
US Income Inequality: All for the Top 1% - o-
https://www.nytimes.com/interactive/2017/08/07/opinion/leonhardt-income-inequality.html?mcubz=1
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sctb
Previous discussions:

[https://news.ycombinator.com/item?id=14956698](https://news.ycombinator.com/item?id=14956698)

[https://news.ycombinator.com/item?id=14959346](https://news.ycombinator.com/item?id=14959346)

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arcanus
Real title was, 'Our Broken Economy, in One Simple Chart'.

Despite some of the recent coverage, this chart indicates that gains are not
going to the top 20%: they are going to top 1%, and particularly <1%.

To be clear, this is not many programmers: "In 1980, the top 1% of adult
earners in the U.S. made $420,000 a year, on average (before taxes and
measured in 2014 dollars) — 27 times as much as the average for the bottom 50%
of earners. Today the top 1% of earners make an average of $1.3 million a year
— 81 times as much as the average for workers in the bottom half."

HBR also found that gains are increasingly going to the top firms: there is a
global set of winners and losers. Inequality is growing everywhere, in all
fields. [https://hbr.org/cover-story/2017/03/corporations-in-the-
age-...](https://hbr.org/cover-story/2017/03/corporations-in-the-age-of-
inequality)

~~~
frgtpsswrdlame
I'm not sure we can just blame this on the tiny minority of mega-rich at the
top. The whole inversion of the curve is cause for alarm. The chart is great
but it seems like everyone's eye is catching on that crazy portion on the far
right. Not only do we have to bring that down, we need to grab the line at 5%
and start yanking it up. That's probably going to require policies and taxes
that not just the 1% but the 20% as well don't like.

EDIT: I'd also like to plug this really great article on regional inequality
which is a huge problem but usually goes unmentioned in these sorts of
discussions: [http://washingtonmonthly.com/magazine/novdec-2015/bloom-
and-...](http://washingtonmonthly.com/magazine/novdec-2015/bloom-and-bust/)

~~~
cristianpascu
If the inequality is artificial, it might be that an artificial intervention
will reverse it. If it's not, than so God help us. A democratically "elected"
Robin Hood will probably just take a lot from the rich and give a little to
the poor to keep being "elected" democratically.

On another side of life, the moment people have enough to pay the bill,
anything more will not make them any happier. Leveling the income or the
wealth is not doing anything effective to increasing happiness. What's and
where's the problem of inequity? The fact that I can't afford a luxurious
yacht trip?

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AstralStorm
The actual problem is working long hours when you could be working short hours
for the same pay, freeing time for both enjoyment, well being and creativity.

Rich can also afford to hire servants and employees to do things for them.
They can also afford expensive extra things or medical procedures without
getting bankrupted. Capital such as factories, research facilities. Teams to
manipulate both common people (marketing) and politicians (lobbyists).

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rafiki6
When inequality grows, empires shrink and eventually disappear:
[https://www.theguardian.com/business/2012/feb/05/inequality-...](https://www.theguardian.com/business/2012/feb/05/inequality-
leads-to-economic-collapse)

And let's not kid ourselves. Those on top intend on staying there by growing
the gap.

~~~
dsacco
I don't really understand how that article by the Guardian supports your
thesis that, "when inequality grows, empires shrink and eventually disappear."

What do you mean?

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rafiki6
What's not clear...it's even in the title. Inequality leads to economic
collapse. Here's the end of the article "An economic model that allows the
richest members of society to accumulate a larger and larger share of the cake
will eventually self-destruct. It is a lesson that is yet to be learned."
Generally any state, nation or empire is heavily dependent on a having a
strong and healthy economy to remain stable...

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autokad
It looks to me that QE3 was a huge part of that later uptick.

its no surprise to me that if you juice the markets and inflate asset prices
(mostly stock), that the richest benefit most. what was surprising to me is
how bad actually making stuff did. I understand that juicing the markets might
not benefit that, but it seemed as though QE3 actually hurt producing tangible
things.

~~~
refurb
Exactly. The distributions looks reasonable until ~2008, when things go wonky.
That coincides quite nicely with the bottom of the equities market and the
subsequent bull run.

Also, something seems off. The animated chart is _not_ data for a given year,
it's for the last 34 year ending in that year. Since you're averaging growth
over 34 years, the only way the top percentile can go from 3% growth (over 34
years) to 5% is if you average in _really_ huge growth.

Also, the 34 year measurement makes me suspicious. Seems like an odd time
period to capture. Maybe if you made it 30 or 40 years the data isn't quite so
compelling?

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mcguire
Income inequality has been a visible problem for more than 10 years.

Income Progress across the American Income Distribution, 2000-2005
([https://www.brookings.edu/testimonies/income-progress-
across...](https://www.brookings.edu/testimonies/income-progress-across-the-
american-income-distribution-2000-2005/))

" _Finally, incomes are growing less equal. Over the past quarter century
Americans at the top of the income distribution have seen much faster income
growth than people in the middle class. If average income grows 1% a year and
top earners enjoy gains of 2% a year, many people in the middle and bottom
will see their incomes grow much more slowly than 1% a year. Top income
earners experienced sharp income declines in the last recession, but in the
last couple of years their incomes have rebounded strongly. This reinforces
the impression that the gains from prosperity have flowed disproportionately
to people at the top rather than in the middle of the distribution._ "

Income Gap Is Widening, Data Shows
([https://mobile.nytimes.com/2007/03/29/business/29tax.html](https://mobile.nytimes.com/2007/03/29/business/29tax.html))

" _Income inequality grew significantly in 2005, with the top 1 percent of
Americans — those with incomes that year of more than $348,000 — receiving
their largest share of national income since 1928, analysis of newly released
tax data shows._ '

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kukx
It is difficult for American workers to compete with Chinese or Indian people
wages. The good thing is that the global inequality is declining.[0] My guess
is that when the incomes in low-wage exporter countries get closer to the
developed countries, then we may see a wage increase again.

[0] - [https://ourworldindata.org/global-economic-
inequality](https://ourworldindata.org/global-economic-inequality)

~~~
logicchains
This has been predicted:
[https://en.wikipedia.org/wiki/Factor_price_equalization](https://en.wikipedia.org/wiki/Factor_price_equalization).
Under this model, incomes (especially those of lower-skilled workers) in
developing and developed countries will eventually meet somewhere in the
middle. Once all countries are equally developed, this downwards pressure on
low-skilled wages in developed countries will abate. Restrictions on
outsourcing and trade would prevent this to a degree, but doing so would slow
down the income increases in developing countries, hence many economists do
not support such restrictions, as it's hard to make an economic argument that
developed countries' citizens should be privileged over those of developing
countries (although a political argument can certainly be made), and more
trade is generally seen as increasing the overall size of the pie.

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humanrebar
It's my understanding that there is some churn in the top 1% of earners. If
the economy transitioned to a place where people had big spikes and dips in
their annual income, couldn't the graph look the same? Doesn't that sound like
a "gig economy"?

In other words, why graph income and not wealth?

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nsebban
> In other words, why graph income and not wealth?

I think it's because people's wealth is really hard to estimate. The border
between people's assets and their companies', foundations' and what not are
usually blurry enough that you would get a graph that shows no insight.

Although income is not a great KPI, at least there are reliable methods to
figure it out, or at least make estimates with a quite acceptable precision.

~~~
humanrebar
Sure, but there are downsides to this approach as well.

Say someone could have a small business that takes off and retires after a few
years with a reasonable retirement fund. This doesn't fit the mold of a
hoarding 1%-er.

It seems like discouraging this kind of income spike would actually decrease
social mobility.

~~~
mcguire
[https://www.theatlantic.com/business/archive/2016/07/social-...](https://www.theatlantic.com/business/archive/2016/07/social-
mobility-america/491240/)

" _“The probability of ending where you start has gone up, and the probability
of moving up from where you start has gone down,” Carr said. For instance, the
chance that someone starting in the bottom 10 percent would move above the
40th percentile decreased by 16 percent. The chance that someone starting in
the middle of the earnings distribution would reach one of the top two
earnings deciles decreased by 20 percent. Yet people who started in the
seventh decile are 12 percent more likely to end up in the fifth or sixth
decile—a drop in earnings—than they used to be._ "

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humanrebar
...I'm saying that depending on what opportunities look like in the 21st
century, this could actually be made worse by focusing on income instead of
wealth.

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mxfh
Taxation should compensate for the fact that the top 0.1% of people have the
means to pay specialists to optimize their financial gains.

This advantage has nothing to do with individual skill or hard working ethics.
Taxation schemes that don't take this into account are simply unfair.

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PhiWhale
There is a cool economic / social principal called "Preferential Attachment"
that helps describe this a bit.

From Wikipedia: "A preferential attachment process is any of a class of
Citation dynamics processes in which some quantity, typically some form of
wealth or credit, is distributed among a number of individuals or objects
according to how much they already have, so that those who are already wealthy
receive more than those who are not."

It's an interesting principle that plays out in economics as well as other
situations where skill is involved. It is similar in some ways to the "80/20
rule" if you are familiar.

I would definitely recommend researching the topic a bit. It will definitely
add some dynamics to your view of income inequality.

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watecmascript
Poverty is a problem. But is inequality bad? It doesn't bother me that when
billionaires have private jets and I don't. I'm not rich, but I can live
comfortably, especially if you look at history. The average american has at
least one air conditioned car. I'm sure that would make the pharaoh of ancient
egypt jealous. He would call inequality on us.

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spo81rty
Any investor can make 4-6% annual gains in the stock market year over year. I
don't think that says much about inequality as a whole.

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viraptor
First you have to have money to invest. Then you have to have enough money to
make it worth considering the transaction fees. The bottom part has debts, not
spare cash for investing, so the stock market is almost completely irrelevant
for them.

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tomtemplate
"Most Americans would look at these charts and conclude that inequality is out
of control. The president, on the other hand, seems to think that inequality
isn’t big enough."

Would nobody else reading this want some further information to back up this
statement? Its a shame it wasn't nearer the beginning of the article as I
could have stopped reading earlier.

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KZeillmann
It's literally in the preceding paragraph. Notes about how the proposed
healthcare law was essentially a transfer of wealth from the poor to the rich,
how the proposed tax cuts mainly benefit the richest Americans, and plans to
cut school funding.

~~~
tomtemplate
"how the proposed tax cuts mainly benefit the richest Americans"

Did you gather this view from reading the tax reform?

[https://assets.donaldjtrump.com/trump-tax-
reform.pdf](https://assets.donaldjtrump.com/trump-tax-reform.pdf)

~~~
mcguire
" _If you are single and earn less than $25,000,... you will not owe any
income tax._ "

In 2016, if you were single and made $25,000 your tax was $3290. The standard
deduction for singles is $6300. Is there a trick here?

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alex98
A great book on income inequality for those interested is _Plutocrats_ by
Chrystia Freeland.

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gallerdude
It's an interesting question. Most of peoples incomes are rising, it's just
whose incomes are rising more than others. Is that still fair?

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dvdhnt
Personally, I think it is blatantly unfair. It's like if we had a big bad of
skittles and every time I took 1 skittle, you took 10 skittles.

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dsacco
But the economy is not zero sum, like that bag. If I have a process that
increases the total number of skittles in the bag, is it still unfair for me
to take more skittles from it?

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mattmanser
Depends on your view point.

You could argue that the process was never really "yours" in the first place.

Society, our laws, our armies and natural resources, our roads, bridges, power
lines, telecoms structure, are 99% of that process and you added 1%.

You simply took advantage of a lot of luck, a little bit of hard work and
probably a bunch of your parents' money to end up owning it.

Maybe you should get a chunk of the rewards, but all of it?

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dsacco
How would you propose we make a more meritocratic system that doesn't allow
for as much luck-based success?

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TheAdamAndChe
Tax the wealthy and use that money to invest in infrastructure, education, and
economic growth across the entire country, not just the big cities. Combine
that with limiting trade with countries that have abysmal minimum wages and
standard of living, and you'd have a fantastic recipe for economic growth for
the lower and middle classes.

Luck is always involved, but by increasing opportunities while giving workers
more leverage, it is definitely doable.

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PeachPlum
If everyone gets 2x as much tomorrow as today, income inequality rises.

Ask people if they would support everyone getting 2x their income tomorrow.

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Jack000
wait, wouldn't scaling income by a constant multiple be the same as not
changing anything? Your income and expenses are both doubled.

this would just kill the bank accounts of anyone holding cash.

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sn9
Why would your expenses double?

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viraptor
If everybody's income raises 2x it means they're paid 2x the previous amount.
"they're paid" means someone's expenses are 2x higher to cover it. (you could
guess, everyone's expenses, but actually... it's interesting how would that be
distributed)

