(Re)imagining Wealth (Re)distribution: A Millennial Perspective
“Someday, I’m going to change the world.”
It’s a phrase repeated between manic visions of my future presidential bid and Nobel laureate acceptance speech. And it’s also a shared sentiment between my fellow Millennial generationalists and subsequent iGenners (generation z, or, whatever).
Generally speaking, we - I’ll just refer to everyone born after 1985 as “we” - take more issue with the status quo. It’s often characterized as complacency or laziness by older generations (sorry Dad!) and even defiant members of our own kin. “Stop whining,” they say. “You don’t know hard work,” they effuse.
But the truth is, stuff is broken. And despite our fathers’ conventional wisdom, we’re not running away from it. Instead, we’re having grandeur visions of repair, and figuring out how we want history to remember us.
Millennials and iGenners grew up and continue to exist in a world where handheld access to every corner of the globe has
probably definitely contributed to some of our social ineptness and disease - look no further than rising levels of depression and anxiety - but also strongly molded our social consciousness. We are more engaged with a diverse array of perspectives, and more attune to the problems that affect the global community.
It’s likely caused some detachment from our local communities, but that’s characteristic of a more global existence. We’ve changed, or adapted, to a new definition of community. And now, we’re seeing the social consciousness of Millennials and iGenners play out in the real world.
The proximity of communication and rapid sharing of ideas has helped usher in a new system of accountability. The #metoo and #familiesbelongtogether movements are great examples. Despite the vast landscape of internet trolls, this new community has encouraged us to thoughtfully express dissatisfaction with failing systems and mobilize change.
Though perhaps more than anything, the collective Millennial and iGen consciousness is best reflected in economic decisions. As it turns out, despite our well-documented outstanding tuition debt, Millennials and iGenners have a lot of purchasing power - studies put the numbers somewhere between $44 and $100 billion for iGen, and $65 and $200 billion for Millennials in 2018 (or maybe $1.68 trillion - bless the wonderful imperfections of economic studies).
When it comes down to buying decisions, nearly three out of every four Millennial respondents to a global economic study conducted by Nielsen stated that they would pay extra for sustainable products, while 67% of iGenners agree that "being true to their values and beliefs makes a person cool," and that they feel the same about brands.
We’ve become politically eligible in an era where our government seems ill-equipped to handle social, environmental, and economic issues. Calling legislative change incremental would be quite the compliment. No doubt making policy ain’t easy. And in the grand scheme of things, our democratic and capitalist systems are relatively young. They are playing catch up in more dynamic times.
But that’s not an excuse for inaction. Maybe it’s because the U.S. government isn’t a good representation of our current demographic landscape, maybe it’s because lawmakers have lost their nerve to take political risks in the face of reelection, maybe it’s because our democracy has become a vehicle for ideology, or maybe, it’s because they don’t even know what the solutions are. (Let’s be real, likely a combination of all the above).
So us Millennials and iGenners are responding the only way we know how - by taking it upon ourselves. Perhaps “I’m going to change the world” is a bit...lofty. But it’s that kind of thinking that leads to great innovation and solutions. Aim low, and you get low end results. Aim high, and you stand a chance to affect change.
This week at Poco a Poco, we took a look at wealth redistribution. This is an explainer of that examination in the context of us irrationally-consuming, lazy, downright no good millennials and iGenners. I use wealth and income equality pretty interchangeably here because, although they’re not the same thing, most studies show they’re inextricably linked.
I think we can all agree that wealth inequality, both on the national and international scale, is a problem. In the U.S., the income convergence between top earners and the general workforce that occurred during the mid 20th century has gone in the entirely opposite direction. And when you look at it holistically, divergent incomes have unsurprisingly led to social stratification, cultural polarization, and low educational attainment. It is a system of self-perpetuation, in which a lack of income leads to a lack of access, and a lack of access to a lack of income.
This is not an opinion or political statement, this is a fact.
What people do not seem to agree on (that’s putting it lightly), however, is how wealth should be (re)distributed. In the middle of the 20th century, when the top one percent of earners were bringing home 900 times more than the bottom 90 percent, redistributive wealth policies (aka taxes) were levied on large income earners and asset owners, bringing the figure down to 114. But people do not like paying taxes.
So beginning in the early 1980s, after some marked changes to domestic economic policy, incomes and wealth again began to diverge. The result? In 2018, the top 0.1 percent once again earn about 900 times more than the bottom 90 percent.
Taxes, of course, go to all sorts of things. But in the context of wealth redistribution, our dollars most notably support social programs - public education, Social Security, health insurance, and nutrition programs.
These programs, often at the mercy of changing political agendas, have short time frames to prove out results, suffer from uncertainty regarding future funding, and are characterized by a similar risk-aversity and unimagination that reflects our legislative gridlock. Which is to say, these programs are having a difficult time creating long-lasting impact on the wealth inequality gap.
This isn’t an attack on government-funded social programs, for which there is a huge need. I think it speaks more to something I mentioned last week and previously in this article: these problems are complex, and our institutions are hard-pressed to find solutions. Increasing tax rates on high income earners and businesses certainly helps incomes converge, but that’s only one piece of the puzzle. More difficult to address is, how do we create sustainable equality and growth?
If we see inequality as being either caused or exacerbated by outsized business, then perhaps we should flip the narrative and look at business as part of the solution.
The field of behavioral economics has been around for a long time, but it’s recent rise in academic and commercial popularity is coinciding with the growth of the socially conscious consumer.
Note: In 2017, the “father” of behavioral economics, Richard Thaler, won the Nobel prize for economics - the first behavioral economist to earn the honor. If you’re looking for 45 minutes of audible entertainment and an explanation of behavioral economic evolution, check out his most recent interview on the Freakonomics podcast
Most basically, behavioral economics departs from the classical school by assuming we are not rational economic actors. Instead, it studies the psychological and cultural motivations of our economic behavior - things that would make us do something outlandish, like, spend extra money on a product that’s sustainable. Sounds crazy. Sounds familiar.
Behavioral economics, or irrational economic activity, isn’t exclusive to Millennials or iGenners. The modern field of study began following World War II, around the same time that the field of cognitive psychology appeared. And let’s be real, we’ve been acting irrationally since the beginning of time.
But I think it’s rising popularity is not uncoincidentally linked to the collective Millennial and iGenner conscious and how we are reimagining wealth (re)distribution. Our widening definition of community and rapid exchange of ideas, combined with a lack of political action, is helping (or forcing, you choose) us realize that we can design our own change. It might cost a little extra, but hey, we’re the avocado toast generation after all.
Socially conscious consuming is a kind of a self-imposed tax for kids who grew up experiencing the world’s problems through interactive photos, videos, and chat rooms, and have yet to see those problems get solved. And now, the same kids who are on the hook for billions of dollars in tuition debt and increasingly part of the 90 percent, are saying screw it. We’ll do it ourselves.
This is where the grandiose, what I would call inspirational, sentiment to change the world comes from. Millennials and iGenners are putting a premium on all different forms of capital - social, environmental, intellectual - not just financial. The premium might be expressed in dollars, but the foundation is much more encompassing.
Social Business and Sustainable Wealth (Re)distribution
There exist two sides to this reimagined economic equation. Demanding change and increased responsibility from business execs is important, but not especially bold when you’ve already agreed to pay more for their products. Sometimes, you’ve just got to reconstruct the model.
So emerges social business as a mechanism for more equitable wealth distribution. We’ve encountered two types of social businesses that are making strides in this area.
There are those tackling supply chain transparency, sustainable sourcing, and fair wages, like the good people over at Adelante Shoe Co., whose entire mission is to improve the livelihoods of its Guatemalan cobblers. The handcrafted boots, wintips, and loafers are competitively priced with bigger brand names, such as Cole Haan and Clarks, but revenue goes towards creating sustainable economic improvement and equality. We wrote a blog post about the company’s story last month.
And then there are the complete market disruptors. We had the opportunity to spend some time at Hola<code/> back in the fall of 2017, and CEO Marcela Torres prides herself on being a disruptor. The five month-long, Mexico City-based software engineering bootcamp uses a program adapted from San Francisco’s Hack Reactor to create opportunity in the tech industry for Mexico’s returned migrant population. Hola<code/>’s goal is to democratize technology, which is quite the undertaking. But the way they do it, is what’s disruptive (at least from a market perspective). Tuition for Hola<code/> students is free. Actually, Hola<code/> pays its students.
Next week, we’ll be re-running an article we wrote about the company with some updates after Hola<code/> graduated its first class in the spring of 2018.
Adelante and Hola<code/> have different social business models but share a common vision - using a for-profit structure to create social change. They are both run by Millennials that employ Millennials to do work in areas where they see the system failing.
Sure, they are also run in developing countries, but the success of social business is not contingent on that fact. Wage inequality and access to technology are glaring problems in every part of the world, and the gap is perhaps no wider than in the U.S.
The sustainability of social business is predicated on the fact that success is measured both by financial health and the ability to affect change. Essentially, the more growth a company enjoys, the bigger its capacity to create impact. The market, despite having played a hand in wealth concentration, is also an effective engine - if a business is sustainable, then so too is its mission. And if wealth equality and access are part of the mission, then the business becomes a sustainable solution to those issues.
There is wealth redistribution, and there is wealth predistribution. But Millennials and iGenners are taking prefixes out of the equation. Together, social business models and the socially conscious consumer are creating a positive feedback loop in which change follows on the heels of good economics.