Virtuous Cycles of Wealth & Vicious Cycles of Poverty
I was going to do three pairs of opposite systems but one of them ended up being too complicated and deserved its own post at a later date. Six maps seemed a bit much for one article anyway. So here’s two positive feedback loops on the influence of childhood wealth (or lack thereof), followed by two more on the importance of leverage in wage negotiation.
It doesn’t really need to be said that wealth has inertia. Rich kids are probably going to be rich adults. Poor kids probably aren’t, particularly in the land of the free. To have any hope of ever addressing this we should try to understand the systemic advantages and disadvantages faced by children.
- First I’ll start with how early life benefits pay dividends.
So we’ll start at wealth. A child born into a wealthy environment will have access to better education (such as preschool, private school, and university) and a more stable home life. (No fear of eviction, parents working unpredictable hours etc.) These elements will contribute to improved academic success, intelligence, and then career success. Improved career success will in turn improve their wealth even further. Link
Another connection is wealth to nutrition. Better nutrition leads to improved health and intelligence. (Even before birth, the stress, health, and general well being of the mother has significant permanent biological ramifications.) Intelligence improves academic success, and career success, and once again improves wealth. Link
Now I’ll simply switch Wealth to Poverty and see how that changes the exact same elements.
More poverty means worse access to education. (No paid nannies, no preschool, no private tutors, no private school.) This leads to lower academic success, lower career success and therefore more poverty in the long term.
Home Life stability takes a hit too. (Get evicted, have to stay with family, move around a lot, etc.)
More poverty means lower quality nutrition, which leads to worse health and potentially lower intelligence. Lower intelligence can hurt academic and career success. It certainly doesn’t help than any health issues you (or your mother) may have could be too expensive to treat.
These maps don’t even cover important factors like knowing the right people, the ability to move to where jobs are, and student debt. It’s silly that it needs to be stated, but despite the supposed universal agreement on the importance of “Equality of opportunity” as an idea, actually achieving it would require a lot of changes that most certainly do not have universal approval.
Positive Feedbacks in Wages/Salary
I wish I could remember the source of this, but I remember reading about an interesting paradox I’ll see if I can describe.
The argument is that if someone has the leverage to get into a high salary position, they increase their wealth, which reduces their need to work, which increases their leverage and further increases their ability to demand a higher salary to continue working.
On the other side when someone is desperate for a job, they have a high need for work, so their ability to negotiate wages goes down. Since their wages are low their potential wealth is low, and they remain desperate for work.
TL;DR it’s better to be rich than to be poor. Thank you for coming to my Ted Talk.
