American Nightmare. Randal O'Toole

populations of the nation’s larger cities. Immigration grew from under 10,000 people per year before 1825 to more than 100,000 people per year in 1842. From 1840 through 1900, immigrants made up 30 percent of the population growth of the United States, and many of those immigrants settled in industrial cities, such as Chicago, Detroit, and Pittsburgh.

      The Middle-Class/Working-Class Split

      The advent of large corporations, such as railroads, textile manufacturers, and steelmakers, created a demand for two types of employees: managers and laborers. Management required special skills and, often, personality traits, so good managers were paid a premium. Laborers were viewed as interchangeable and were generally paid much less. Although management jobs tended to go to native-born Americans with better educations, immigrants mainly took the laborer jobs. The managers became the middle class, while laborers became the working class.

      These distinctions were largely unknown before the 19th century. The first recorded use of the term “working class” was in an 1813 book titled A New View of Society, which divided people into “poor,” “working class without property,” “working class with property,” and higher classes that employed the working classes.¹ The term “middle class” is older, its earlier meaning referring to traders and merchants who were between the aristocracy and peasants. Its modern usage of referring to professionals and managers has been traced to an English statistician named T. H. C. Stevenson, who worked for the Registrar-General—roughly the British equivalent of the Census Bureau—in his analysis of Britain’s 1911 census.²

      Cultural differences between the middle and working classes go well beyond differences in income, which greatly narrowed in the second half of the 20th century. Qualifying for a management job generally requires more education, and that advanced education helps shape people’s tastes in food, recreation, entertainment, and lifestyles in general.

      These cultural differences go back many decades. An analysis of 19th-century literature, for example, found that working-class fiction, reflecting the realities of working-class lives, tended to be more violent and more overtly sexual than middle-class fiction.³ Cultural differences in the 19th century were particularly exacerbated by the high percentage of immigrants—often immigrants from countries culturally much different from the Anglo-Americans who made up most of the native-born population. Irish immigration peaked in the 1840s and 1850s; German immigration came in waves that successively peaked in the early 1850s, early 1870s, and early 1880s; Italian and eastern European immigration became significant in the 1890s and peaked in the 1900s–1910s.⁴ These waves of immigration brought in people who were increasingly alien to the Anglo culture that dominated the United States.

      Imagine a Sunday summer afternoon in late 19th-century Chicago or Pittsburgh where a working-class family lives next door to a middle-class family. On the front porch, the working-class father plays a banjo and the family sings songs from their native land in their native language, accompanied by clucking chickens and barking dogs. Meanwhile, the middle-class family gathers around the piano indoors. The working-class mother is cooking a meal liberally laced with garlic, strong cheeses, and other odiferous ingredients. The middle-class family eats food that is even blander than English food is noted for today. Boarders come and go in the working-class house along with customers of the in-home sewing business; the only visitors to the middle-class house are as prim as its residents. The potential for conflicts is obvious.

      The Immigrant Dream

      One of the cultural differences between 19th-century working- and middle-class families was in how they viewed their homes. While middle-class families considered homes to be simply a place to live, working-class families also used their homes as income-producing opportunities. They could raise chickens and vegetables in their yards; take in boarders; and run small businesses, such as sewing, out of their homes.⁵ These supplemental sources of income, together with income earned by children and other family members, typically came close to equaling the income earned by the family’s principal wage earner.⁶

      In addition, working-class families rarely had bank accounts (partly because 19th-century banking hours were so limited— typically from 10:00 a.m. to 3:00 p.m.—that laborers could rarely visit a bank). Instead, they regarded their home as a bank, using their homes as collateral for small loans (from relatives or “real-estate entrepreneurs,” not from banks) to start up businesses or tide them over if the leading income producer in the family was temporarily out of work.⁷ Realtors of the day said that houses were “better than a bank for a poor man,” and “with hindsight,” says one historian, “this appears to have been true.”⁸

      As such, 19th-century working-class families had powerful incentives to own their own homes. “The lure of land ownership served as the single most important magnet for English and European immigrants from the sixteenth century until well into the nineteenth,” observes historian William Worley. “In the last third of the nineteenth century, this hunger was transformed into desire for ownership of city and town lots.”⁹ “The ambition of the immigrant to own property in America is one of his most striking characteristics. For it, he will make almost unbelievable sacrifices both of his own comfort and that of his wife and children,” wrote an observer of Chicago working-class living conditions in 1913. “The possession of a house from which one may draw an income is the highest mark of prosperity.”¹⁰

      Fortunately for the immigrants, housing was inexpensive. Land in most cities was abundant. Although land within walking distance of factories eventually became scarce, in Chicago, for example, subdividers had created enough lots by 1873 to accommodate a million people, or 2.5 times the city’s actual population.¹¹ Rather than buy a lot, people could save a little money by leasing a lot and building a small, wood-frame home that could be moved when the lease expired.¹²

      The cost of erecting a small, wood-frame structure was low and could be made lower if the homeowners did much of the work themselves. Someone could buy a lot and built a small home—suitable for eventual expansion—for $800 to $1,000.¹³ Median incomes for late 19th-century or early 20th-century wage earners was $350 to $600 a year, or roughly one-third to one-half the cost of a house.¹⁴

      Early Credit Tools

      The financial tools available to 19th-century homebuyers were more primitive than they are today. Until 1886, no one conceived of a contract that would convey a home’s title to the buyer only after the buyer had paid off most or all of the house, and sellers were reluctant to give title to someone without a substantial deposit. So most lots and homes were sold with a 50 percent down payment. Working-class homebuyers would have to save this money or, more likely, borrow it from relatives.

      The remaining 50 percent would be paid through a nonamortizing loan—which today we would call an interest-only loan—typically at 7 to 9 percent interest, with a balloon payment of the principal after five or six years. A $500 loan would have a monthly payment of less than $4; at each five- or six-year interval, the family would typically refinance the loan. To make monthly payments, families might take children out of school in their mid-teens so they could earn money and contribute to the household budget.¹⁵

      Housing affordability was a major political issue in late 19th century cities. After the Chicago fire, the city’s Common Council considered an ordinance forbidding wood-frame homes and requiring brick or stone instead. That constraint would have easily tripled the cost of home construction. When more than 2,000 people besieged city hall in protest, the council agreed to exclude working-class neighborhoods from the requirement.¹⁶ Even among the middle class, passage of the ordinance slowed home construction. According to a local writer in 1878, the ordinance resulted in “a brisk demand for building lots just outside of the fire limits, and a chronic dullness in the market for moderately choice lots within those limits.”¹⁷

      Middle-Class Renters

      While working-class families had strong reasons to buy homes, the incentives for middle-class families were quite different. Before zoning, no one could predict what would happen to neighboring properties. Although it was unlikely that anyone would build a factory or dig a gravel pit next to middle-class homes, no one could stop a working-class