Income Disparity Series

[MarginOfError]

This looks like it will be a great series.

So what do you think the role of income disparity has been in the current economy? What kind of role might it take in the recovery?

[HoosierGuy]

The socialist movement was at its historic peak, a wave of anarchist bombings was terrorizing the nation's industrialists, and President Woodrow Wilson's attorney general, Alexander Palmer, would soon stage brutal raids on radicals of every stripe. In American history, there has never been a time when class warfare seemed more imminent.

The reported unemployment rate is something around 9%. But the real unemployment rate, if you include those who have not found a job in more than six months, or given up trying to find a job, is greater. It could be from 14 to 22 percent. I recently heard from a historian that when the unemployment rate gets to around 22%, you start seeing radical protests, revolutions, revolts, etc... I don't see things getting better. I expect violence to rise. Only

this time it's not going to be from the hard working middle class/poor who simple want a good paying job, healthcare, and education. The violence is going to come from the right wing nuts who are controlled by the very big businesses that's stabbing them in the back in the first place.

[Just_A_Guy]

I'll be interested to see, in subsequent installments, a) how each class's current standard of living compares with the standard of living the equivalent class enjoyed fifty years ago, and b) (assuming living standards are higher now) why inequality per se is necessarily a bad thing even if people are actually better off.

[bytor2112]

right wing nuts who are controlled by the very big businesses that's stabbing them in the back in the first place.

Kind of like the left wing nuts who are controlled by parasitic envy and a desire for cradle to the grave nanny care provided to them by the very organization that steals from those who produce (big business) and redistributes to whining victims like.......

Edited September 8, 2010 by bytor2112

[MarginOfError]

The socialist movement was at its historic peak, a wave of anarchist bombings was terrorizing the nation's industrialists, and President Woodrow Wilson's attorney general, Alexander Palmer, would soon stage brutal raids on radicals of every stripe. In American history, there has never been a time when class warfare seemed more imminent.

The reported unemployment rate is something around 9%. But the real unemployment rate, if you include those who have not found a job in more than six months, or given up trying to find a job, is greater. It could be from 14 to 22 percent. I recently heard from a historian that when the unemployment rate gets to around 22%, you start seeing radical protests, revolutions, revolts, etc... I don't see things getting better. I expect violence to rise. Only

this time it's not going to be from the hard working middle class/poor who simple want a good paying job, healthcare, and education. The violence is going to come from the right wing nuts who are controlled by the very big businesses that's stabbing them in the back in the first place.

Kind of like the left wing nuts who are controlled by parasitic envy and a desire for cradle to the grave nanny care provided to them by the very organization that steals from those who produce (big business) and redistributes to whining victims like.......

How about both of you pipe down and make rational and reasoned arguments that aren't based on political ideology.

[Captain_Curmudgeon]

Anyone else remember Chauncey Riddle at BYU? I've probably got his first name spelled wrong, but he was the most interesting member of the faculty when I was there.

There was someone who had his own read on wealth and income and inequality and much else -- and all from a particular (and traditional (I thought then)) point of view.

[MarginOfError]

I'll be interested to see, in subsequent installments, a) how each class's current standard of living compares with the standard of living the equivalent class enjoyed fifty years ago, and b) (assuming living standards are higher now) why inequality per se is necessarily a bad thing even if people are actually better off.

Those are interesting questions. In a sense, you're right. The disparity might not matter all that much if the standard of living is higher. But allow me to throw another wrench into the works.

Employers shouldn't be surprised that Americans won't take their crummy, low-wage jobs.

The author of that article describes a recent phenomenon in which, under the current labor glut (high unemployment), employers have a little more leverage in negotiations because supply is low and demand is high. Yet, they're having trouble finding people to accept positions when they come with lower wages. There could be two things going on here...in our consumer society, it's possible that people refuse to lower their standard of living (which would be stupid, but I have no doubt some people do it), or it's also possible that people won't accept the lower paying jobs because it simply doesn't allow them the basic income they need to get by. This is perhaps particularly pronounced for a person who might have to go from $35K to $25K.

Anyway, my point is this, is it possible that the disparity is tipped in such a way that the lower middle class is bottomed out...just barely scraping by and unable to afford to take lower wages?

[Dravin]

How about both of you pipe down and make rational and reasoned arguments that aren't based on political ideology.

Are you suggesting there is a purpose for this forum beyond ideological soap boxing?

[MarginOfError]

Are you suggesting there is a purpose for this forum beyond ideological soap boxing?

I know I know...I keep forgetting we just instituted a rule against anything but ideological soap boxing.

So, you better be using biodegradable soap boxes!

[Moksha]

I imagine there are those posters who see this widening gap between the rich and poor as a good thing. Could any of you make a one paragraph answer as to why this widening gap is good?

[Wingnut]

...the right wing nuts who...

...the left wing nuts who...

I think I'm having an identity crisis. Can you please just leave me out of it?

[Moksha]

I think I'm having an identity crisis. Can you please just leave me out of it?

Sort of makes you wonder if wing nuts are directionally challenged.

[FunkyTown]

There are two reasons why this sort of class warfare will always exist, JAG, and why we must fight to instill fairness.

1) Envy - People want what others have. The faceless masses look out and see people driving better cars, with better houses, with more job security and less consequences to them when they fail. It causes anger and rage.

2) Greed - People always want more. CEO's and corporate bigwigs want their company to go from top 1000 to top 100 to top 10 to #1. The flow of money become a scoring mechanism - 'He who dies with the most toys wins'. Rather than seeing the increase in their funds as a blessing to share, companies seek always to minimize costs. Unlike Henry Ford, who was a visionary who once said "There is one rule for industrialists: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible", companies today are moving to cheap labour, reducing benefits and clutching at their gold like a modern day Midas. The lessons of the visionaries of the past are being ignored in favour of immediate gratification.

People are greedy: Both rich and poor. Class warfare has repeated itself throughout history, from Ancient Athens to the Soviet Revolution. The problem, JAG, isn't that people don't have nicer cars or better air conditioning or even better food then they did 50 years ago. The problem is that too many people are living hand to mouth, knowing that if they lost their job their entire lifestyle(Of which Hollywood seems to promise everyone they will have) will go up in smoke. People are scared.

Scared people do radical things.

I'll be interested to see, in subsequent installments, a) how each class's current standard of living compares with the standard of living the equivalent class enjoyed fifty years ago, and b) (assuming living standards are higher now) why inequality per se is necessarily a bad thing even if people are actually better off.

[Wingnut]

Sort of makes you wonder if wing nuts are directionally challenged.

Nope, just dizzy.

[Just_A_Guy]

There are two reasons why this sort of class warfare will always exist, JAG, and why we must fight to instill fairness.

Frankly, I'm not sure I find either one convincing (again, assuming that actual living standards have increased).

The first one basically says we've got to appease the thugs by taking away their cause of envy. What does this mean? Pardon the crassness, but one could use the same logic to say that men with hot wives should be compelled to share them with x number of other men each year.

The second assumes that the rich are deliberately trying to keep the poor from rising up and joining their ranks. I don't think that's the case. Sure, the rich are trying to hold onto what they've got, but they're not trying to block the creation of new wealth.

Does management want to get as much work for as little pay as possible--and do they sometimes collude to get it? Sure. But guess what? Labor wants as much pay for as little work as possible--and they also collude to get it.

The problem, JAG, isn't that people don't have nicer cars or better air conditioning or even better food then they did 50 years ago. The problem is that too many people are living hand to mouth, . . .

Well, that's the thing--they think they're living hand-to-mouth, but they really aren't as long as they've got the $90/month cable/dish/internet package, the iPhone with a $80 monthly service fee, the house with a four-figure mortgage, the car (or two cars) . . .

Scared people do radical things.

The question being, then, to what degree is it proper to appease them by hosing a third party?

[Just_A_Guy]

Those are interesting questions. In a sense, you're right. The disparity might not matter all that much if the standard of living is higher. But allow me to throw another wrench into the works.

Employers shouldn't be surprised that Americans won't take their crummy, low-wage jobs.

Haven't had a chance to read the article yet, but given that the bulk of jobs come from small businesses run by owners who are themselves middle-class: it could very well be that many of these employers simply can't afford to pay more.

I would love to be able to hire a paralegal at present, but given my own family circumstances - it just isn't going to happen.

There could be two things going on here...in our consumer society, it's possible that people refuse to lower their standard of living (which would be stupid, but I have no doubt some people do it), or it's also possible that people won't accept the lower paying jobs because it simply doesn't allow them the basic income they need to get by. This is perhaps particularly pronounced for a person who might have to go from $35K to $25K.

As I mention to FunkyTown, it may be that we all need to re-evaluate what "getting by" really means. (Which may be neither here nor there, in the context of this discussion).

One other issue to throw into the mix, though (and I'd love to get your thoughts on this, MOE) is that when you run the numbers--under certain conditions, there isn't a lot of incentive to take a higher paying job, either.

(source here)

[Dravin]

Nope, just dizzy.

The thing with wingnuts is when they go too far to the right they tend to become stiff and stuck and in extreme cases broken, when they go too far to the left they cause that which depends on them to become loose and unstable and in extreme cases they fly off becoming lost.

Must be tough being a wingnut.

[FunkyTown]

According to that, a family of 3(So mother, father and single child) with a one parent earner bringing in $20, 000/year has exactly the same as someone earning $0/year.

That makes sense. And somebody earning $60, 000/year has about a 25% increase over someone earning $40, 000/year. So for 50% more money, they have a 25% better lifestyle. Okay. That sounds good. I'm not really seeing how there's no incentive to get a higher paying job under that?

Now, on to 'Taking away the cause of envy' and whether they 'think' they're living hand to mouth.

Are the rich deliberately keeping people from joining their ranks? No. However, I would like you to look at the wealthiest people in North America. How many came from an impoverished background? How many people came from a 'just squeaking by' $20, 000/year home?

Now, let's take your second argument:

Does management want to get as much work for as little pay as possible--and do they sometimes collude to get it? Sure. But guess what? Labor wants as much pay for as little work as possible--and they also collude to get it.

Perfect. I agree with this. Both sides are greedy, JAG. Now:

Slashdot | Richest 2% Own Half the World's Wealth

What does this mean?It means that if you look at 1 rich person and 49 others, chances are the 49 others do not have the same wealth as one person.

If your argument of getting by is: "These houses don't need cars, or cell phones, or television. They can live in a rented apartment and take public transportation.", then you aren't using the argument "Let them eat cake."

You're using the argument, "Let them eat dirt."

I suggest that isn't the wisest course to take when those 49 people are angry at the CEOs, Bankers and Lawyers, JAG.

Frankly, I'm not sure I find either one convincing (again, assuming that actual living standards have increased).

The first one basically says we've got to appease the thugs by taking away their cause of envy. What does this mean? Pardon the crassness, but one could use the same logic to say that men with hot wives should be compelled to share them with x number of other men each year.

The second assumes that the rich are deliberately trying to keep the poor from rising up and joining their ranks. I don't think that's the case. Sure, the rich are trying to hold onto what they've got, but they're not trying to block the creation of new wealth.

Does management want to get as much work for as little pay as possible--and do they sometimes collude to get it? Sure. But guess what? Labor wants as much pay for as little work as possible--and they also collude to get it.

Well, that's the thing--they think they're living hand-to-mouth, but they really aren't as long as they've got the $90/month cable/dish/internet package, the iPhone with a $80 monthly service fee, the house with a four-figure mortgage, the car (or two cars) . . .

The question being, then, to what degree is it proper to appease them by hosing a third party?

[Just_A_Guy]

According to that, a family of 3(So mother, father and single child) with a one parent earner bringing in $20, 000/year has exactly the same as someone earning $0/year.

That makes sense. And somebody earning $60, 000/year has about a 25% increase over someone earning $40, 000/year. So for 50% more money, they have a 25% better lifestyle. Okay. That sounds good. I'm not really seeing how there's no incentive to get a higher paying job under that?

If the person has the time and resources to invest in him/herself and her qualifications (going back to school, or whatever), I'd agree with you. But if they don't--realistically, how many people will be able to get a $60K/year job coming right off of a $40K/year job? What's more likely is that you choose between a $30 and a $33 or $35K/year job, and as the graph shows--in those ranges, the marginal benefit is approximately zero.

Are the rich deliberately keeping people from joining their ranks? No. However, I would like you to look at the wealthiest people in North America. How many came from an impoverished background? How many people came from a 'just squeaking by' $20, 000/year home?

I'll be interested to see some hard figures there, and the article in the OP looks like later installments will provide. But that argument speaks to economic mobility, not inequality per se.

Perfect. I agree with this. Both sides are greedy, JAG. Now:

Slashdot | Richest 2% Own Half the World's Wealth

What does this mean?It means that if you look at 1 rich person and 49 others, chances are the 49 others do not have the same wealth as one person.

And to that I say . . . so?

If your argument of getting by is: "These houses don't need cars, or cell phones, or television. They can live in a rented apartment and take public transportation.", then you aren't using the argument "Let them eat cake."

You're using the argument, "Let them eat dirt."

Funky, I've been married 8 years. We've lived in apartments all that time, had one car up until a month ago (and are about to go back to one car again as soon as we can sell our old car), have never had cable, and never had a cell phone until I opened my law firm last year. We've never thought of that as "eating dirt".

I suggest that isn't the wisest course to take when those 49 people are angry at the CEOs, Bankers and Lawyers, JAG.

Telling the masses what they want to hear--and giving them what they want to get--is what has gotten our economic system into the mess that it's in. (We can be the world's policemen and fight two wars at once! You can own a house on $20K/year income! You can get a new car with no down payment! You can get rich sinking money into overvalued stocks perpetually! You have a right to a new plasma TV and surround sound with no interest for five years!)

Maybe it's time we all told each other the truth.

If we want to focus on factors that affect mobility, I'm all for that. But the preferred fix seems to be to tax the snot out of the rich and give it to the poor while making only cursory attempts to address the issue of why the poor remain poor; with the overall strategy of staving off the angry mob for as long as possible. I think that's silly.

As Milton Friedman's said:

A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.

[FunkyTown]

I'll be interested to see some hard figures there, and the article in the OP looks like later installments will provide. But that argument speaks to economic mobility, not inequality per se.

And to that I say . . . so?

You say "so?". The majority do not. At the risk of this being an ad hominem argument, you own a law firm.

Telling the masses what they want to hear--and giving them what they want to get--is what has gotten our economic system into the mess that it's in. (We can be the world's policemen and fight two wars at once! You can own a house on $20K/year income! You can get a new car with no down payment! You can get rich sinking money into overvalued stocks perpetually! You have a right to a new plasma TV and surround sound with no interest for five years!)

Maybe it's time we all told each other the truth.

If we want to focus on factors that affect mobility, I'm all for that. But the preferred fix seems to be to tax the snot out of the rich and give it to the poor while making only cursory attempts to address the issue of why the poor remain poor; with the overall strategy of staving off the angry mob for as long as possible. I think that's silly.

As Milton Friedman's said:

The problem, JAG, is that you're address it from the entirely logical side of someone who is wealthy. Compared to most, you always were wealthy and always will be wealthy. Maybe you couldn't always go out with your friends during law school, but I guarantee that you weren't a plucky inner-city kid playing B-ball with the Thugz. They come from also an entirely logical side based on their experiences.

What is happening now has happened before. In ancient Athens, the landowners were constantly butting heads with the peasant classes. In a true Democracy, the peasants forced the wealthy to pay 'Wealth taxes', face corruption charges and even engage in wealth distribution.

Philosophers fell on both sides of the fence there. Ultimately, the student of history knows what happened to Athens and their class warfare.

The rich land owners never forgave nor forgot. They combined with Macedonian Kings and Roman Viceroys and smashed Democracy to a pulp and instituted a Tyranny. Quite literally.

I understand where you're coming from, JAG. I do. In fact, as one who earns a decent living, I struggle under greater taxes, too. That doesn't stop the fact that the core reasons behind this class warfare have to be addressed or the exact same thing will happen in our time.

[Just_A_Guy]

You say "so?". The majority do not. At the risk of this being an ad hominem argument, you own a law firm. . . . Compared to most, you always were wealthy and always will be wealthy.

No worries, but if we're going to make this about me--my Adjusted Gross Income last year--as it has been for every year of my marriage save one--was well below the poverty line. We've always been self-sufficient; but we have to be very, very careful even now.

Maybe you couldn't always go out with your friends during law school, but I guarantee that you weren't a plucky inner-city kid playing B-ball with the Thugz. They come from also an entirely logical side based on their experiences.

The difference between me and an inner-city kid isn't really the balance sheet, Funky. Your average inner city kid might have a balance sheet of zero, whereas I'm many thousands of dollars in the red. It's not just a question of who's poorer.

The difference, if any, lies in our mobility--our ability to pull ourselves out of our respective situations, as defined both by our individual qualities and, to some degree, by our circumstances.

I'm not making the arguments I'm making because I am rich; I'm making them because my fundamental worldview is that, through my own hard work, the American economic system can allow me (and others) to become rich.

If one loses faith in that idea, then that lack of hope in conjunction with inequality can foment destruction. But as long as people have faith in their own potential for economic mobility--and as long as empirical studies demonstrate that yes, you do have a pretty good shot at rising above the circumstances you were born in--then I don't see inequality per se as a major social issue except on the part of those whose worldview involves other people making their fortunes for them.

That's one reason that some of us see US progressivism/liberalism as so destructive. The system depends on a) people believing that they can, and then b) actually doing it. Liberalism teaches broad demographics that a) no, you can't (unless the government gives you a bailout of some sort), and b) if you do, we're going to take as much as we think we can without triggering you into a forcible resistance.

When you believe the system is irreparably broken, then yes--you're more likely going to quit working within the system and improve your circumstances through theft and violence instead.

Edited September 9, 2010 by Just_A_Guy

[Guest]

Funky, I'm gonna have to disagree with you on this one... at the risk of losing favor in the Funkytown Fan Club...

You made an assumption that just because JAG owns a law firm that he is 1.) rich, 2.) always has been rich. Or maybe there's history between you two that I don't know about that give you insight into who JAG is, but seems like JAG disagrees.

Anyway, my doctor, of example, is... A DOCTOR. I mean - that usually means big bucks right? Well, sure, he rakes in twice more money than I do but that doesn't make him rich. He is in the red because his net income (after taking away taxes and insurance) is not enough to pay his school loans. He graduated 8 years ago. The government taxes him on income, not net worth. So, technically, this family in our ward who just lost their jobs and their house and is down to almost 0 net worth is richer than my doctor who is at a negative net worth.

I came from the Philippines - that's where you can find a stark difference between rich and poor within 20 square miles. It's not a good situation. There is democracy there but when people are so poor, democracy is lost in the crab-mentality of people fighting for survival. (Crab mentality - you put a bunch of crabs in a bushel, they can't get out - because the moment one crab gets to the top, all the other crabs get on its back to try to use him to get out which ends up with all of them falling back into the bushel).

So, what of the rich? That's another problem - you have a lot more poor people than there are rich people. True story: My husband - a blonde 6'2" guy - walks in downtown Cebu. A poor kid selling candles comes up to him. My husband buys a candle by pulling his wallet out and pulling a 10 peso bill from a stack of bills. Not even 2 seconds later, A HORDE of poor kids flock around him. He gives each one all his money - that included the money we needed to pay customs tarriff so we can go back to the US. It was a bad experience for my husband and he avoided downtown after that.

What am I trying to say? The good thing about being in America is that there is (or used to be) OPPORTUNITY for EVERYBODY to get somewhere. In the Philippines - these kids don't have anywhere to go. Businesses are not thriving there because of the corruption of government. Cebu is, at least, better than all other cities, but it can't support the entire Philippine population.

The government CANNOT fix the problem single-handedly. It will need cooperation from the people who actually MAKE the money. And just like my husband in downtown Cebu, you can't just take it away from those who have money.

What Cebu did well is through the cooperation of government and the private sector, they were able to create an environment that attracts more businesses. It is these businesses that eventually gets these kids off the beggar line. More businesses = more employment... More employment = bigger population... bigger population = more businesses! It's a self-feeding cycle. Don't you guys play SIM city?

Anyway, the government starts it all off with an environment conducive to the success of a business - building international air and water ports, accessible roads, power and water supplies, competitive tarriff schedule, police force, etc. Of course, the only way you can do this successfully is to bring graft and corruption to bare minimum. So, you kinda need idealists in power. Businesses start to move headquarters/operating facilities/warehouses to your city. They start hiring people. People flock there because of the jobs available. The bigger population attracts other businesses - schools, restaurants, apartments, hotels, malls, etc. These businesses offer more job opportunities... So then you start creating a balance between population and taxation. There is no need to offer welfare except to those who have handicaps and seniors. Instead of welfare, attract more businesses - agriculture, manufacturing, exports etc. Go check your closets and pull out the labels on your clothes - you probably have Made in the Philippines there. Not too many Made in the US anymore.

But you know, the problem with Cebu is it is a small city compared to the # of population. You can't really say - nope, Cebu is full, you can't come here anymore. So, you will find the poorest of the poor not even 10 miles away from the thriving areas.

So yeah, I don't really know if you can truly solve the problem.

[Just_A_Guy]

Just a list of the installments published so far, for mine and anyone else's later reference. I'll try to update this as new installments come out.

Introducing the Great Divergence

The Usual Suspects are Innocent

Importing Inequality

Computer Exceptionalism

Too Many Republicans [Of Course! --JAG]

The Great Divergence and the Death of Organized Labor

Trade Didn't Create Inequality, and Then It Did

Edited September 14, 2010 by Just_A_Guy

[talisyn]

*sigh* this is all very depressing.

[FunkyTown]

No worries, but if we're going to make this about me--my Adjusted Gross Income last year--as it has been for every year of my marriage save one--was well below the poverty line. We've always been self-sufficient; but we have to be very, very careful even now.

The problem, as you mention later, isn't the balance sheet. It's real living conditions.

If you can honestly say that the guy with the actual income of $0, if he walked up to you and said 'Brother JAG? I have seen you are in dire straights. Please - I will let you have my home and I will take yours. I will let you have my car and I will take yours. I will let you have my furniture and I will take yours.' - If you can honestly say that your answer to that would be, 'Heck, yeah!', then I will agree that your adjusted balance sheet is a fair representation.

The difference between me and an inner-city kid isn't really the balance sheet, Funky. Your average inner city kid might have a balance sheet of zero, whereas I'm many thousands of dollars in the red. It's not just a question of who's poorer.

The difference, if any, lies in our mobility--our ability to pull ourselves out of our respective situations, as defined both by our individual qualities and, to some degree, by our circumstances.

I'm not making the arguments I'm making because I am rich; I'm making them because my fundamental worldview is that, through my own hard work, the American economic system can allow me (and others) to become rich.

I grew up with my Grandfather. He was the chief plant engineer at Imperial Oil in Sarnia. In the 70s, he was earning $50, 000/year. That was pretty spectacular at the time. He retired just as Sarnia, most of which was employed by the oil companies in a place called 'Chemical Valley', went from one of the most prosperous cities in Canada to a ghost town. The companies kept a skeletal staff on their vast concrete jungles because it was cheaper to hire people forever then it would be to have to clean up.

I saw massive layoffs. I saw families that had two generations of workers who had spent their life with the chemical plants suddenly smashed in to poverty. Sarnia, which accounted for roughly 5% of the population in that area, made up 60% of the military recruits because that was the only way out.

The executives were all moved elsewhere. The wealthy simply left Sarnia to die, while those who were middle managers and below suddenly found themselves with experience in a career that had no prospects because the companies that hired had moved elsewhere.

Hard work didn't save those people, who were some of the hardest working, company-loyal men I know. And with the sudden glut of skilled labour, it was impossible to get good paying jobs. They had to take their hard working selves and take positions that paid less than half of what they were earning, and most had to move to get that. This was not a hurricane that caused this. This was not an earthquake. It was not an act of God. It was the act of an executive who took a pen and, with a single stroke of that pen, sent tens of thousands of people to the unemployment line and shattered most of their hopes for a better future.

Income inequality isn't the frustration of the working class, though it's part of it. power inequality is the issue, and that power is decided upon by who has the most money. This is causing a lot of frustration in those who realize how tenuous their hold on their life is.