steuard | Wealth and motivation

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Wealth and motivation

A conversation [locked post] over on

akiko's journal has me thinking about taxation, particularly taxation of the very wealthiest people in our society. In this post I'm not interested in most of the arguments about what tax rates are appropriate or fair for various income groups, but I need to describe one argument for context. One major argument against higher tax rates for the very rich is that people who earn large incomes tend to be the most productive as well: taxing them too heavily would reduce their incentive to work and thus hurt society as a whole.

But that got me thinking: when you're already earning many times as much each year as you need not just to support yourself but to purchase almost any luxury[1], what is the incentive to work harder? (Heck, what's the incentive not to slack off?) I see a few possibilities, but I'm not sure that any of them would be affected by even a moderate increase in marginal tax rate:

A desire for the next super-luxury item. There are always things that you don't quite have the money to buy; maybe the person's eye is always on that next goal that's just out of reach. But if this is the motivating factor, it would be just as true regardless of marginal tax rate.

A means of keeping score. Some people may want to earn more to prove to themselves and to the world how valuable they are (either directly via their salary or indirectly by being able to afford more visible luxuries than their peer group). But it seems like any monotonic function of raw salary would have the same score-keeping benefit in principle. As long as the marginal tax rate isn't so close to 100% that nobody can tell you're earning more, it shouldn't much matter.

A plan to pass wealth to the next generation. Some people want to earn lots of money so their children won't have to worry about money. But this isn't all that different than the points above (as noted in [1], every two years' salary could set up a kid in reasonable comfort for life). Past a certain point, your kids' wealth is pretty much guaranteed, too (and your grandkids', for that matter).

So what's the actual reason that a higher marginal tax rate on the super-rich would discourage them from working more? I'm sure I'm missing something. Any thoughts?

[1] According to this data, the top 1% of earners in the US make an average of $1 million each year: that means that every two years they could set up an endowment to support Kim and me at more than our current standard of living basically forever.

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My only thought is that I not only agree, but would go further. I think people who spend a lot of time worrying about the demotivational possibilities of various tax brackets are vastly underestimating the effects of intrinsic vs extrinsic motivators. I think a lot of high earners have a certain go-getter personality type that would be very hard to depress through non-ludicrous taxation. They may well complain about higher taxes, but stop working? I don't think they actually *could* in many cases. It's not in their nature. Conversely, I don't think I have it in me to work as long and as hard as some of those people for *any* conceivable financial reward.

That said, I'm certainly not against rewarding hard-working people from their work. But past a few orders of magnitude, I see nothing but diminishing returns in both utility and motivation, not to mention any hard-to-nail-down notion of "fairness".

I believe you are mistaken, but I suspect neither of us knows enough "high-earner" types for a statistically valid sample.

In fact, I can only think of one $1 million+ earner that I'm sure of, and guess what? He quit his job and moved out of state, explicitly for tax reasons. Most of his income at that point was appreciated stock, and his tax savings for not paying 10% to California was several years' salary.

So consider him an existence proof. My impression is that there isn't a typical super-rich person any more than there's a "typical poor person", so (without some very careful poll), there's limits to what we can know.

But of the wealthy people I know, all of them are well-aware of tax consequences, and act accordingly. Many of them do feel that they owe a lot to society, but prefer to structure that giving as directed philanthropy instead of taxes. (And, in many cases, posthumous philanthropy, when they're absolutely sure they don't need it.)

There may be a moral duty to pay a fair share of taxes, but such an impulse isn't terribly compatible with the existing tax code: It's an ill-thought-out mess, and the only sane approach is to (legally) minimize taxes to the extent compatible with your productive activities, and then worry about how to benefit society separately.

Well, I'm open to the possibility that I'm wrong about the "average" psychology here, but either way I'm sure it is true that there are examples either way and it's the kind of thing that's extremely difficult to test empirically. (I admit I'd be interested to know what your example person did after moving... did he actually stop being *productive*? But of course anecdotes prove nothing.)

I'm also willing to believe that many super-rich people are interested in giving back, but I question the wisdom of (if we assume a scheme where taxes are cut back to a bare minimum) a huge fraction of the wealth available to society for safety nets and so on is explicitly directed by relatively few individuals. (One might argue that happens with the govt anyway, but the govt is at least *theoretically* accountable to the people at large.)

I'll also readily agree that the current tax code is a huge stinking mess, though. Closing loopholes and simplifying incentives could certainly be part of a better, though sadly politically difficult, solution.

Mr. Example is, as I understand it, spending more time on his hobbies. So he may be happier, but in terms of producing stuff of value to society at large, probably significantly less.

I'm puzzled by the discussion of "safety nets", though. If you'll allow me the liberty of excluding programs that aren't means-tested, "safety nets" are a tiny portion of the budget. Social security & Medicare aren't (in the large) means-tested, and really represent a wealth transfer from younger workers to retirees: Take from the poor, give to the rich. Those two + interest in the debt (prior excesses) is more than half the budget.

I'm happy to discuss safety nets in the abstract (and infrastructure, etc.), but that, unfortunately, has almost nothing to do with a discussion of tax rates.

That's a good point that's often overlooked in this sort of discussion. I, for one, would not be against phasing in some amount of means-testing to both those programs. Of course, one problem with means-testing is running into the issue of essentially rewarding people for using up (or hiding) all their money, so the solutions are not immediately obvious. And then of course there's the political hurdles.

Indeed, hiding money is a risk in such a scheme. A very, very similar risk exists with an income tax. (Apparently income taxes paid are only in the 85%-90% range of what's nominally due.)

Oh dear.

I remember hearing your friend talk about his move to Nevada in order to avoid California taxes, and, well, I'm not sure there's a good way to say this: I was deeply disgusted by his behavior.

Certainly it was in his own personal best interest to not pay those taxes.

However, he earned that income while living in California and reaping the benefits of being here. He became a millionaire by living in California, and then he chose to cheat California by moving elsewhere before he had to pay California for what it enabled him to do.

I think you're right that the tax code should be amended to cover situations like this. The stock was clearly income earned in California, so California should have benefited from it, even if it wasn't literal income until it ceased to be stock.

Or maybe the problem is that taxes are too low in Nevada, that he was tempted to move?

Clearly the outcome is suboptimal, in that he'd have rather not moved, and California would rather have had the tax revenue. But the structure of taxes doesn't have that degree of moral clarity.

Consider 3 cases:

There's a tax on cigarettes: Am I denying California its just due by not smoking? That's a punitive tax, and as citizens we're supposed to avoid the taxed behavior (mostly).

The income tax: This is a revenue tax, and we're supposed to keep earning (mostly).

The gas tax: This is a proxy for a usage tax to maintain the roads. It seems silly to say I'm evading this tax by (for example) walking to the high school to volunteer, but the intent really is a mixture of adjusting usage habits and raising revenue.

In some cases the intent is unclear, and even the law itself: There's a derivatives trade that I'd consider, but the IRS's position on it is, more or less, that Congress was unclear when they made the law: Until a court clarifies it, no one knows how it should be taxed.

It sounds like you have a theory of the social contract which includes a moral obligation to pay taxes (beyond the legal obligation), and, opportunity permitting, I'd enjoy discussing that with you. (There's a line in the tax form for "I'd like to pay this much more tax than required." Do you do so? Why or why not?)

I take something resembling a pragmatic view: The tax code is what it is, and we should comply with the law as it is, and at the same time consider how the law should be changed to improve things. That includes a pragmatic view as to how society as a whole will react to the changes: Many emotionally appealing alternatives turn out not to work well in practice.

In terms of this example: If the money "belongs" to California, why was it not taxed when the stock was obtained? Or maybe the taxes should have come out of the corporate earnings that justified the stock price (that tax was paid). Or maybe the earnings of whoever bought the stock? Presumably those taxes were paid too.

I did a pretty good, but not perfect, job on frosh chem problem sets, and went to bed by 2, because past a certain point of diminishing returns, I say "screw it". My roommate wanted to do the perfect job. She stayed up several more hours each Thursday night to get those last few percent. A few people are obsessive like that, but the higher you jack up the sleep costs of those last few percent, the more of us, I imagine, just ended up saying, "screw it".

That's an interesting metaphor, but I don't think reducing earnings is equivalent to jacking up the sleep costs. It's more akin to saying, "Sorry, there's no such thing as an A+++ grade on this assignment; the best you can do is A+". (Though that's still imprecise, since even with high taxes income still grows, just at a slower rate.)

Anyway, it's true that even reframed my way I could see more people saying "screw it", though I suspect some of those all-nighter people would continue to be perfectionist anyway.

I agree with this: as soon as the benefit of those last few percent is outweighed by the cost of achieving it, most people decide that's where they're going to call it quits. But I'm not sure that this is at odds with anything I said above: my big question is "What IS the benefit one gains from earning $1.8 million/year rather than $1.6 million/year?" From my perspective as an earner well below those rarefied heights, it naively seems like it would be a lot like getting those last few percent: nice and all, but maybe not worth losing more sleep. If a lot of people really do perceive that increase as a big deal, I'm very interested in knowing what they get out of it.

Oh, heck if I know ;). I'd be fine with the $200K between those numbers, personally.

But I suspect there are people who use those numbers for scorekeeping -- the relative mattering more than the absolute. And I know from my teaching experience that people can and do live staggeringly expensive lifestyles. I'm sure I've met people for whom those differences are salient. But as I, personally, do not have five children in private school, a nanny for each of them, first-class trips abroad in every major school vacation, a ski chalet in Colorado, a house on the Cape, a designer wardrobe, et cetera, I can't quite get my head around it.

(Not, by the way, hypothetical examples, although I'm not sure that I know any single family that did *all* of those things. But the five kids/five nannies/private schools thing I know happened in at least one, and probably multiple, instances. And the other things were common enough.)

Chris's current salary is more than double what his starting salary was. Eight years ago, I knew that an extra $10-15K would make life a whole lot easier, but would have thought that doubling our income would remove all possible financial pressures on us. Now, I know this to be false -- we still can't fix our topologically interesting basement floor without carefully considering where the money's coming from, and I'm still driving an 18-year-old van until we can save up the cash to replace it, just for two random examples. Life is far more expensive, in general, than we tend to think it is, and the activities involved in making $1.8MIL are likely not cheap.

There are three points I can think of to contribute to this discussion. The first is that, while gaining a luxury is merely nice, giving up that luxury is often very difficult. I read

ukelele's description of a staggeringly expensive lifestyle and am almost struck dumb at the extravegance. But can you imagine sitting down with a kid who's grown used to that lifestyle -- excuse me, five such kids -- and telling them that they'll be staying home for all of summer vacation? Or that they will no longer have a nanny? Or that they will be attending the local public school next year? It would be a difficult adjustment. And if you're going to make all those adjustments, you might as well pick up and move to some small Central American country or some such where you can keep all those things, and take your money and earning potential out of the United States altogether.

The second point is the work it takes to earn that last $200K. Chris and I have some experience with overtime and earning extra money, albeit on a much smaller scale. Chris is salaried; our regular, predictable needs are covered. However, he sometimes gets paid overtime under certain conditions; since this money is recorded separately on his paycheck, it's pretty easy to see the effect that the marginal tax rate has on it. When an entire evening gets taken up with work, when that translates into lost sleep, a family supper missed, an evening at the park missed, and kids getting tucked into bed without Daddy there, we notice. In order for that evening to feel remotely worth it, the monetary compensation for it -- the takehome compensation, after taxes, 401(k) withholdings, etc. -- needs to also be something we notice. For us, that doesn't take $200K -- but if it were a regular pattern and we were already making $1.6MIL, on an annual basis, it very well might. And I can tell you that at our current marginal tax rate, it's getting rather borderline, and we're not that high on the tax rates.

The third point is that not all things that rich people spend money on are necessarily materialistic gadgets and luxuries. There are indeed people living rediculously opulent lifestyles -- but many rich people are living fairly reasonable lifestyles in houses that are simply very nice, but not ostentascious. Many of these people, instead of spending that extra money, would invest it or donate it. I have way more business ideas than I have the resources to implement; if I were to be presented with an extra $200K, one or more of them would likely get implemented. Similarly, I know of way more worthy charitable organizations than I am able to support currently; just for one random example, I read recently that the cost to provide clean drinking water for a refugee camp is around $175K. (That includes manufacture, shipping, installation, and maintenance, I believe, for a device specially developed for use in such circumstances.) Having to throw away requests for aid from worthy organizations trying to do worthwhile things that save lives is one of the drawbacks for us of making a fairly reasonable salary.

Newt

[How would high marginal tax rates discourage work]

There's also the concept of "Deadweight loss": Inefficient allocation of resources.

The usual story involves a rich man mowing his own lawn. When asked why he didn't pay someone $50 to do it, he answered that he'd have to earn $500 to pay $50, and for $500, he'd mow his own lawn. (Marginal tax rates were higher when I first heard this.)

He's still working, but society has lost something by having him work on something he's not as good at. If I can pay you to do something you do relatively better than I, and vice-versa, we both gain. But the higher marginal tax rates are, the less sense that makes.

How much does this matter? It's arguable, but I think it's significant, especially at higher tax rates.

All I got to that tale is "Huh?"

A more concrete example, then. Suppose I have a 20-hour electronics project that I need done, and the going rate is $50/hour. I could do it myself, of course, but it's not my specialty, and it'd take me 25 hours.

So I work 25 hours in my specialty (software), also at $50/hour, earning $1250. After taxes (assuming a 30% marginal rate), I have $875, which is less than the $1000 I need to get it done. So I do it myself.

The guy down the street is in the reverse situation, and I could do his software project in 20 hours, but he winds up spending 25 hours doing it. If somehow we'd been able to swap tasks, we'd each have an extra 5 hours to do something useful (my favorite is to volunteer at the local high school), but the tax rate makes that impractical.

The effect is stronger the higher the tax rates (or other transaction costs) are.

It follows fairly directly from normal supply and demand curves: If you shift the price up (tax or other cost), the equilibrium changes, and the total benefit produced diminishes.

The question becomes then whether the revenue benefit from the tax is large enough to justify the loss.

See, there's very little I'd say "not worth the money" to, if I can avoid doing it myself. I pay the nice men at the mechanic's to change my oil ($65, synthetic oil), because it's messy, a pain in the ass, and I don't know how. Takes them like half an hour, they do all the disposal stuff, and I don't have to worry about it. That's about 2 hours of my current pay*, but I would so much rather pay someone else to do it.

See also the bathroom remodel we did last fall. We know jack about building, let alone plumbing, wiring, and masonry, and we don't have the tools. It was a thousand times easier for us to call a guy and have him coordinate a bunch of people to come into our house and do their things using their own power tools than for us to figure that mess out. And buy a bunch of power tools which we'd probably never use again and have to find a place to store.

So I don't buy that.

*I make shit, as far as pharmacist salaries go. Retail starts at $45+/hr in my area, and after 2.5 years in my current job, I'm making $35.

Which part don't you buy?

That I might be 25% more effective at software than hardware?

The numbers? (You should be able to verify them.)

That the effect is possible?

That it might be worth doing something yourself?

The whole body of standard economic theory, because you don't like some of the predictions?

It is certainly possible to find examples where the comparative advantage is larger than in my example: That's the point. The negative effects of taxation don't affect all of these choices equally, and are strongest when the tradeoff is small.

To be honest, I'm not sure if I'm not explaining this well enough, or if you really don't want to understand it. You've called yourself a Marxist: Consider why Marx made a deep study of capitalism before offering an alternative prescription.

That'll have to do for now: I'm off to volunteer at the high school.

That it really makes that big a difference in tax policy. Is there serious evidence (other than one guy who up and left, without paying a dime to the broke state of California) that an increase in top marginal tax rates stops people from working or decreases their productivity?

It was 90% in the 30s-60s or something like that, and the gap between rich and poor was a hell of a lot smaller. Did a bunch of CEOs and Rockefellers just quit one day?

I've also read a bit on the "going Galt" movement, but I haven't read anything that they've actually quit their jobs or become less productive.

I do plenty of things myself, BTW. Make coffee, cook food, shop, clean.

Behavioral economics, from what I read in The Economist, is a terrible field with a lot of theories that don't hold water. Because people aren't 100% rational machines, which behavioral economists tend to assume.

I don't want to make a deep study of economics. It's boring, and it's not something I can understand (like physics or advanced calculus.) I rely on people like Paul Krugman.

ETA: It occurs to me that I'm more likely to defer to expert opinion in matters I'm not well-versed in. I'm also more likely to pay people to do things I'm not good at or expert in or particularly interested in investing my time and energy into (see: rebuilding the bathroom from scratch). So paying someone 2 hours of my work to change my oil, or 4 hours to rotate and balance my tires, because they're experts and have the equipment, etc, doesn't faze me.

I'm still not seeing why money is the one and only thing that causes productivity, according to this "higher marginal tax rates decrease productivity" argument. Because in my experience as a living, working person, it's nonsense, falling into that bad behavioral economics theory.

Edited 2009-04-21 18:36 (UTC)

Behavioral economics, from what I read in The Economist...

These days, the online version of the Economist is worth the paper it's printed on; he paper version isn't even worth that. Far too often it allows politics to get in the way of economics.

Is there serious evidence (other than one guy who up and left, without paying a dime to the broke state of California) that an increase in top marginal tax rates stops people from working or decreases their productivity?

Yes. Large numbers of high income people have moved out of California. Large numbers of companies have moved out of California to places with lower taxes and property values. This has lowered the tax base and is one cause of California's financial shortcomings (the inability to ever cut the budget being the bigger one).

The plural of anecdote is *still* not data.

I'd heard that the problem with California was due in no small part to the voter referenda, which allow people to vote for social programs without requiring funding, combined with a supermajority being required to raise taxes in the legislature.

Spending in California has increased by nearly 10% per year since I moved to California 14 years ago (in easy to find terms, it went from $56 billion in 1998 to $131 billion in 2008 - a 9% annual growth rate). Yet, you think the problem is that the state can't raise taxes? I'd argue that the problem is that the state keeps spending. I agree that the voter initiatives are a driver of this problem, but the fact is that the politicians just can't stop spending either.

If you want more information on changes in high income earners in California (and companies moving out), you'll have to find them on your own. That data is in the bowels of places like the IRS and census websites.

http://steuard.livejournal.com/28386.html?thread=116194#t116194 explains my problem.

The state *has* to keep spending because our population is growing, and we need those services that we're spending money on.

I often hear people complaining about the California government spending too much money, but I never hear what it is we're supposed to cut.

MediCal, duh. And other things that help those lazy poor people, who ought to be pulling themselves up by their bootstraps!

The population is growing at a rate of between 1% and 2% per year; the expenditures by much more than that.

(You can look at the numbers yourself if you'd like: For example at http://www.ebudget.ca.gov/pdf/BudgetSummary/SummaryCharts.pdf)

We're getting more government per person than we used to.

As to what I'd cut? Much of it, fractionally. If you want this week's annoyance, it's STAR testing. 3 days of student time are spent taking tests, and substantially more than that in preparations, in a significant distraction from the actual goal of educating students. (If you want useful data, do statistical sampling, and have it administered by people with less incentive to cheat.)

But for big cuts, it really does have to come out of one of the big slices of the budget: Education, "corrections" or health care. (I have politically unpopular opinions on all three, of course.)

I do wonder why "Business, Transportation & Housing" is up almost 60% in one year, though.

There are various studies as to how large the effect is, and it various substantially across income levels. Pure wage earners have the least control over their income structure and the least effect. At the high end, the correlation is apparently as high as .57: Try to increase tax rates to get $100 more, and $57 of income vanishes. Across the whole range of incomes, the sensitivity is apparently around .4.

You're right that your experience as a worker isn't particularly strong support for the thesis, but that's because that's not where the changes happen. Experience running a business or investing would be more relevant. Do you have a retirement account? Presumably, it's tax-deferred ...

Marginal tax rates were lower than 90% for much of the 30s-60s range (and higher for some): Tax rules get changed a lot. But there were also a lot of 'tax shelters', which were gamed to make real income not show up in the IRS income data. Are you measuring the gap by income (whose data?) or by wealth? In any case, there do exist many ways to reduce tax-visible gains, and they're used, a lot.

As for not studying economics: That's unfortunate. Based on how much you write about economic topics, it's pretty clear you care, and arguing from a position of deliberate ignorance is kind of strange. But if you balk at stuff like interpreting a supply & demand graph, I don't think I can explain some of this stuff to you. (Nor does it sound like you've understood Krugman, who has a lot of useful stuff to say.)

Except making your own coffee or food? ;-)

Heh. It's cheaper for me to do that, and cooking is kinda fun. Making a cup of coffee costs 50 cents (the beans) plus 1 cup of water and the energy to heat it in an immersion kettle and takes 4 minutes. (I have a French press.) Driving to the coffee shop before work takes 10 minutes to get there and back to the highway, plus waiting on line, and it costs $1.50 for a travel mug (BYO.)

I'd rather sleep the extra half hour and make it myself.

I'm a bit surprised that this guy would be willing to mow lawns even for $500, actually. If the "rich man" is in the top 1% of incomes, that puts him (today) at about $1.2/year. Assuming it takes him a couple of hours to mow his lawn, that would only come out to about $0.5 million/year as a 40-hour/week job. Still a pay cut!

But more to the point, if you're earning a million a year, how big a deal is $50 really? I would claim that most people earning $1.2 million/year wouldn't even bother negotiating over a salary change of $50/week: that wouldn't even show up until the fourth significant digit! Would this guy even notice if his paycheck were off by that much? Where's the incentive?

Scale it down. Suppose you make $120,000 a year (as a family). How big a deal is $5 really? If you go to a restaurant, do you bother looking at the prices on the menu? Most of the time the price differences are on that order.

On top of that, wealthy people tend to be well aware of such issues (exceptions abound, especially among lottery winners), and if given a choice, why not take the better option? I pick up pennies, for example: It beats not picking them up.

If I were making $120k, I don't think I'd sweat paying someone $5 to mow my lawn. (And the top tax bracket currently kicks in at $350k, doesn't it? And of course is 30-some percent rather than the 90% used in the anecdote. That doesn't mean the principle is invalid, but it's going to change the extent to which it kicks in as a significant effect.)

I think this ties in to akiko's objection in the thread above, also. It's not that she doesn't buy the math or the fact that people have different efficiencies. What she's not buying is the idea that every (or a large majority) of people's decisions are going to be based *strictly* on a monetary bottom line compared to their earning potential per hour. Although I don't deny such considerations have some degree of influence on some decisions, I think you're overstating them. For one thing, a lot of people are on salary - if I mow my lawn while not at work, there is no potential earning that I'm losing. Sure, there's hobbies I'd rather be taking part in, but we already dismissed hobbies from our "productivity" metric in the anecdote of the guy who left CA.

On top of that, wealthy people tend to be well aware of such issues (exceptions abound, especially among lottery winners), and if given a choice, why not take the better option? I pick up pennies, for example: It beats not picking them up.

Also, "The Wealthy" is generally a self-selected group of frugal people. The ability to accumulate and earn money from capital is a primary reason that people become (and stay) wealthy.

Generally a self-selected group? I don't think so. Wealth is transferred generationally; you can't select the family you're born into.

Some wealth is transferred generationally, 'tis true. What's generally more important than the amount of money you inherit, however, is the attitudes you learn from your family regarding money. Poor people who win the lottery tend to spend it all and return to being poor; many rich people started out poor or middle-class, made the most of the opportunities available to them, lived frugally, and learned to invest wisely and build wealth slowly over time. People move from one socioeconomic class to another pretty often in the United States.

Newt

Not so much: More than 7 in 10 Americans who start at the bottom of the income ladder remain below middle income status 10 years later

Also, the reason poor people spend money when they get it is because they have it so rarely. There's no education about investment, saving, etc among the poor. Your example of people living frugally, etc, assumes that there are opportunities available, which for a large group of people there are NOT.

We are seeing the same numbers see a different story. You are seeing that 7 of 10 people who start in the lowest 20% are still poor and miserable 10 years later. I'm seeing that 3 of 10 people who start off in the bottom 20% are in the TOP HALF after only 10 years of trying. Not only that, but 7 are in the bottom HALF after 10 years -- starting from the bottom 20% that means that some of those people (your source cleverly doesn't say how many, because it hurts it's point) are now in the 20-50th percentile -- i.e. they've moved up. To me that's a far cry from "hard work doesn't mean shit."

Same numbers, different interpretation. I choose the one with hope.

--Beth

Hope doesn't trump the vicious reality of having dark skin or tits in this country.

The problem with your claim here is that the flip side is quite ugly: You are essentially saying that if you're poor, all you need to do is work hard and you'll be better off. That is patently not true, as has been explained elsewhere, and the corresponding side to that is that poor people are poor because they DON'T work hard.

I don't know if you read

akiko's LJ, but

tiurin has some really excellent comments there about the problems with mobility, and the related problems of privilege. I think that is what a lot of these discussions are coming down to. It's a very important concept, and it's not one that's easy to explain sufficiently well, especially if you don't have a background in women's or African American studies or something similar.

Regarding the lottery: Are you sure about that? Sure, there are newspaper stories about people who win and then spend it all within a year, but that's not good data. Obviously, the newspaper is printing it because it makes a good story, not because that's an actual tendency.

Also, moving from one class to another is a hell of a lot easier if you already have a leg up. Going from third to fourth quintile will still take work, but if you're in the third already you likely have a lot of things available to you, like education and the expectation from your parents and peers that you'll do well. (That makes a HUGE difference.) If you're in the bottom or fourth quintile, not so much. This whole "pull yourself up by your own bootstraps" notion doesn't work so well if you can't even afford to buy boots.

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Wealth and motivation

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