
New Data Shows Income of Top 1% Has Grown 100x Faster Than Bottom 50% Since 1970 - wajdiben
https://www.commondreams.org/news/2019/12/09/staggering-new-data-shows-income-top-1-has-grown-100-times-faster-bottom-50-1970
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awshepard
Without meaning to quibble with the numbers in the article, they point out
that the bottom 50% of income has gone up $8,000, while the top 1% has gone up
$800,000, which is indeed a 100x difference in absolute numbers. But on a
relative basis, the bottom 50% of earners' incomes have gone up 42%, and the
top 1% have gone up ~250%. Still a large difference, but not nearly as extreme
as 100x.

Is there merit to analyzing these numbers on an absolute vs. relative scale,
and/or is that beside the point? Does it miss the point if analysis like this
doesn't also look at the cost/standard of living in those time periods too?
E.g. if a particular standard of living that cost $19k in 1970 (manageable in
the bottom 50%) now costs $21k, that's a great boon, but if it now costs $30k,
that's probably a bad sign.

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cmdshiftf4
Not to sound defeatist, but we've now an endless amount of charts pointing to
the significant changes that came as a result of political and economic
decisions made in the 70s, including their effect on income and wealth
inequality, and what has come from it?

We've had revelation after revelation in not only this regard, but also the
exposure of the gaming of tax/visa/migration/residency/etc. laws to shelter
the gains from those changes in an untouchable manner, and what has come from
those?

What do we, as a society, want to do about this? What can we do about it? What
are the side effects possible from any actions taken on it? Therefore, what
will we do about it?

The answer is likely not much. We might elect someone Sanders-esque, but the
result will be the middle earner taking a further pummeling. Eat the rich?
Revolt? They're untouchable. There's a reason many have been building or
acquiring elaborate "fall out" shelters in remote areas of New Zealand and
elsewhere. It'd also probably be met with economic and societal collapse, and
all that hidden money would come back to scoop up the deals in the remains.

I'm not saying something _shouldn 't_ be done, but good luck designing
something that will continue our mutual relative safety, security and
prosperity. Not to mention the high likelihood that if actions were taken and
the shit did hit the fan, the likely candidates to have the finger pointed at
them will be those of us in tech and those in finance, and when you can't
access the CEO for a battering then the cronies who built their systems will
probably do.

~~~
spyckie2
Some of these problems feel larger than life because they are.

I think our generation (I'm early 30s) is spoiled because we receive the
benefits of great problem solving all the time in the form of continually
progressive improvement in all aspects of society. We've come to expect that
things should always improve, because so many things improve tremendously year
over year.

But what we don't see is how they improve. For instance, the amount and
quality of work that goes into making our phone better and better amounts to
thousands of years of research and expertise every year, and we (by and large)
take it for granted.

You can use the market to approximate the amount of investment. 2.2 billion
iphones sold in it's history, at around 1000$ each = 2 trillion in revenue.
Assume about 5-10% goes into research, and your iphone has about 10-20 billion
dollars of investment into it. That's 7000 years of a 300k salary amount of
effort. This is back of napkin and can be off by an order of magnitude, but
I'm trying to put into perspective how much effort is needed to create really
meaningful, great solutions / products. Not just lifetimes, generations of
generations of lifetimes.

> What do we, as a society, want to do about this? What can we do about it?
> What are the side effects possible from any actions taken on it? Therefore,
> what will we do about it?

The honest truth is that if you don't have talent or money, you can't do
anything but play your role. Welcome to the 21st century. You're not the R&D
engineer in the iPhone ecosystem; you're the consumer. You're one of 2.2
billion.

Now, consumers do have power in the market - they can refuse to buy goods and
services. They can leave the ecosystem. They can complain. They can boycott.
But in the consumer model, this only serves to provide awareness of the
problems so that the real engineers can fix them.

Similarly, the economic changes that the US is going through is not something
that normal people can make positive change. We need talent and hard work
applied to the problem to create, test, and deploy real solutions.

If you think this is not true, imagine replacing the head of R&D at Apple for
the next generation iPhone with an average American (or just yourself).

A lot of people feel helpless because they see a problem but are unable to
solve it. But actually, if you just play your role, things will likely be
solved. The consumer market actually works pretty well - it just takes time
and some systems are more competent than others. Just playing your role as a
consumer that can complain, can speak out, and can demand solutions, is
usually good enough.

The other option is not something most Americans want to hear. Work on
yourself to become a lot better than you are. Think a lot harder than you
currently do. Become a better manager of resources, become a better strategic
thinker, become addicted to solving harder and harder problems. Eventually
(give or take 10-20 years), you'll become someone who is talented and capable
enough to be given the harder problems of the world to solve.

~~~
lunias
How do you feel about individuals that have money, but arguably lack talent
themselves. That is, people who have acquired resources through inheritance /
luck, then grown them through investment strategy executed by those with
talent and the simple nature of exponential growth?

I feel like this type of wealth in particular is commonly used for personal
empire building and doesn't benefit society much at all as it ends up being
hoarded for future generations of the same family (or passed back and forth
between wealthy families) and not circulated amongst the general population. I
see no reason to think that these empires will not be increasingly
strengthened by time without outside intervention.

If you happen to work in a growth area then you may catch some relatively
minor benefits of cash infusion, but the overwhelming trend seems to be using
money to buy more money to insulate and protect oneself rather than using
money to improve the quality of all human existence. Money currently flows to
where the biggest ROI is and not necessarily where the biggest impact in
standards of living can be made. To me, this seems tantamount to running up
the score at the expense of everyone else when you've already won.

I think this is just normal human behavior that won't change without
incorruptible regulation.

~~~
spyckie2
The underlying issue that a unit of capital is intrinsically more valuable
than a unit of labor in the current shape of our economy. From the perspective
of what's broken, it's not who has the capital that is broken. It's that
between capital and labor, capital is too powerful and over time most ROI will
end up being earned from capital.

In my view, people who have money should not be separated between those who
have talent and those who don't because for the vast majority, money is
stronger than talent at ROI, and therefore carries more weight (in our current
economy). Talent, sadly, is both the outlier and the rounding error.

Also, when talking about the economy, it's not really about improvement of
standard of living - that's the side effect. The key issue is actually
distribution.

If you look at Amazon, it's lowering the cost of goods and making it faster /
more convenient to get them - arguably, that's a higher quality of life for
its consumers. The only issue with Amazon is that it's doing the job so well
that many of the very same consumers lose their job and can't consume anymore.

Rich people who create personal empires have their money stored somewhere.
They probably bought some companies stock that are making improvements to
people's lives, so indirectly their money is being used to improve standard of
living globally. The issue is not improvements, it's who gets the money.

The plain fact is that in our current economy there's just not enough value
that labor can provide to get enough share of our global monetary supply.
Capital is eating it up, no matter if it comes from inheritance, from
financial institutions, or rich tech conglomerates.

You can try to solve by either reducing the return on capital as a whole to
match labor, or increasing labor's ability to get returns equal to capital.
The first can be done by a tax on wealth that can't be loop-holed out of -
unsurprisingly, quite hard to do. The second can be done by improving labor's
value through making people work harder, take less wages, or become more
skilled - also very hard to do.

But even if you manage to equalize capital and labor return temporarily,
capital is always getting more efficient over time, while labor will be
largely stagnant (unless we modify our genes on a societal level to increase
our ability to work). So while we can level the playing field temporarily,
eventually we need to explore how labor can exit the economy altogether.

2 reasons - first, the only winning strategy of labor right now is to become
capital. That doesn't sound sustainable. Second, it just doesn't make sense
for (certain parts of) labor to be in the economy anymore.

For instance, we have the technology and systems to fully automate our
cashiers in restaurants. Why keep someone there? I understand the need for
fulfillment, social life, and something to do, but can't we as a society come
up with something better than working an assembly line at a McDonald's?

We grow up with the assumption that we should work for our existence and our
value is based on the work that we do. If we don't work, we don't eat. If we
don't work hard, then we deserve everything bad that comes to us. Conversely,
if we work hard, then we deserve the money that comes.

But the reality is that rich people don't have to work hard. If you inherit a
couple million, you can just throw it in an index fund and not have to do
anything for the rest of your life, and "earn" substantially more than the 99%
of the population.

Capital > Labor is not just an economic crisis, it's a values crisis. It calls
into question almost everything we believe about our self worth. In many ways,
it's our belief in the value of our hard work, not the system of capitalism,
that is preventing us from making good solutions.

From a pure systems point of view, economics does not need to be fair to work.
The economy is just how resources get distributed, so we could yearly collect
and throw the world's money into a pot and roll a dice to see who gets what,
and that's an economic system. It's not fair but it is a distribution. We have
strong opinions of what is fair because much of our self worth is tied up in
what we do.

Currently, the capitalist economy says the people who can generate the highest
ROI deserves most of the resources. This… is not wholly bad, it generally
means that people who know what they're doing get to manage most of the
resources of the world. But with the emergence of tech and winner-take-most
companies, it creates a larger and larger group of people who, based on the
distribution rules of the current economy, don't get anything, and this is bad
because it creates a situation where slavery or starvation is the typical
livelihood of the 21st century.

One solution is universal basic income. UBI is basically the admittance that
labor will never become competitive in our economy again, and that we should
look for other ways to distribute resources to them because market forces
ain't going to give anything to them.

I actually think UBI is one of the only solutions. But it only scratches the
surface of the issue. Beyond income, there's structure, affirmation, goals,
promotion, social status, social interaction, belonging on a team, and more
built into the social fabric of work. Even if we give income to people who are
forced out of the workforce, there's still a lot missing.

But I don't think capitalism should be completely thrown out. The very same
tools that you use to build a successful ROI generator can also be used to
solve hard problems that don't give ROI. One positive example I think about is
the goal to reduce cases of malaria to zero. This is tough! But it's an
activity that can potentially create a lot of value - just that you don't
capture it directly yourself. And you don't fund it based on your profits, you
fund it based on people who align to the cause, want to invest in the cause,
and believe you capable to use the money well to actually tackle the problem
instead of wasting it.

At the highest level, the truly scarce resource is never the lack of money;
it's the lack of ability (talent). So, even though from an ROI perspective,
talent isn't as good as money, if we expand our values beyond ROI, talent
becomes paramount.

~~~
lunias
Thanks for taking the time to write that. It's clearly stated and helped me
recognize some more of the nuance of our current situation.

While I haven't thought it through entirely, nor am I qualified to assert that
I can; I wonder what a universal max income and / or placing a maximum on the
value of an individual's asset holdings (in addition to a UBI) would do to
combat the disparity between the strength of capital and labor. I wonder if
such a system could support itself without a traditional tax structure and
instead impose a 0% tax rate on income below the max and a 100% rate on income
in excess of the max.

~~~
spyckie2
The short answer is it won't help much and it might hurt a lot.

90% of working Americans make less than 100k / yr. The tax structure is
already skewed so that the richer you are, the more you pay, and you can make
it more extreme... but it does nothing to help the 90% of people who make less
than 100k / yr.

When thinking about distribution, it's not about reduction, it's about
transfer. So you need to think in terms of transfers, not in terms of earnings
amounts.

But, putting a max income ceiling is an interesting systemic exercise. What do
you want to happen and what will actually happen?

It seems sensible, maybe we can put a cap of say $5m a year on income. But the
problem is that we have no clue how people who make more than $5m a year feel
about it and how they will respond.

One way to get insight it is to put it in income levels that you can
understand. Lets say you put the max at 30k / year. This would vastly
disincentive people who are working really tough jobs that pay well because
there is an equivalent easier job that pays just as well, so it would
devastate certain industries. If collecting garbage paid the same as petting
kittens, the garbage collection industry would face a huge worker shortage and
they would not have the levers (raising salary) to attract people.

At what point does the max salary cap stop hamstringing certain industries?
I'm not sure. But the NBA / NFL max salary is like $50m a year I think? So at
least at that level.

Bleeding down asset holdings over time to a certain level is also interesting
but also not likely to help - the economy holds the stability of our assets as
the basis for trust. If assets slowly shrink over time to a fixed number OR
just disappear overnight (via taxes or other things) there would be a massive
scramble to find the asset that is the safest to hold - basically, people will
scramble to find that one investment / place in the economy where your assets
are secure. Most optimistically, it would create a giant "hunt for the tax
loophole" system, but it's likely to destabilize the entire economy.

The hard part of the solution to inequality is that we have to think about how
to get poor people more money BUT no one wants to just give them money because
they have to "earn it". This is where many people get stuck in the old way of
thinking. 90% of American people can't do much of anything to earn more money
for themselves.

There's this naive thought that rich people are siphoning it away from poor
people, if we just hamstring the rich then the poor people will get more of
it. The sad truth is that poor people are not worth much in today's market
economy, not valued by the market, so no matter what you do to rich people, it
won't help.

It's not that poor people are worthless to society though. People are people,
poor or rich, and together we create a dynamic, diverse, robust and enriching
society in many ways other than wealth. But the economy doesn't care about
that - it just cares about one number going up.

You need to have a clear sense of the available options you have (levers) and
what they do in order to understand how to affect change in a good way.

Especially when fixing inequality, you'll have to think about levers outside
of the economic system because all the economic levers affect things within
the constraints of market forces, but its the market forces themselves that
you need to offset.

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carlhjerpe
If we graph out how companies has scaled out (Measured in different ways) I
don't think it'd be as suprising.

