit are seriously underinclusive), estimate that the five highest-paid executives at America’s largest firms, finance workers at the level of managing director or above, partners at the hundred largest law firms, professional athletes, and top celebrities collectively together compose roughly 20 percent (give or take a few percentage points) of the top 0.1 percent, 0.01 percent, 0.001 percent, and 0.0001 percent of tax units. See Kaplan and Rauh, “Wall Street and Main Street,” Table 14.

  capital’s renewed dominance: See, e.g., Josh Bivens and Lawrence Mishel, “Understanding the Historic Divergence Between Productivity and a Typical Worker’s Pay: Why It Matters and Why It’s Real,” Economic Policy Institute Briefing Paper no. 406 (September 2, 2015), accessed August 23, 2018, www.epi.org/publication/understanding-the-historic-divergence-between-productivity-and-a-typical-workers-pay-why-it-matters-and-why-its-real/; Angelo Young, “CBO Reports Suggests [sic] Growth in US Income Inequality Will Continue Through 2035 (but, Hey, as Long as Capital Markets Are Doing Great, Right?),” International Business Times, June 5, 2013, accessed August 23, 2018, www.ibtimes.com/graphic-cbo-reports-suggests-growth-us-income-inequality-will-continue-through-2035-1292085.

  the decline of labor unions: See, e.g., Louis Uchitelle, “How the Loss of Union Power Has Hurt American Manufacturing,” New York Times, April 20, 2018, accessed August 15, 2018, www.nytimes.com/2018/04/20/business/unions-american-manufacturing.html.

  market power among large employers: See, e.g., Alan B. Krueger and Eric A. Posner, “A Proposal for Protecting Low-Income Workers from Monopsony and Collusion,” The Hamilton Project, Policy Proposal no. 2018-05 (February 2018), accessed October 24, 2018, www.brookings.edu/wp-content/uploads/2018/02/es_2272018_protecting_low_income_workers_from_monopsony_collusion_krueger_posner_pp.pdf; Eric Posner and Glen Weyl, “The Real Villain Behind Our New Gilded Age,” New York Times, May 1, 2018, accessed August 15, 2018, www.nytimes.com/2018/05/01/opinion/monopoly-power-new-gilded-age.html.

  outsourcing and globalization: See Chrystia Freeland, “For U.S. Workers, Global Capitalism Fails to Deliver,” New York Times, April 14, 2011, accessed August 18, 2018, www.nytimes.com/2011/04/15/us/15iht-letter15.html.

  Labor’s share of national income: See, e.g., Robert J. Gordon and Ian Dew-Becker, “Controversies About the Rise of American Inequality: A Survey,” NBER Working Paper No. 13982 (April 21, 2008), http://economics.weinberg.northwestern.edu/robert-gordon/files/RescPapers/ControversiesRiseAmericanInequality.pdf; Paul Gomme and Peter Rupert, “Measuring Labor’s Share of Income,” Federal Reserve Bank of Cleveland Policy Discussion Paper No. 7 (November 2004), accessed August 23, 2018, https://papers.ssrn.com/s
ol3/papers.cfm?ab stract_id=1024847; Brian I. Baker, “The Laboring Labor Share of Income: The ‘Miracle’ Ends,” Monthly Labor Review, January 2016, accessed August 26, 2018, www.bls.gov/opub/mlr/2016/beyond-bls/the-laboring-labor-share-of-income-the-miracle-ends.htm; Loukas Karabarbounis and Brent Neiman, “The Global Decline of the Labor Share,” Quarterly Journal of Economics 129, no. 1 (February 2014): 61–103; International Labour Organization, Global Wage Report 2012/12: Wages and Equitable Growth (Geneva: International Labour Organization, 2013), 41–53. Note that the global trend—which spans countries with vastly different political systems and domestic policy regimes—strongly implies that labor’s decline stems from economic fundamentals rather than shallow political or policy choices.

  Eight of the ten richest Americans: The ten richest Americans, according to Forbes magazine, are (in order): Bill Gates, Jeff Bezos, Warren Buffett, Mark Zuckerberg, Larry Ellison, Charles Koch, David Koch, Michael Bloomberg, Larry Page, and Sergey Brin. See “Forbes 400,” Forbes, accessed August 26, 2018, www.forbes.com/forbes-400/list/. Of these, all but the Koch brothers are self-made, and the Koch brothers inherited a relatively small business (from its entrepreneur-founder), which they built into a much larger one, at a growth rate that resembles self-made entrepreneurship. Broadening the inquiry to the fifty richest Americans reveals that thirty-three owe their wealth principally to founder’s stock, partnership shares, carried interest, or executive compensation—that is, to their own labor—and that a further eight owe their wealth to labor from just one generation earlier. A similar point appears in Victor Fleischer, “Alpha: Labor Is the New Capital” (unpublished manuscript on file with author), table in appendix. Hereafter cited as Fleischer, “Alpha.” See also Dan Primack, “Are Entrepreneurs Exploiting a Tax Loophole? (Part II),” Fortune, December 30, 2010, accessed August 26, 2018, http://fortune.com/2010/12/29/are-entrepreneurs-exploiting-a-tax-loophole-part-ii/.