The Changing World of Work I: America's Nine Classes

Eight of the nine classes are hidebound by backward-looking conventions, neofeudal and neocolonial arrangements and a spectrum of perverse incentives and false choices.

My theme this week is the changing world of work. The goal of this week's five-part look at the changing world of work is to look forward, rather than dwell with misty-eyed longing for what is now firmly in the past.

Let's start by establishing a socio-economic context for the discussion: the class and income structure of the U.S.

The conventional class structure is divided along the lines of income, i.e. the wealthy, upper middle class, middle class, lower middle class and the poor.

A few years ago I suggested that a more useful scheme is to view America through the lens not just of income but of political power and state dependency, as a Three-and-a-Half Class Society (October 22, 2012).

But this 3.5-class structure did not capture the changing nature of employment, income and wealth/political power, so last year I subdivided America's socio-economic spectrum into nine classes.

This nine-class structure is not feudal, in the sense of extremely limited social and economic mobility; only the Oligarchy Class is nearly impervious to upward social mobility, and even this class can be cracked open by anyone amassing billions of dollars in productive assets.

It is however neofeudal, a term I use to describe a society and economy dominated by financialization and the apex of wealth and political power that wealth buys. The classes below this apex are either tax donkeys, Upper Caste technocrats serving the apex, or the lower classes that are bought off with social welfare and various modern iterations of bread and circuses.

I described the tax donkeys in Neofeudalism 101: Strip-Mining the Upper Middle Class.

The bread and circuses class is aptly described in this first-hand report: I live better on Welfare then I ever did working.

The working poor now toil to serve the well-paid technocrats: The Shut-In Economy: In the new world of on-demand everything, you’re either pampered, isolated royalty, or you’re a 21st century servant.

Let's review the nine classes:

1. The Deep State. Mike Lofgren offered this description of the Deep State in Anatomy of the Deep State:

The Deep State is a hybrid association of elements of government and parts of top-level finance and industry that is effectively able to govern the nation without reference to the consent of the governed as expressed through the formal political process.

I describe the U.S. Deep State as the National Security State which enables a vast Imperial structure that incorporates hard and soft power--military, diplomatic, intelligence, finance, commercial, energy, media, higher education--in a system of global dominance.

The key feature of the Deep State is that it makes decisions behind closed doors that the surface elected government ratifies and implements.

The number of people in the Deep State class is small: senior Federal officials (NSA, Pentagon, State, Treasury, etc.), Executive Branch officials and key private-sector players.

Membership in the Deep State class is not dependent on wealth so much as on relationships and power. One's origins matter less than one's ambition, moxie, smarts and ability to maneuver up through the political thickets of bureaucracies.

2. The Oligarchs. Oligarchy is in the news--for example We're Headed for Oligarchy--and a number of descriptors are somewhat interchangeable: corporatocracy, plutocracy, etc. I have used Financial Aristocracy to invoke the neofeudal structure of our economy.

Whatever word you prefer, this small class is more or less the top .01% who owns a majority of the nation's financial wealth. They essentially own the political machinery of the nation, writing the rules that regulate their industries, taxes, etc.

Anyone who starts another Google of Facebook (and quickly diversifies their wealth into political power) can buy their way into this class.

3. New Nobility. This is the super-wealthy class just below the Oligarchs. They own a significant percentage of all assets but do not directly manage the political process like the Oligarch class. They hire CPAs and attorneys to protect their interests and constitute an influential political-financial class with global connections.

4. Upper Caste. I use this term to describe the technocrat/professional class that manages the Status Quo for the upper classes. They serve in both government and the private sector. These are the people described in the link above, who work hard for their corporate/state masters and who can afford to live in San Francisco, West L.A. and Manhattan, and pay for all the tech-enabled services that have replaced a dedicated private servant with a small army of people delivering prepared food, groceries, Amazon Prime goods, etc.

5. State Nomenklatura. In the Soviet Union, the Nomenklatura were the key administrators in all sectors. In the U.S., the Nomenklatura are well-paid government administrators with security and power. Collectively, they administer their own share of the swag, gaming the system to maximize their pensions, benefits, etc.

Together, the Upper Caste and the Nomenklatura comprise about 9% of the 121 million households in the U.S.: roughly 8.7 million households who earn between $145,000 and $250,000 annually. This class is the bulk of the top 7%, i.e. the top 90% to 97%.Household income in the United States.

The top level of the Upper Caste (2.8 million households) earns more than $250,000 annually. The Nomenklatura and Upper Caste number in total about 11.5 million households.

6. The Middle Class. While others attempt to define the middle class by income alone (many see a household income of around $50,000 as qualifying), I define the middle class not by income alone but by purchasing power, benefits and assets owned. What Does It Take To Be Middle Class? (December 5, 2013).

By this definition, the middle class is the cohort between 70% and 90%--households earning $80,000 or more. Even this is problematic, because in high-cost cities $80,000 is not enough to sustain middle-class conventions (owning a home, reliable vehicles, retirement funds, etc.) while it may be ample in lower-cost regions.

This 20% comprises about 24 million households.

The lower middle class--what I define as having some but not all of the attributes of full middle class membership--is the cohort between 50% and 70%--households earning more than $55,000 annually.

This class also comprises about 20% (24 million) of all households.

If you think this is too restrictive, please read my above analysis of middle class membership. It may change your view of what constitutes middle-class.

7. The Working Poor. Roughly 38 million households have earned income but it is not sufficient to secure the basics of middle class life. Many qualify for social welfare programs such as food stamps and Medicaid.

This class is about 30% of all households.

8. State Dependents. Though often labeled "poor," those with minimal legal employment may be living better than the working poor, due to generous social welfare benefits such as Section 8 (housing), Medicaid (healthcare), child care, food stamps, disability, etc., and black-market sources of cash income. This class is comprised of the bottom 20% of households.

9. Mobile Creatives. This is an emerging class that ranges across many income classifications and thus cannot be described by income alone. Some earn Upper Caste incomes, others are Working Poor. This class is self-employed, free-lance, entrepreneurial, sole proprietors with adaptive skills. They may collaborate with other Creatives rather than have employees, and may have part-time jobs.

There are roughly 5.5 million incorporated self-employed people in the U.S.; these tend to be professionals such as attorneys, engineers and physicians. These self-employed are generally members of the Upper Caste.

The Mobile Creatives (which include small farmers, craftspeople, independent programmers, etc.) number around 10 million, or 8% of the workforce. I use the word mobile here not to suggest mobility between physical places (though that is one factor in this class's flexibility) but mobility between sectors, skills and ways of earning income.

Members of this class might take a short-term paying gig if the pay and circumstance is attractive, and then return to self-employment. They tend to foster multiple income streams and in general operate by the principle trust the network, not the corporation or the state.

Some members of this class joined the cohort involuntarily, as the result of layoffs; others pursue this livelihood for its freedom, flexibility (important to parents of young children or those caring for elderly parents) and potential for self-expression.

This is the "wild card" class that falls outside all conventional class/income hierarchies. It includes those seeking outlier wealth and those who have chosen voluntary poverty as a means to an independent life that they "own" lock, stock and barrel.

Though this class wields little conventional financial or political power, it has a potentially large leadership role in social and technical innovations. This is the 4% Pareto Distribution that can exert outsized influence on the 64%.

The other eight classes are hidebound by conventions, neofeudal and neocolonial arrangements and a variety of perverse incentives, false choices and illusions of choice, including democracy itself.

I will end this examination of the Nine Classes of America with these questions:which class is having more fun? Which has a future as the Status Quo unravels? Your answer may say more about your aspirations and worldview than the class/employment/income hierarchy itself.

Of related interest:

Don't believe the hype, the 'sharing economy' masks a failing economy

Some cities are still more unequal than others -- top 5% in San Francisco earns $423,000/household

Skills in Flux

Class and the Classroom: How Elite Universities Are Hurting America 

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Gordon Long and I discuss The New Nature of Work: Jobs, Occupations & Careers(25 minutes, YouTube) 

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