Inequality

[WellSpyder]

Income per what period?

Indeed! The quoted increase is pretty hard to understand without knowing what periodicity it refers to. It would also be helpful to know when adjusting for inflation whether the 2011 figures were put into 1966 prices or the 1966 figures put into 2011 prices.....

[Winstonm]

Income per what period? I well remember MSGT "Moonbeam" Smith, USA, who circa 1969 said proudly "I been in th' Army eighteen and a half year, and in uhnothe' yea' and a half, I c'n retire and move to Florida and make seventy five dollah a week!"

 

Income growth for the lower 90% if equal to 1 inch means the upper 90% gained 168 feet.

[dwar0123]

Income growth for the lower 90% if equal to 1 inch means the upper 90% gained 168 feet.

Yes, but if the lower 90% had started with a nanometer, their growth would be phenomenal, while if the top 10% had started with a Parsec, their growth would be statistical noise.

 

Your rephrasing it with this analogy did nothing to elucidate the problems people were posing.

[Winstonm]

Yes, but if the lower 90% had started with a nanometer, their growth would be phenomenal, while if the top 10% had started with a Parsec, their growth would be statistical noise.

 

Your rephrasing it with this analogy did nothing to elucidate the problems people were posing.

 

The link was posted if anyone wished more information.

 

Here is the entire article by David Cay Johnston.

[mike777]

The link was posted if anyone wished more information.

 

Here is the entire article by David Cay Johnston.

 

"Incomes and tax revenues have grown from 2009 to 2011 as the economy recovered, but an astonishing 149 percent of the increased income went to the top 10 percent of earners"

 

Winston again see my post which explains this effect,it has nothing to do with growth and total wealth formation

 

The one percent of the one percent of the population is vastly more sensitive to inequality than total GDP growth (which explains why the

superrich are doing well now, and should do better under globalization, and why it is a segment that doesn’t correlate well with the economy).

For the super-rich, one point of GINI causes an increase equivalent to 6-10% increase in total income (say, GDP). More generally, the partial

expectation in the tail is vastly more sensitive to changes in scale of the distribution than in its centering

 

---------------

---------------

 

 

The Gini coefficient measures the inequality among values of a frequency distribution (for example levels of income). A Gini

 

http://en.wikipedia....ini_coefficient

=================================

 

the money of the superrich reacts to inequality rather than total wealth in the world, wealth multiplies by close to 50 times in response to a change of 25% in dispersion of wealth. it has nothing to do with growth and total wealth formation

[helene_t]

149 percent of the increased income went to the top 10 percent of earners

Literally this would mean that the low 90% had negative income but obviously it should read "increase in income", so the 90% just saw their income decrease. Still it is a funny way of putting it, and it makes me wonder if it should read "the top 10% saw their income increase by 149%". Or maybe it is just a typo?

[kenberg]

It seems pretty clear to me that the claim amounts to:

 

The total income, obtained by adding all AGI figures for all taxpayers, increased by a certain amount, call it x, between 2009 and 2011. The total income of the top 10% increased by 1.49 times x, the total income of the lower 90% decreased by 0.49 times x. I think that is what he is saying.

 

Is this plausible? Perhaps. Is it meaningful? I am not sure. He says:

" In 2011 the average AGI of the vast majority fell to $30,437 per taxpayer"

There are many places for ambiguity. I think he is using "vast majority" to mean "lower 90%". I am guessing that if a married couple filing jointly have an AGI of $60,000 he is counting this as two incomes of $30,000 each but I don't know. Early on he speaks fo "real income reported by the bottom 90 percent of earners" so maybe he counts this as one income of $60,000 if it is all earned by one person, even if they are filing jointly. I don't think he says anywhere how this works.. I also am not sure who gets counted. If I recall correctly, some of the time when I was a teenager working part time I made enough to pay a (very) small amount in taxes. So I would be counted as an earner? I suppose so. It would bring the average down.

 

The problem with these statistics is that it is often pretty hard to figure out what they mean and even harder to figure out what to do about it. Suppose you are 20 years old looking for a job. If someone creates a job paying $14 an hour and hires you, probably you consider this a good thing. But uh oh. $14 an hour, 40 hours a week for 50 weeks, that's $28,000 per year, This average of $30,437 just went down a bit. Gotta do something about that, shoot the employer maybe.

 

Statistics can be useful, but care is needed. Some time back a guy from some educational study was speaking of the declining mathematics scores of high school students. But there was "good news" mixed in with this. Boy's scores were declining more than girl's scores so the gender gap was narrowing. Well, break out the champagne!

 

In my view, lack of opportunity to live in a safe neighborhood and get a decent education is a very serious problem in this country. Ann Romney owning three Cadillacs, or however many it is, is not a pressing national problem.

[helene_t]

I am guessing that if a married couple filing jointly have an AGI of $60,000 he is counting this as two incomes of $30,000 each but I don't know.

No it is sqrt(2) incomes of 60,000/sqrt(2) each, you should know :)

[kenberg]

No it is sqrt(2) incomes of 60,000/sqrt(2) each, you should know :)

 

I was hoping the square root stuff had gone the way of the Dodo.

[Winstonm]

"Incomes and tax revenues have grown from 2009 to 2011 as the economy recovered, but an astonishing 149 percent of the increased income went to the top 10 percent of earners"

 

Winston again see my post which explains this effect,it has nothing to do with growth and total wealth formation

 

The one percent of the one percent of the population is vastly more sensitive to inequality than total GDP growth (which explains why the

superrich are doing well now, and should do better under globalization, and why it is a segment that doesn’t correlate well with the economy).

For the super-rich, one point of GINI causes an increase equivalent to 6-10% increase in total income (say, GDP). More generally, the partial

expectation in the tail is vastly more sensitive to changes in scale of the distribution than in its centering

 

---------------

---------------

 

 

The Gini coefficient measures the inequality among values of a frequency distribution (for example levels of income). A Gini

 

http://en.wikipedia....ini_coefficient

=================================

 

the money of the superrich reacts to inequality rather than total wealth in the world, wealth multiplies by close to 50 times in response to a change of 25% in dispersion of wealth. it has nothing to do with growth and total wealth formation

 

The issue that is of importance is not how the wealth of the upper 10% grows rather the significance lies in the stagnation of incomes of the bottom 90%.

[awm]

Inequality is more of a symptom than a problem.

 

The real issue is that financial success ought to be primarily determined by hard work and skill/talent. If this fails to be the case, it leads to a significant misallocation of resources and hurts society as a whole in myriad ways. For example: someone willing and able to work a full-time job ought to be able to support herself and her family. A child's ability to get nutrition and an education ought not to be wholly dependent on his parent's economic status. And a person whose parents were very wealthy ought not to be able to maintain and even increase that wealth without putting forward some substantial contribution to society (either through work or innovation or taxation). If any of these fail, we have people in our society who could be contributing and are either unable or unmotivated to do so.

 

The current level of inequality gives evidence (and there are many other statistics which support this) that economic success is more determined by the parents' economic status than by anything else. There are many cases of children relegated to failing schools and even homeless and hungry. At the same time, the children and grandchildren of the rich and successful are typically able to increase their fortunes simply by investing the money, and have no incentive to work (some of them do some amount of charitable work, but many don't). Small businesses struggle, in part because they must compete with much larger businesses which, in addition to the advantages economies of scale provide, are also taxed at a much lower rate.

 

Of course, the above is not really an argument for socialism per se, in the sense that government often determines winners based on connections and party loyalty rather than hard work and skill/talent. The point is that a completely unregulated free market often generates monopolies and perpetual pools of inherited wealth. The government needs to step in and break these up, without moving to control the market directly. Raising the minimum wage and prosecuting some of the criminal conduct in the financial collapse would be a good start.

[mike777]

Something I think we all can agree on. No one is advocating for a world with no regulations from the central govt or a world where traditional criminal conduct is not prosecuted or a world with no taxes.

 

 

Some posters do the raise the interesting issue of size and I think there would be an interesting discussion whether size may in fact be a detriment to companies rather than a competitive advantage in the long run. Not only to companies but possible to countries.

 

For example an owner of a too big to fail company may have access to cheaper capital but being to big to fail may also act as a barrier to respond to innovation. You always run the risk of the govt stepping in, wiping out the owners and taking over.

 

 

--

 

 

As an aside free capital markets dont try and reward based on hard work or talent. Example a teacher or an artist may work harder and have more "talent" but that may not be the most important factor for an investor. But it is important.

 

A feedback mechanism comes from capital markets putting pressure on company managers to become more efficient, invest only in profitable investments and be accountable to investors. A big problem comes when the link between risk and benefits is broken.This is an area where government may be helpful, in maintaining that link and where government is harmful when they try and break that linkage.

[kenberg]

Inequality is more of a symptom than a problem.

 

This much I definitely agree with. Exactly what it is a symptom of, I am less sure. I do believe that the world was somehow easier when I was young. I am having trouble pinning down just why this is.

We are helping someone with problems, and this has led to some evaluation of schools. Some really suck. My Kindergarten day was three hours long, and mostly we sang and drew pictures. Kids today have full day Kindergarten, they have pre-Kindergarten, they have homework in Kindergarten. We learned more. Very strange.

 

But of course in the better areas, they now learn more than I did. A lot more.

 

It's this educational inequality that keeps me fretting. I just don't care about yacht counting.

[mike777]

Ken I think the entire question of the "education arrow" deserves its own thread.

 

Does our formal education system make us richer or does the fact we are rich gives a decent education system.

 

Or to put it another way the notion that university knowledge generates economic wealth.

 

 

“Soccer moms are the enemy of natural history and the full development of a child.”

 

E.O. Wilson

[kenberg]

Yes, perhaps so Mike.

 

As far as financial inequality goes, again life used to be simpler. Growing up, I saw it as the corporations take care of making profits for the owners, the unions take care of the working man. This pretty much worked. Yes I saw On The Waterfront but all in all, as I saw the process in action, it worked. Somehow it's not working so well anymore. Globalization is the obvious culprit but that oversimplifies matters. Some forty years ago everyone was talking about converting from a manufacturing economy to a service economy. At that time I thought this meant that we would all become servants. Something to that, I think.

 

A guy who is willing to learn a skill and hold a job should be able to raise a family. If we start with that as the fundamental axiom, we might be able to prove some theorems.

[Winstonm]

Yes, perhaps so Mike.

 

As far as financial inequality goes, again life used to be simpler. Growing up, I saw it as the corporations take care of making profits for the owners, the unions take care of the working man. This pretty much worked. Yes I saw On The Waterfront but all in all, as I saw the process in action, it worked. Somehow it's not working so well anymore. Globalization is the obvious culprit but that oversimplifies matters. Some forty years ago everyone was talking about converting from a manufacturing economy to a service economy. At that time I thought this meant that we would all become servants. Something to that, I think.

 

A guy who is willing to learn a skill and hold a job should be able to raise a family. If we start with that as the fundamental axiom, we might be able to prove some theorems.

 

Therein lies the argument for progressive rather than regressive tax policies.

[mike777]

I dont buy the study if it says that our standard of living is basically the same as 1966 for 90% of us.

 

btw I also just watched On the Waterfront last week.

Keep in mind the backstory which was his reaction to the liberal outrage and blacklisting in Hollywood due to his testimony to Congress.

[kenberg]

I dont buy the study if it says that our standard of living is basically the same as 1966 for 90% of us.

 

btw I also just watched On the Waterfront last week.

Keep in mind the backstory which was his reaction to the liberal outrage and blacklisting in Hollywood due to his testimony to Congress.

 

I know, but it was still a really good movie. Everyone knows the scene with Rod Steiger in the back seat of the car but my favorite line came from Eva Marie Saint.. Edie is telling Terry that he must go and leave her alone. He says something like "You know you love me". She replies "I didn't say I didn't love you, I said to leave me alone".

 

Anyway, back to the thread.

[awm]

There are big differences in family structure between now and the 1950s and 1960s. In those days, it seemed that one working adult could support a family of four or five at a reasonable level, even if the one working adult lacked a college education. This is very far from true today! In most two-parent families, both parents work. This enables them to obtain a reasonable standard of living (probably better than the one-working-parent homes of the 1950s and 1960s) but it has a lot of side effects since the kids are getting much less care/education at home. They become more reliant on school and/or daycare providers, meaning that modern schools often have to deal with issues that kids growing up with a parent caring for them full-time at home didn't present. Note that this problem is less of an issue for very affluent families which can afford good child-care (either one parent staying home, or a nanny).

 

This issue is compounded by the increase in single-parent households. There are a lot of causes for that, including high divorce rates, people waiting longer to marry (but not waiting longer to have sex), and high incarceration rates (especially of minorities for minor drug-related offenses).

 

It's certainly arguable that standards of living are still higher now, in part because of technological advances (no one had a computer in their home in the 1960s for example). However, if you look at things that are less tech-dependent like say: median age to purchase a house, median age to be free of debt, median retirement savings relative to income.... I think we are quite a bit behind the 1950s and 1960s.

 

While globalisation plays some role in this issue (globalisation is a net GDP positive but definitely hurts people in low-skill jobs) I would also blame: technological advances leading to automation of low-skill jobs, reduction in union membership and rights nationwide, replacement of defined-benefit pension plans with 401(k) type plans, high incarceration rates, vastly reduced tax rates on capital income and mega-corporations along with reduction in spending on infrastructure and public universities, refusal to provide birth control and accurate information about family planning to young people, exorbitant health care costs due to price opacity combined with government inaction sucking up money that could otherwise go to workers. There are probably some more things I could list.

[y66]

Easter Morning

 

by Jim Harrison

 

On Easter morning all over America

the peasants are frying potatoes in bacon grease.

 

We're not supposed to have "peasants"

but there are tens of millions of them

frying potatoes on Easter morning,

cheap and delicious with catsup.

 

If Jesus were here this morning he might

be eating fried potatoes with my friend

who has a '51 Dodge and a '72 Pontiac.

 

When his kids ask why they don't have

a new car he says, "these cars were new once

and now they are experienced."

 

He can fix anything and when rich folks

call to get a toilet repaired he pauses

extra hours so that they can further

learn what we're made of.

 

I told him that in Mexico the poor say

that when there's lightning the rich

think that God is taking their picture.

He laughed.

 

Like peasants everywhere in the history

of the world ours can't figure out why

they're getting poorer. Their sons join

the army to get work being shot at.

 

Your ideals are invisible clouds

so try not to suffocate the poor,

the peasants, with your sympathies.

They know that you're staring at them.

 

from Saving Daylight. © Copper Canyon Press, 2007.

[Winstonm]

I believe most people in the upper middle class on up do not realize how little money most people in lower classes actually make. Here is an article that deals with that subject.

[mycroft]

My cousin has determined that for the price of daycare for two, they can hire a live-in nanny, who will also make some meals, do some cleaning, and other housekeeping activities. Because they're a standard example of my family, she's probably treated better than most, not only the letter of the law and agreement being adhered to but reasonable allowances not actually required.

 

Yes, that's a "rich enough to..." solution; but how many of these "two-working parent" households have to find something - which costs something, even if it's "grandparents, can you help watch?" - for two children, too? I don't want to go back to the good old days where the only acceptable occupation for a woman was the MRS. degree; but similarly, I don't think "same family standard of living" applies when both have to work, even with the same amount of household buying power exists (and that likely hasn't either in general; the same amount of money, maybe).

[mike777]

I believe most people in the upper middle class on up do not realize how little money most people in lower classes actually make. Here is an article that deals with that subject.

 

 

Perhaps what surprises me the most about this subject is how many people can afford a car and a cell phone and all the related expenses that come with both of them.

 

I think people dont realize what life was like for most of us in 1966. We did not own a car, a phone, air cond, a washing machine, a dishwasher, a home. My mom did not have a nanny or grandparents to care for 4 kids. She went to work, made dinner or we might make dinner as we got older and somehow we survived.

 

For some posters to talk about having a nanny or affordable day care is naive at best to life in 1966.

For some posters to think mom did not work and pay all the bills is to have no idea about life in 1966.

[Winstonm]

The issue behind this issue is the value we as a society place on each other. There is no doubt that higher educated individuals for the most part contribute more value to society and therefore should be entitled to greater compensation. The question is how to share the wealth with the less fortunate. As we are dealing with a population of around 400 million in a huge area it seems best to utilize a national organization and national leadership - we just happen to have such an outfit and we call it the US federal government.

 

Of all the methods of sharing the wealth, national socialized healthcare would be the greatest benefit to the greatest number of people. If you think the young people who work at McDonalds or WalMart should die from untreated infections because they cannot afford to go to the doctor, then you will probably be staunchly opposed to the idea of national healthcare provided by progressive taxation policies.

 

If you view your neighbors as a fellow human beings, all equally valuable, you probably support the idea.

[mike777]

The issue behind this issue is the value we as a society place on each other. There is no doubt that higher educated individuals for the most part contribute more value to society and therefore should be entitled to greater compensation. The question is how to share the wealth with the less fortunate. As we are dealing with a population of around 400 million in a huge area it seems best to utilize a national organization and national leadership - we just happen to have such an outfit and we call it the US federal government.

 

Of all the methods of sharing the wealth, national socialized healthcare would be the greatest benefit to the greatest number of people. If you think the young people who work at McDonalds or WalMart should die from untreated infections because they cannot afford to go to the doctor, then you will probably be staunchly opposed to the idea of national healthcare provided by progressive taxation policies.

 

If you view your neighbors as a fellow human beings, all equally valuable, you probably support the idea.

 

 

 

I understand you and many others have this view regaring education, formal education and creating wealth.

 

I would put forth another idea. That of the risk taker or entrepreneur as the driving force of wealth or increasing the standard of living. That is not to disregard education which can be and is important. I do think government can play an important role such as enforcing and supporting private property rights.

 

I suppose the biggest difference when it comes to an expanding govt to help our fellow human beings is the whether you have faith that an expanding govt will not become fascist in many elements.

 

I hope I dont overgeneralize too much on this next point. But it is really my main point. Many view the risk taker or entrepreneur as the more likely to become fascist while many others view "too much govt" becoming so.