
‘We were shocked’: RAND study uncovers income shift to the top% (cont) - whack
https://www.fastcompany.com/90550015/we-were-shocked-rand-study-uncovers-massive-income-shift-to-the-top-1
======
dpc_pw
[https://wtfhappenedin1971.com/](https://wtfhappenedin1971.com/) \+
globalization.

Money creation favors people closer to the the printer. People that can take a
loan at 2% - which are generally wealthy people already. In the meantime
working class has to compete with cheaper labor from poorer countries, while
the capital owning class is pocketing the difference and enjoys cheaper goods.

Before capital owners had to pay a decent wage to workers in USA. The products
made in US were more expensive, but the workers were compensated well so
generally could afford it.

Now manufactured goods are cheaper, so people can still afford TVs and phones,
but their purchasing power is lower in respect to things like services,
housing.

This BTW. benefits software engineers that can plug themselves into high
margin, low-labor operating capital, enjoy higher wages and rather easily join
the capital class themselves.

Fundamentally labor increases profits linearly and capital increases profits
exponentially. Without something to bridge the gap, exponential function will
always eventually overtake the linear one. This happened many times before,
and unfortunately the bridging was usually very destructive (wars &
revolutions).

~~~
rayiner
Except financial capital isn’t getting a greater share of GDP than it used to:
[http://blogs.wsj.com/economics/2015/03/26/thomas-piketty-
say...](http://blogs.wsj.com/economics/2015/03/26/thomas-piketty-says-labors-
share-of-income-is-declining-but-is-it). The decline in labor share of income
has come entirely from increased income from land and rents.

[https://www.vox.com/2015/4/1/8320937/this-26-year-old-
grad-s...](https://www.vox.com/2015/4/1/8320937/this-26-year-old-grad-student-
didnt-really-debunk-piketty-but-what-he)

> Rognlie finds that when you account for depreciation properly, the capital
> share's increase has been entirely about housing.

The part that you’re forgetting is that capital accumulates, returns to
capital go down. There is a ton of capital sloshing around the economy right
now looking for marginal returns.

~~~
heavenlyblue
> The part that you’re forgetting is that capital accumulates, returns to
> capital go down.

How does that help labour?

------
dTal
Shocked, really?

>...even he was surprised by RAND’s findings. In fact, he says that before the
report was completed, he had done his own “back-of-the-envelope math” and
wound up underestimating by a good 40% the degree to which workers’ incomes
have failed to keep pace with GDP. “It’s startling,” he says...

...except this [0] graph has been floating around for years, and the 40%
failure to keep pace is visible plain as day on it. I'm glad there's more
comprehensive research about it, but come on - this isn't even remotely
groundbreaking. You'd basically have to be living under a rock for any of this
to come as a surprise. There were even protests about it a few years back -
what were they called? "Occupy Main Street" or something?

[0] [https://i.redd.it/szwd5045fzl51.png](https://i.redd.it/szwd5045fzl51.png)

------
rayiner
How does the math work out here??

The total income of the top 1% is $2 trillion:
[https://taxfoundation.org/summary-latest-federal-income-
tax-...](https://taxfoundation.org/summary-latest-federal-income-tax-
data-2018-update)

Meanwhile, there are 130 million full time workers:
[https://www.statista.com/statistics/192356/number-of-full-
ti...](https://www.statista.com/statistics/192356/number-of-full-time-
employees-in-the-usa-since-1990/)

The chart in the middle shows that top 1% incomes would drop by half in the
counter-factual scenario. If you redistribute that to 130 million full-time
workers, that adds $7,650 per worker across the board. So how can you get
$30,000 more at the 25th percentile and $40,000 more at the median?

The basic problem seems to be that the study assumes that taxable income
should scale with per capita gdp growth. But it ignores that there are a bunch
of other things in GDP besides personal income, and the proportions of each
component can change over time:
[http://lmi.mt.gov/Portals/193/xBlog/uploads/2016/10/26/GDPvs...](http://lmi.mt.gov/Portals/193/xBlog/uploads/2016/10/26/GDPvsIncome_800px.png)

There are a lot of things included in GDP that are not taxable personal
income: social security contributions, net government transfers, etc. The RAND
study looks at just taxable personal income. So if nothing else changes other
than the fact that the government prints a bunch of money to pay for welfare
benefits, or if the income from rents skyrockets, or if benefits grow faster
than wages, or if corporate profits sit undistributed (all of which are true)
the share of total GDP going to median income earners will go down. (Note they
do include investment income and distributed corporate profits.)

The study’s problem isn’t methodology, per say. It’s overlooking that there
are other things in GDP besides taxable income to the bottom 99% versus the
top 1%. The article draws the conclusion that reductions in the percentage of
the economy going to the median earner means that they instead went to the top
1%. Obviously that’s false because the money could go somewhere else. Under
the RAND model, both shares could even go down, because a larger share of the
economy is comprised of GDP components that aren’t taxable personal income.

~~~
whack
> _There are a lot of things included in GDP that are not taxable personal
> income: social security contributions, net government transfers, etc_

This is not true. The GDP numbers specifically exclude social security and
other money transfers, specifically to avoid the problems you've stated.

[https://www.investopedia.com/ask/answers/082415/are-
social-s...](https://www.investopedia.com/ask/answers/082415/are-social-
security-payments-included-us-gdp-calculation.asp)

 _" No, Social Security payments are not included in the U.S. definition of
the gross domestic product (GDP). Social Security payments are transfer
payments, which are not included"_

[https://en.m.wikipedia.org/wiki/Transfer_payment](https://en.m.wikipedia.org/wiki/Transfer_payment)

 _" For the purpose of calculating gross domestic product (GDP), government
spending does not include transfer payments, which are the reallocation of
money from one party to another rather than expenditure on newly produced
goods and services"_

The main difference between GDP and Gross National Income, is that GDP doesn't
include income from foreign sources, and going to foreign destinations. But
this doesn't make a significant difference in USA.

 _" For instance, the U.S. GNI for 2018 was about 20.7 trillion, according to
the World Bank. The GDP in that same year was $20.5 trillion, according to the
U.S. Bureau of Economic Affairs_"

------
glial
Absent a countervailing force, capital tends to accumulate. These results
should be no surprise. So, what now?

~~~
WealthVsSurvive
Specifically? The US federal reserve maintains low interest rates, allowing
oligarchs to borrow against their pre-existing conditions of prosperity. This
in turn allows them to inflate USD and buy an alternate currency with higher
interest rates, things like gold, bitcoin (stores of value that are hard to
take via force, but are ultimately functionally useless). USD simultaneously
inflates and deflates, leading to a near-useless currency. As a result the US
balkanizes into 2 nations, one allied with Russia, Christianity, & Gazprom,
one allied with China & Europe. The oligarchs will misjudge the transition and
the world will be thrown into war & chaos. Understanding the enormity of the
mistake, the world will be forced to either unite or die. It's unfortunately
where we really, really seem to like to move ourselves, not as a whole, but as
individuals, and we like to pretend like our daily decisions aren't causing
this. If yours must be the glory, then mine must be the shame; you want it
darker? We kill the flame.

------
tuatoru
RAND has produced some very high quality research over the course of its
existence.

Unfortunately this study, if Fast Company's clickbait article bears at all on
the actual research, is not part of that canon.

The phenomenon that the study talks about, rising productivity with stagnating
wages for the great majority of people since about 1975, has been discussed at
length in academic economics for at least the past decade.

In the early days, of course, there were the usual attempts to say "nothing to
see here": faulty methodology (no), confounders (yes, mainly a bigger
percentage of women in the workforce, but adjusted for), it's a business cycle
effect and will correct itself, there's no such thing as income/it's too hard
to measure precisely, but-but-but "stable income shares" is one of the great
Kaldor's stylized facts, blah blah blah.

The objections got increasingly more feeble and desperate as time went on, you
will note.

TLDR: RAND has discovered something everyone else has known for decades.

~~~
fuzzfactor
I think it's good to see them bringing it to light in as dramatic a way to get
as much attention as possible, especially among those who are not too aware.

It's just fine for people to think the trend is newly discovered, it would
acually help if it got viral attention.

I think a good effort was made to only include solid representative figures
for comparison, nothing nebulous or significantly questionable.

At least these are some new good baseline numbers and qualified experts even
if they had originally underestimated the magnitude of the cascading wealth
removal.

Since the mid 1970's this has been forseen.

You could sketch it out on the chalkboard with mathematically minded
associates.

America was never going to be the same.

21st Century wasn't going to be pretty.

This was across the board.

>RAND crunched the data in all sorts of ways, and the basic pattern held true
for part-time workers, entire families, men and women, Blacks and whites,
urban dwellers and rural residents, and those with high school degrees and
those with college diplomas. “There is no way of slicing the numbers where
people come out ahead,”

The damage is much worse than it looks numerically.

It had to be for them to even do a study.

In hind sight they are now _adjusting_ for inflation as usual, but there is no
accurate accounting for currency devaluation, internationalization, commodity
flow, and resulting after-tax purchasing power. These are more nebulous, but
if they were factored in it would look way worse not better.

That's what we found shocking.

------
ForHackernews
I'm shocked, shocked to find that gambling is going on in here!

