Review: The Meritocracy Trap


In The Meritocracy Trap, Daniel Markovits presents a convincing argument that America has become dominated by an increasingly hereditary meritocratic elite. It's not a short read or listen. It took me a couple weeks of listening to The Meritocracy Trap while running to get through it on Audible, but this book opened my eyes to the new class structure in America; it's one of those books that will change your perspective on the world around you and your place within it. Since the book is mostly support for the core thesis, in a pinch you can read the first section outlining Markovits's argument, skim the intermediate chapters, and fly to the last chapter where he makes policy suggestions. You can also hear an excellent interview with Markovits on Sam Harris's podcast (opens new window).

Get The Meritocracy Trap on Amazon. (opens new window)

# Summary

In The Meritocracy Trap, Daniel Markovits argues that America has become dominated by a meritocratic elite. Unlike earlier ages when aristocrats wielded capital in the form of inherited land, factories, or enslaved labor, our current elite gains its power largely through its own labor. Our wealthiest people do not inherit their riches, but rather earn them by creating companies, learning highly prized skills, and working extremely hard.

Over the half century starting in the 1970s, the American economy increasingly created jobs at the extremes of the income scale. At the top are "glossy jobs" held by "superordinate workers": highly trained positions that utilize advances in technology to command legions of low skilled workers and machines to produce wealth. At the very bottom are "gloomy jobs" held by "subordinate workers": jobs that require little skill, have few options for advancement, and are often part-time.

America has become dominated by a meritocratic elite that gains its power largely through its own labor.

This split has created an American elite that, despite earning its place at top schools and employers, is increasingly hereditary. Top schools are dominated by students from wealthy families; only these families can afford the intensive (and expensive) training necessary to propel a student into the Ivy League or similarly elite institutions. Where populists scorn this elite as corrupt and self-dealing, the reality is that the elite perpetuates itself primarily through extreme pressure and a "meritocratic inheritance" of education.

# Unwinding the Myth of Meritocracy

Our myths support this regime. We find it hard to criticize an elite that averages work weeks above 50hrs, with many working much longer hours than that. Likewise, it's easier to criticize middle class workers who increasingly enjoy greater leisure time not out of choice, but due to precarious part-time employment.

Undermining this implicit faith in the "deserved" status of the elite is one of Markovits's most difficult tasks. If he succeeds, it's through exhaustive quoting of statistics. It's possible that, because I primarily listened to The Meritocracy Trap, that his argument was blunted due to lack of charts. However, I think the primary problem may be that a litany of statistics alone isn't enough to erase ingrained dogma.

Markovits's claims that meritocratic status is undeserved because...

  • It rests upon large subsidies in the form of higher education tax breaks, payroll tax rules that favor high earners (primarily the payroll tax cap), and a favorable capital gains tax (think employee stock compensation).
  • It strongly tracks family wealth.
  • It does not make the economy more prosperous or stable.

Salary differentials between top executives and median earners has increased by an order of magnitude or more since the 1960s.

The last argument is perhaps the most interesting but the least well supported. As one example, Markovits looks at the making of the modern financial sector. In the old economy, mid-skill loan officers managed the risk of mortgages through personal relationships. Personal visits to families, assessments of character, community standing: all of these were used in lending decisions. In the new economy, a comparatively small number of highly skilled workers make algorithms to assess risk and package together mortgages to distribute it. Managing these tools requires training in statistics, computing, and other skills.

Markovits seems to indicate that the old model could produce similar economic growth; this seems hard to support. By his own admission, most of the increases in American spending since 1980s has been powered by household debt. Without the liquidity created by modern finance, it is hard to imagine that this debt would be possible, although one should question (as he does) whether it is sustainable.

However, his arguments for qualitative prosperity are better founded. The old model helped create and maintain an income ladder that was fairly evenly spaced and offered workers better opportunities for advancement. The "rungs" between an office secretary and the bank CEO where much closer together at mid century; by various measures he quotes, the distance between a median salary worker and an executive has, depending on the industry, increased by an order of magnitude or more since the 1960s. This is reflected even in consumption habits. A luxury car might only be twice the value of a pedestrian model at mid-century, whereas a modern Bentley might be 10x the cost of a normal commuter car today. Similar trends can be seen in housing, dining habits, and most dramatically in schooling.

Markovits also questions the foundational stability of the new economic order. The 2008 economic crisis, which Markovits uses to bookend many of his conversations regarding the financial sector, is a powerful parable for how meritocratic firms created risk which was eventually passed on to taxpayers.

# The Descent from Mid-century Equity

It's important to note that Markovits's two target groups are the rich and the middle class, not the poor. He argues that the material well-being and status of the poor has made substantial strides since the 1960s. The portion of the population falling below the income-based poverty line is between a half and a fifth of what it was in 1960, and declines in consumption poverty (based on consumption habits needed to obtain a minimum standard of living) are perhaps even greater. Today's poor benefits greatly from technological advances like air conditioning and automated washing that was unimaginable in the early '60s. Markovits is quick to condemn poverty, but its continuing existence is not the focus of The Meritocracy Trap.

The share of income claimed by the wealthiest 1% has doubled since 1960.

Conversely, over the same period he shows how middle class incomes stagnated and declined. While the ratio between the median income in the US to the average income of the bottom 20% has remained surprisingly steady for nearly 60 years, the ratio between median income and the average income of the 1% has doubled. Similarly, the share of income claimed by the wealthiest 1% has doubled since 1960, from 10% to nearly 20% today. The rungs between the middle class and the wealthy have become further spaced out as the rungs between the middle class and the poor have remained consistent or even shrunk. Indeed, much of the increase in the US's Gini Coefficient, from nearly .45 to nearly .5 today, is represented in the difference between the wealthy and middle class. The Gini coefficient for the bottom 70% of income has actually decreased over that time period, meaning that the bottom 70% of households have become more equal in income. Over the past 60 years, American income equality has declined from a level comparable with modern Norway to a level comparable with heavily stratified India.

These trends are repeated for educational outcomes (the rich dramatically outpacing the middle, while the middle and the poor largely maintain parity or see the poor gain on the middle). This has an outsized impact in the United States, which has an unusually high wage premium for college educated workers, and sees much greater correlation between a parent's educational attainment and their child's educational performance. We fetishize training our young who stand to reap high rewards for their performance, but that performance largely tracks the achievements of the parent. Well-educated parents are more likely to stay together, and well-educated mothers commonly leave the workforce to better train their children. Markovits points out wryly that elite parents are non-practicing libertines, likely to be socially liberal, but extremely unlikely compared to middle-class parents to divorce, have a child out of wedlock, or undergo an abortion.

Over the past 60 years, American income equality has declined from a level comparable with modern Norway to a level comparable with heavily stratified India.

# The Damage to the Middle Class

The dramatic increase in inequality between the "broad middle class" (Markovits can be squirrely about what he defines as middle class, sometimes using the term "broad" to indicate a swath of incomes between roughly the 30th and 90th percentiles) and the wealth has had negative impacts on middle class status, created modern American populism, and led to an alarming decline in life expectancies.

Where the middle class represented the American ideal in mid-century America, we now idolize the habits of the wealthy. Whole Foods and the French Laundry beat Safeway ketchup and Mel's. Televised depictions of life typically show the habits and luxuries of high income earners.

More troubling is the rise of populist politics in America. Markovits links Donald Trump's platform to middle class discontent. Nativism blames immigrants for stealing middle class jobs. Anti-globalist and conspiracy theories take aim at a globalized elite. Anti-professionalism, painfully evident in partisan responses to the COVID-19 epidemic, displays a direct resentment of the elite class that not only claims a disproportionate share of wealth, but also controls the levers of power.

In perhaps the most worrisome development, health outcomes for middle class Americans have started to reverse gains in life expectancy due to "deaths of despair" from drug overdose, alcohol abuse, and suicide. This reversal in life expectancies is entirely unique for a peace-time nation; it's as if an invisible war is sapping away the lives of middle class Americans.

# The Damage to the Elite

While the middle class has suffered dramatic damage, the elite has lost idle luxury. Before the New Deal, the elite used their riches to work as little as possible. "Bankers hours" ended the day at 3PM, including a long lunch break replete with cocktails. Instead of personally training their children for high performance, wealthy families entrusted them to caretakers and finishing schools that cared more about bearing than work-oriented skills. This picture of wealth was captured in Thorstein Veblen's "Theory of the Leisure Class."

This changed quickly after World War 2. Higher education suddenly became widespread through the GI Bill. In the workplace and on campus, skill, not family history, started to become the primary consideration for awarding positions. A "Great Compression" occurred and wealthy incomes, lifestyles, and luxuries increasingly resembled middle class ones. Markovits contrasts F. Scott Fitzgerald's phrase "the rich are not like you and I" from the early 20th century with Hemingway's quote in the '50s, saying "yes, they have more money."

Expectations for labor from the wealthy grew correspondingly, but Markovits argues that the biggest changes occurred in the 1980s, when many industries started to concentrate labor in superordinate workers. As the rewards for labor skyrocketed, so did working hours. At all points before 1960, poor and middle class works in the bottom 60% of workers by income worked more hours on average than any of the income groups about the 60th percentile. In 1960, the top 1% and the bottom 60% worked roughly the same amount: about 47 hours a week. In 2015, the top 1% worked over 51hrs a week and the bottom 60% worked about 41hrs a week. Elite careers increasingly demand extremely long hours, to the detriment of family life, leisure, and even personal health.

Markovits is quick to point out that we shouldn't necessarily feel sorry for the elite, but his writing is clearly aimed at an elite (or elite adjacent) audience. He wants to create empathy, planting a question: wouldn't you trade 10hrs of your life back for a decrease in income that would be inconsequential to your wellbeing?

# How to Escape the Trap

In his final chapter, Markovits outlines several specific policy recommendations:

  1. Elimination of the payroll tax income cap.

Markovits argues that superordinate salaries are made cost effective by the income cap on payroll tax. As of 2021, the payroll tax for Social Security ends at $142,800/year. This tax is paid jointly by employers and employees. Thus if a firm is able to hire a single superordinate worker for $1M/year, compared to 10 middle class workers for $100K/year, they would pay roughly $8.8K in SSI tax for the one worker versus $62K for the 10.

  1. Elimination of Tax Breaks for Private Universities.

Private universities have massive endowments; Markovits calls them "ivy walled hedge funds". These endowments are entirely untaxed, but their gains largely go to training a wealthy student body. Markovits suggests that private universities must forgo their tax break unless they draw at least 60% of their student body from below the 90th income percentile.

  1. Increase in Top Income Tax Rates.

Top income tax rates in the US are much lower than those in the rest of the developed world. Our top tax bracket is 37%, down from the historical top bracket of 90% in the 1960s.

  1. Strengthening of the Social Safety Net

Markovits argues that broader access to healthcare would not only lighten the sting of inequality, but it would help to create mid-skill occupations. Training large bodies of nurse practitioners as front-line healthcare workers would lessen the burden on doctors, broaden access to healthcare, and create mid-skilled jobs.

# Thoughts on The Meritocracy Trap

# First Impressions

Markovits provides a needed perspective that is orthogonal to our entrenched partisan perspectives. He makes a point of attacking progressive policy measures, presumably in an assumption that his likely reader has a liberal political outlook. By identifying the meritocratic system as the core problem he makes no friends, but in an age so deeply divided, this "attack on all parties" also makes The Meritocracy Trap a true "third way" in American politics. One could equally see conservative and progressive populists admiring Markovits's rationalization of anti-elitism and critique of the professional class.

His policy recommendations may seem to skew liberal, but there are promising bipartisan possibilities. Making university tax breaks conditional would allow conservative politicians to score points against the "cultural Marxists" and "snooty academics" who they claim make universities liberal bastions. Expanding payroll taxes would be hard to swallow, but the same effect could be achieved by eliminating payroll tax. If current populist trends continue, one could even see the creation of higher tax brackets ("tax the rich") becoming a bipartisan issue.

# What Did Markovits Miss?

The Economist has a largely Markovitsian perspective and provides useful corollary and counter evidence. One recent article showed how parents outside of the elite are increasingly adopting elite attitudes towards education. Traditionally middle class parents have been more likely to take a standpoint that their role is provide a safe space for a child to thrive. Contrary to elite parents, who as Markovits describes invest immense sums of money and precious time in their childrens' education, middle class parents provided a safe place to live and food on the table.

According to The Economist, parents outside the elite are increasingly joining the educational arms race, reading to their children longer and supporting their school work. From one perspective, this makes it seem that market forces may help correct the current educational deficit. Middle class parents are responding to the astronomical rewards of education. However, if this is truly a trend, the true test will be seeing if the political and economic might of the middle class, sapped over 60 years of stagnation, can overcome huge barriers in inequality. Modern innovations in education may help democratize access further, but it's hard to imagine a broad swathe of the middle class gaining access to private tutoring or being able to pay for private schooling starting before preschool.

Further, Markovits would point out that a lack of educational attainment among middle class parents correlates to deficiency in their childrens' outcomes. Even if middle class parents spend more time training their children, without having elite schooling themselves the results will likely lag behind those achieved by elite parents.

# Questions for Discussion

  1. What role does technological advance play in The Meritocracy Trap?
  2. Does Markovits underestimate the potential for meritocracy's disruption by non-regulatory forces?
  3. How does COVID-19 strengthen or weaken Markovits's arguments.