The trend of elites, but more broadly, the professional-class, pulling away and ahead of the working-class, began in earnest in 2008, after the financial crisis, when the wealth and education gap really exploded (such as the college wage premium, ballooning salaries for tech, finance, medical, legal jobs, etc., surging stock market, etc.).
I call this the ‘great confluence’: cheap mortgages, surging home price, surging stock prices, and high-paying professional jobs. You see this all over Reddit on popular finance and investing subs (such as /r/investing, /r/fatfire, /r/financialindependence ) of people in their 20s and 30s with substantial wealth over the past decade thanks to the convergence of those four factors. Never before in history have all four factors been aligned this way as they are today and have been for the past decade. Either inflation was too high, or asset returns were poor, or professional jobs didn’t pay that well, etc. If you look at the BLS data, doctors, lawyers, and bankers , on an inflation adjusted basis, didn’t earn nearly as much money as they do today. For people with good incomes and and hence an opportunity to borrow and invest, the past decade has been amazing.
But on other extreme, are young and middle-aged people who are stuck in the service sector and other low-paying professions, who may have a lot of debt but no good prospects, and whose lives are so benighted and blighted beyond any hope. The college-educated barista trope is more more of a creation of the media than an accurate depiction of reality: the typical barista or cashier is likely to have no degree and be in their 40s or older. Indeed, the unemployment rate for college grads is just 3%, half that of high school grads. I have to remind myself that Reddit is not reality but rather just a thin, cherry picked slice of it. Despite the popularity of personal finance and investing subs, 6-figure tech salaries, large inheritances, and 7-figure net eggs, are the exception and far from the norm. The outliers of income and wealth inflate the mean, whereas the median gives a more accurate depiction of distribution of wealth in America. There are tons of people at retirement age with little to no savings, expecting to rely on Social Security.
As Charles Murray explicated in The Bell Curve and later books, such cultural and economic stratification is largely along the lines of IQ. Environment to some extent plays a role too but only at extreme levels of family wealth. Someone with an 140+ IQ and a proclivity to STEM has significantly greater earnings potential than even kids from wealthy families, who blow the wealth anyway. It takes probably tens of millions of dollars to overcome the poor habits and poor prospects of having a low/average IQ, and given how lotto winners, trust fund babies, and pro athletes not uncommonly blow their fortunes, even that is probably not enough.
Regarding IQ again, thanks to the ‘four factors’ [forever-low interest rates, the forever-bull market in stocks (the post-2009 bull market exceeds even the 80s and 90s bull markets on an absolute and inflation-adjusted basis), the forever-booming housing market, low inflation (which makes mortgages cheap and amplifies real returns), the booming tech and finance sectors, and the forever-rising college wage premium] the windfalls of having a high IQ and being ambitious have never been so great in the history of the US.
Dr. Peterson argues that society is arranged into what he calls ‘hierarchies of competence’, and maybe in STEM this may be true to some extent, but the spate of major data breaches/hacks at large corporations and the sorry state of America’s political leadership, shows all too often that incompetent people are getting to the top.
It is commonly assumed that this will end badly as the present ‘boom’ crests, as all cycles do, but why should it? For reasons discussed earlier, all indicators are portend to higher prices: interest rates are still rock-bottom, inflation is low (although rising slowly), and corporate profits are the fattest ever, as well as massive revenue growth. Tech companies, ‘big retail’, consumer staples, etc. are generating record cash flows quarter after quarter to no end, no matter what is thrown at them: endless Covid cases and variants, the possibility of rising interest rates, rising inflation, a president whose short-term memory is measured in picoseconds, the mess in Afghanistan, is no match for the indefatigable consumer. I predict things will not end badly, at least not for a looong time, and that the post-2008 wealth creation bonanza will continue for a long time to come, far longer than anyone expects. Huge $50-100+ billion-dollar IPOs, 8-figure stock compensation, 6-7 figure tech salaries, etc. are the new normal.
As economic growth continues to be funneled into a shrinking number of large, hugely profitable firms, such companies are forced to offer increasingly lucrative compensation to attract top talent, given how high the stakes are. We’re talking hundreds of billions of dollars or even trillions of dollars on the line: Amazon, Google, or Facebook making minor tweaks to their algorithms in terms of ad delivery/targeting, for example, can make the difference between a blow-out quarter versus just a merely good quarter. A 10% swing in the share price of a $1-2 trillion dollar company is hundreds of billions of dollars…that is the size of entire economies. Winner-take-all markets and network effects mean that the difference between dominating a market or losing it, can hinge on a single employee. Contrast this to the late 90s when the ‘dream job’ was to start your own company; nowadays, people are making more money with much less risk joining top tech firms than going out on their own.