Income Inequality

[Minute]

Was reading THIS article & shock headlines aside, I tend to agree. Income inequality is the greatest danger this country faces.

Thoughts?

[Morbidd]

Its not just the USA either. In the UK i read a report the other day that the top 5 richest people in the UK own more wealth than the entire bottom 20% of the country. We are returning to a Downton abby regime where there is is no middle class. Just the rich and the poor

[Minute]

Its not just the USA either. In the UK i read a report the other day that the top 5 richest people in the UK own more wealth than the entire bottom 20% of the country. We are returning to a Downton abby regime where there is is no middle class. Just the rich and the poor

w3rd. Part of the reason that I don't think the U.S.'s financial crisis can be compared to the great depression is because of the way the world is connected now. The real money in the world isn't nearly as interested in keeping America as prosperous as it did then because the entire world is available now.

[Ddrak]

Income inequality is a massive problem with no good solution, particularly with the amount of money required to influence politics.

Dd

[Arathena]

Income inequality is a massive problem with no good solution, particularly with the amount of money required to influence politics.

Dd

There are two solutions. The rentier classes may come to understand that you cannot parasitize a dead body and accept a sustainable rate of return, either voluntarily, through their own corporate policies, when current actions start to fail, or involuntarily, through taxation and unionization. I do not hold great hope for this. Alternately, we have a couple big, violent deals like the French revolution, fuck the hell out of the world, and spend a couple generations sifting through the ashes until we all agree to do it again. When people reach the point where they cannot feed themselves, heads will roll, and the consequences are never good.

[Ddrak]

Yeah - I agree. Hence "no good solution". :/

Dd

[Kulaf]

Going to Necro bump the crap out of this issue.

Income Inequality is not a critical issue at all, anymore than it has been since Feudal days. The important statistic is how many people have been lifted out of abject poverty. Who gives a crap if Bill Gates has X billion or X+1 billion. The world has never had this percentage of people living above the poverty line ever......and that is the most important thing.

[Ddrak]

If you look at extreme poverty, sure. Great article here: https://ourworldindata.org/extreme-poverty

That's a different axis to income inequality in the first world though, and I guess I'm really talking about first world problems here. As income inequality rises in a nation, it destabilises it as power tends to aggregate into the minority holding the wealth. Ultimately you trend to a situation where the general population strives to reduce that power while those in power resist, resulting in drama.

Dd

[Kulaf]

So the entire world is doing better. Capitalism works, has worked and will continue to work. If you took all the wealth from the top 1% and gave it to everyone else, what would happen? Nothing. It's simply not enough to make any material difference to the over 7 billion other people.

If you redistributed 1 trillion dollars, each person would receive $142.86.

[Ddrak]

The top 1% own around $100 trillion, so distributed over 7 billion would put everyone permanently out of extreme poverty ($14k per person at 5% return gives around $2/day which is double the extreme poverty line). Probably not the best result, but the point I was making is that politics is local and not global. If you increase inequality, eventually those on the bottom decide to do something about it - it's a destabilising influence.

"Capitalism" is a fairly broad term - I'd say regulated capitalism works (you need to socialize the services that don't have a viable market). Laissez-faire capitalism doesn't.

Dd

[Kulaf]

Why? Why do people care what the top 1% have or earn? If you are able to live comfortably, and there is income mobility, what is the problem? I can understand in the past when you were born into a "class" of people and were destined to remain there because there was zero income mobility, but there is certainly not that problem in the U.S. In fact, people rise and fall out of the top 1% all the time.

When Bill Gates dies some day, most of his money is going to various charities and foundations and a small percentage is going to his kids. If they are smart, they will be well off for the remainder of their days. If they are morons, they will blow through all their money.

No one, and no family is destined to be rich forever unless they are very smart, which is the key factor in becoming wealthy, not just being.

[Ddrak]

Interestingly, the US has the lowest income mobility of the developed world. Essentially if you are born in poverty then it's very likely you're remain there, and likewise if you were born wealthy then you are likely to remain wealthy. Couple that with rising inequality and people are more likely to move to the extremes rather than the centre. I think that's the general issue - taken to it's ultimate conclusion you have a failed state.

Is it necessarily bad that there's not a flat wealth distribution? No.
Is it bad that it's getting less flat, with less mobility? Yes.

Dd

[Baginns Hobbiton]

To me, Income Inequality is a moral and economic problem. On the economic side it's a matter of buying power. What is a more powerful driver of an economy, a million people with $10K to spend, or one person with $10bil? Since 1978, average workers have seen an increase of income of 11.2%, while executives have seen a 937% increase over the same time period. If minimum wage tracked with that it would be over $60 an hour. What we end up with is a shrinking middle class that can't buy things, that is not good for anyone, including those at the top.

It's doing real harm to society, people can't spend time with their kids because both parents are working jobs to keep the same quality of life a single worker had 40 years ago. Single parents are working 2 or 3 jobs to keep afloat. This boils over into other area's, causing things like increased crime rates. Most people don't have savings anymore, so when something happens, they fall into poverty and can't recover. That's not good for anyone either, including those at the top.

Who cares what the top 1% earn? Maybe the employee's who are working hard to make that money while not being fairly compensated for that work. They can't really go anywhere else because it's the same situation across all their options, and they don't have the capital or resources to start their own business. They are trapped, and you see it in our terrible mobility numbers.

[Kulaf]

Interestingly, the US has the lowest income mobility of the developed world. Essentially if you are born in poverty then it's very likely you're remain there, and likewise if you were born wealthy then you are likely to remain wealthy. Couple that with rising inequality and people are more likely to move to the extremes rather than the centre. I think that's the general issue - taken to it's ultimate conclusion you have a failed state.

Is it necessarily bad that there's not a flat wealth distribution? No.
Is it bad that it's getting less flat, with less mobility? Yes.

Dd

I have no doubt that it is more difficult for people born into poverty to make their escape, since most likely depend on the government for assistance and the government is in the business to give you just enough aid to remain on assistance. That said, I dispute the claim of low income mobility and present the following:

http://www.aei.org/publication/some-ama ... -is-false/

[Kulaf]

To me, Income Inequality is a moral and economic problem. On the economic side it's a matter of buying power. What is a more powerful driver of an economy, a million people with $10K to spend, or one person with $10bil? Since 1978, average workers have seen an increase of income of 11.2%, while executives have seen a 937% increase over the same time period. If minimum wage tracked with that it would be over $60 an hour. What we end up with is a shrinking middle class that can't buy things, that is not good for anyone, including those at the top.

It's doing real harm to society, people can't spend time with their kids because both parents are working jobs to keep the same quality of life a single worker had 40 years ago. Single parents are working 2 or 3 jobs to keep afloat. This boils over into other area's, causing things like increased crime rates. Most people don't have savings anymore, so when something happens, they fall into poverty and can't recover. That's not good for anyone either, including those at the top.

Who cares what the top 1% earn? Maybe the employee's who are working hard to make that money while not being fairly compensated for that work. They can't really go anywhere else because it's the same situation across all their options, and they don't have the capital or resources to start their own business. They are trapped, and you see it in our terrible mobility numbers.

When illegals start being CEO's, their wages will stagnate as well. You can take any CEO's salary and calculate how much it would make a difference to all the employees and it amounts to nothing. Mark McMillon, the CEO of Walmart, made 22.8 million in compensation in 2018. Walmart employs 2.22 million employees. Take his salary and what......give all of the employees a $10 bonus for the year......woooooooo.

Wages stagnate for a variety of reasons, not the least of which is how many people are in the workforce. If we allow undocumented workers to take jobs, that stagnates wages. I know it is not popular to say, but the influx of women into the workforce stagnated wages. If it used to take 1 household income to make a good living, and then twice as many people enter the workforce......what is going to happen? Wages are going to flatten, and it is going to take two people working to maintain the same standard of living. This is basic economic theory here.

[Baginns Hobbiton]

That is just the CEO, it's more of a difference when you add up all the executives. You also have to look at the profit though. In 2018 Walmart made $126 billion. That is $57K per employee, while the median salary for those employees is $19K. Try and work out a budget you could live on with 19K a year. Some investor is making a nice return off that work though. In my mind, it's just not right.

You're right about women coming into the workforce causing a stagnation of wages, but it's not the only thing.

[Kulaf]

Ok first off, Walmart made "gross profit" of $127B. Walmart's Operating Expenses were $107B leaving an Operating Income of $20B. After Interest, Taxes and other Operating Expenses, Walmart made a Net Income of $9.9B. So some recalculations on your part might be needed. After all, if you took your $60/hr "minimum wage", and a 32hr work week for a base level Walmart employee, that would make their annual wages nearly $100k per year, which at 2.2 million employees would work out to roughly $202B dollars.

The simple truth is that minimum wage jobs were never designed to be something you "live on", they are jobs that completely unskilled workers get to gain experience. This idea that you can live working at McDonald's is just a fantasy that people have concocted to explain why they continue to stay at jobs rather than improving themselves by seeking better employment. It's just plain laziness. If you have any doubts about what happens to an economy that inflates the minimum wage, I am sure Dd can regale us with tales from down under and Ausie woes.

But if all else fails, take it from John Stossel: https://youtu.be/1Ipu-yUOFxk

[Baginns Hobbiton]

My mistake on the profit numbers. Revenue was higher and I didn't realize that only the product cost were taken out and not payroll or overhead. It works out to about $4500 per employee which is far more reasonable.

[Ddrak]

The simple truth is that minimum wage jobs were never designed to be something you "live on", they are jobs that completely unskilled workers get to gain experience. This idea that you can live working at McDonald's is just a fantasy that people have concocted to explain why they continue to stay at jobs rather than improving themselves by seeking better employment. It's just plain laziness. If you have any doubts about what happens to an economy that inflates the minimum wage, I am sure Dd can regale us with tales from down under and Ausie woes.

Interesting you should ask - the Reserve Bank (our equivalent of the Fed) looked into it last year and found no correlation in job losses to minimum wage increases. https://www.rba.gov.au/publications/rdp ... 018-06.pdf . Note that our minimum wage is AUD18/hr, but almost everyone is covered by an award wage which is higher - refer https://www.fwc.gov.au/awards-and-agree ... wards-list .

Things I see from a high minimum wage:

- Increase spending power and liquidity in the economy, which largely offsets the issue with the minimums but also negates the spending power from the increases.
- Inflated housing prices (everyone has more money for a mortgage)
- No reliance on tips etc. in the service industry (very uncommon to tip over here).
- It's part of a complex mix that drives manufacturing overseas, but it's hard to compete with SE Asia on wages at any minimum.

Overall, it's hard to isolate though. The Aussie economy is much harder hit from the boom/bust mining cycles, and the fact it's a small player on a global scale. I'm not a huge fan of the minimum wage being quite as high as it is here, but I think the US is way too far down the other extreme. USD10-12/hr seems reasonable.

I also don't buy into the argument that a minimum wage shouldn't be something you "live on". I'm not entirely sure what else you should be expected to live on if it's not your wages.

Dd

[Ddrak]

Sydney Morning Herald commentary on that paper: https://www.smh.com.au/business/the-eco ... 506mb.html

Dd