

When income grows, who gains? - anon1385
http://www.stateofworkingamerica.org/who-gains/

======
snitko
The question people should be asking is not whose income grows and who gains
the most. To me, the only relevant question is: did this person stole the
money or made it honestly? If he stole it, then he should be in jail. If he
didn't, then it's none of anyone else's business how much he has and what he
spends it for. And by honestly I mean he didn't force people to pay him and he
didn't coerce anyone to pay him. If one can't convince a rich person who made
his money honestly to share or help the poor or invest in a project that would
supposedly create more jobs, then maybe it's that person's problem that he
can't convince.

~~~
gizmo
Most people reject this Libertarian framing of the issue. The progressive
point of view is that income redistribution is justified if it leads to a
"better" or "more just" society; it's not about punishing successful people.
They also don't think the world is anywhere close to a meritocracy, therefore
the wealth people create is at least to a very large part a function of good
fortune so there is no moral issue with wealth redistribution.

The US busted unions and fought organised labor in general since the 1970s,
and deregulated industry enormously. Also taxation is at a historic low. Those
are the causes of the massive wealth presently accumulating at the top --
wealthy people today are not more meritocratic or harder working than wealthy
people from the 1950s. But they're much, much wealthier. The reduction in real
wages since the 70s has pushed regular people into debt (in an attempt to live
a middle class lifestyle) with all the predictable negative consequences.

This is even terrible from a libertarian point of view. Because a country
without a middle class is a country without consumers.

~~~
snitko
Most people rejected the idea that slavery is a bad thing for the most of
human history. The problem with the idea that one's success somehow lies on
the shoulders of the rest of the society (and therefore one is forever in debt
to it, some may say) is that you can't prove it. You can say it, but you can't
prove it. Some people got successful despite the hurdles society put in front
of them.

When you say taxation is at historic low you have to remember that it is those
who are at the top and are in bed with politicians who can afford to pay low
taxes. Starting entrepreneurs and mom and pop businesses pay a lot. That's not
even mentioning the fact that they have a lot less options to protect their
savings from inflation (which is also a tax). If you look at the US govt share
in the economy it grew from about 8-10% in the 1930s to more than 50% now.
Those who get enormously rich these days are mostly those who are in bed with
the government.

~~~
tks2103
I don't understand what you are trying to say in the first paragraph.

You can easily say that no one would be successful without roads or
electricity, so there is always some percentage of a person's success derived
from society.

Society lowers the cost of innovation far more than any perceived hurdles it
may place in front of people, in all but the most extreme cases (like Syria
maybe?).

So, what do you mean?

~~~
snitko
_> You can easily say that no one would be successful without roads or
electricity_

You can? A lot of people became successful without roads or electricity in the
past. Actually, I'm pretty sure those who built roads or invented electricity
became successful without those things. Then others paid them to use their
invention and that paved way to their success.

Of course everyone's success depends on many things that were built before.
But to claim that only a government can build those things and therefore you
are forever indebted to the society as a whole is just plain wrong.

Are you willing to pay Apple for the rest of your life because it invented the
modern smartphone?

~~~
tks2103
What?

I'm willing to pay Apple for a smartphone. Why would I pay them for life? Even
if I did pay them for life, what would that have to do with anything?

Nowadays, everyone uses roads. If you claim today that you are a self-made
person that doesn't owe anything to anyone, I could just point out that roads
exist and without them you would not be successful. I guess Genghis Khan was
pretty successful without roads, but what does that have to do with anything?

Right now, other people make things that allow individuals to succeed. Right
now, if you succeed and claim other people did not have anything to do with
it, you are lying to yourself and everyone else.

Edit: And therefore, the idea of a rich man who made his money 'honestly' is
too simple to be useful in any framework that manages a modern society. The
definition of 'honest' is missing.

~~~
snitko
I'm trying to say here that government is not the only possible provider of
things it currently monopolistically provides. If you claim everyone uses
roads therefore everyone should pay taxes to keep those roads well maintained
I'd say you're only partially right. Government, for the most part, keeps
private companies away from owning roads. If there was no government, do you
think there would be no roads? Of course there would! And people would be
willing to pay for using them. Except that those who use roads once a week
wouldn't subsidize those who use them every day.

 _> if you succeed and claim other people did not have anything to do with it,
you are lying to yourself and everyone else_

No, I don't claim that. What I claim is that I would like to know exactly who
those people are. If I use a road to deliver what my company produces, I would
like to pay for this road before I actually use it. Now my business may fail,
or it may succeed, but the owner of the road gets paid. I don't owe anyone
more than they asked me to pay at that moment in time. Nor do they. I think
that's fair. Don't you?

~~~
tks2103
Infrastructure is very complicated.

Typically if you have a guy build a road and you let that guy control the
pricing, he charges a lot because he has a monopoly. That transfers wealth to
the road builder at the expense of all the would-be businessmen who would
build institutions that use the road.

So societies use governments to control a relationship between the manager of
the road and the people that use the road. The price to use the road dips
because of the enhanced bargaining power of the people that use the road
through the institution of government. Typically governments even subsidize
the unit cost of using the road by paying the road manager directly up front,
because the corresponding increase in business is worth it across a society.

I think that if you have a system that focuses on individuals and their
relationships to roads and road builders without regulation by a large third
party that represents all members of the society, you'll get a situation where
the road builder uses the monopoly power to price road usage so highly that
business investment is hampered. Usually people use government institutions to
manage this sort of thing, and usually it works pretty good.

I think this is pretty basic stuff, no?

~~~
snitko
So why do you believe a company which manages the road is a monopolist? Where
did you get this? Why is it impossible to build another road? Or go by train?
Or by air? By no means road companies would be monopolies.

A government, on the other hand, is a monopoly. Furthermore, if for some
reason I dislike the quality of the services that are provided or I dislike
the way they are provided (for example, I ride a motorcycle and government
requires me to wear a helmet, even though it is only my life I risk by not
wearing it) then I still have to pay. If I don't pay, I get fined and may go
to jail. It's not just a monopoly, it's extortion.

Imagine your ISP knocks on your door and says: "Hello sir. You are going to
pay us this amount a month, we will provide you with internet access. The
quality is going to be completely up to us, you can't unsubscribe and if you
stop paying, you'll be fined and may go to jail. Oh, and there are practically
no competitors, only very expensive ones. And if you use them, you would still
have to pay us." How would you like that? Why roads are different? Nearly
everyone uses Internet these days, just like they use roads.

Finally, you made this point _" Typically governments even subsidize the unit
cost of using the road"_. Actually, taxpayers subsidize it, not government.
Government doesn't have any money.

------
joelrunyon
Honest question:

Almost no one here will question the effect of the 80/20 principle has on
their business[1].

So why are people surprised when it rears its head in income statistics?

[1]
[http://en.wikipedia.org/wiki/Pareto_principle](http://en.wikipedia.org/wiki/Pareto_principle)

~~~
anonymfus
Because it's different in different countries and hints that USA is extraction
economics like all the world before XIX century and modern dictatorships where
elite is more interested in redistribution of existing wealth than creating
new.

~~~
Glide
Wait. So we're not in a country that is purposefully moving backwards when it
comes to distribution of wealth? /s.

I think the more interesting part of these graphs is that economic mobility
can regress in society and the USA has not hit a point in its development
where that is not true. It's like the price of freedom being eternally
vigilant thing except most of society is unaware or powerless.

------
bsbechtel
Maybe the title of this link should be "When Value is Created, Who Captures
it?" That is the more relevant question. When someone invents something new
that creates more value for society, it can go to 5 different parties -
customers, the business founder, shareholders, employees, and the government.
Right now, most value creation is shared between customers, founders,
shareholders, and the government, with very little going to the employees. If
the innovation that created more value was invented by an employee within a
firm, why is it that the other four parties are the ones to receive the
majority of the wealth created by the innovation?

The Facebook 'like' button has arguably created billions of dollars in wealth
for Mark Zuckerberg and Facebook's early shareholders. What percentage of that
wealth went to the employees who came up with the idea? This is the question
we should be asking.

------
Brakenshire
At least over the past 25 years, the picture is fairly different for other
developed countries; in the UK, over that time period, there have been
significant inflation-adjusted pay increases across all wage categories:

[http://www.ons.gov.uk/ons/rel/lmac/earnings-in-the-uk-
over-t...](http://www.ons.gov.uk/ons/rel/lmac/earnings-in-the-uk-over-the-
past-25-years/2012/rpt-earnings-in-the-uk-over-the-past-25-years.html#tab-
Real-wages-up-62--on-average-over-the-past-25-years)

Inequality has increased, but the poor and the middle-income have also seen
significant increases in their prosperity.

------
tinco
For me the chart loaded at a point the average income shrunk, and the richest
actually got most of that shrinkage. Since that point there seems to have been
no point at which the average income had shrunk. But, the graph goes until
2008, which was the start of the recession. Isn't the period after 2008 not
the most interesting period? Didn't the average income drop? Who took the
heaviest blow there?

Not that the rich would feel much if they would lose 50% of their income, but
it would at least mean that some of the theory is true, and the rich really do
carry more risk, and in that way protect the stability of the overall economy.

------
velodrome
The graph is pretty consistent up until the 1970s (the last 40 years).

What the graph does not tell you is that US dollar was no longer pegged to
gold after 1971 (Bretton Woods). The currency devalued over time and the
wealthy were in diverse asset classes that retained or grew in value over time
(such as equities, forex, real estate, etc). The rest of society kept most of
their money in cash.

~~~
gizmo
> The rest of society kept most of their money in cash.

Not true. Regular people have most of their wealth in their house and cars.
That's if they have net wealth in the first place. (And 401ks and other mutual
funds, which is also not cash money).

According to the census bureau households(depending on income or asset
quintile) have between $200 and $1800 in their checking account.
([http://www.census.gov/people/wealth/](http://www.census.gov/people/wealth/))

~~~
velodrome
Sorry, I did generalize quite a bit. But your right, they did not keep their
money in cash. Much worse, they converted their excess cash to illiquid and/or
depreciating assets.

Also, many people do not have access to a 401k: 50.6% of Americans work for an
employer that sponsors a retirement savings plan. 40.4% of employees utilized
a 401(k) or pension in 2008.

[http://www.ebri.org/pdf/briefspdf/EBRI_IB_11-2009_No336_Ret-...](http://www.ebri.org/pdf/briefspdf/EBRI_IB_11-2009_No336_Ret-
Part.pdf)

If they do have a 401k plan, it really depends what assets you can buy. If the
plan offered only allows you to purchase mutual funds with high load and
yearly fees, your wealth is being transferred to others. Over time, you will
lose money vs the index. There are also penalties for early withdrawals.

Also, people are not forced to put money in a 401k or to buy a house or car.
They could save that money and do something productive with it. On that link
you posted, the wealthy DID NOT have most of their wealth in a 401k, it was in
equities, equity in their business, rental properties, and other assets.

So, the point I was making was - the wealthy put the money to work for them
rather than other way around. Imagine if you had excess money during the 2008
recession, you could have had many opportunities to make money. Most had their
money (as you mentioned) tied up in their house or car. So, really it is about
the wealthy being in a position to advantage of all available opportunities.

------
Arun2009
Does anyone know why this must be so? I.e., is there any fundamental reason
that, provided no-one breaks any laws, in an increasingly globalized,
interconnected, technology-centric world, the majority of economic gains must
_always_ go to those who own more capital than others in a free market?

~~~
Qantourisc
Yes it's called capitalism. Or how my parents say it: "money makes money".

To fix this you need to remove money makes money.

Examples of money makes money that would need fixing:

To save money (i.e. by insulating your house) you need money

To get a better job, you need time/education, this also requires money up
front.

To create a new big profitable company, you need money.

If your a bank you need money (unless your local law doesn't require this) to
get money by the interest.

If you wish to get interest of money you need money.

To buy a house, you need money, after a 30 years, you get more money back then
you invested.

------
mmcconnell1618
I think the more interesting question is what changed around the 1980 time
frame that caused such a dramatic increase in the share of wealth for the top
1 percent? There appears to be a slight ramp up from the early 1900's to
1970's but in 1980 the slope jumps up.

~~~
lawtguy
It starts in the 1910's and 20's with Henry Ford: mass production of goods
while paying your workers a high enough wage to buy your own products. This
gets further codified in the 1930s with the New Deal: tax supported social
safety nets, government support for unions and corporate regulation. The
upshot of this is a new social consensus: the rich cannot get richer by taking
a bigger slice of the pie, only by growing the pie.

Then World War II has two more effects: it finally kicks the U.S. economy into
gear through massive government spending but maybe more important the rest of
the first world (Europe and Japan) has most of it's infrastructure heavily
damaged. The only other potential competitor, the Soviet Union, disengages
from the capitalist economies of the 1st world and builds it own 2nd world of
communist countries. This leads to spectacular growth in 1950s and 1960s for
the U.S. and with the New Deal consensus it mostly goes to the working class
and the middle class.

In the 1970s, the consensus starts to break down primarily due to two factors:
automation and globalization. The rest of the world begins to recover and
compete. And because thy haven't had the same sort of growth the U.S. did,
their workers are much cheaper. Additional automation begins to create an
ever-lowering ceiling on how much a low skill job is worth. Once the machinery
to automate a job becomes cheaper than the worker, that worker is out of a
job.

In the 1980s, the business owners (who never really like the New Deal) use
their newfound leverage to create a coalition with libertarians and social
conservatives to essentially dismember the government portion of the New Deal.
Once this is done, the pie continues to grow, but the rich have start to grow
their portion of it.

------
seanalltogether
I'm fascinated by the period between 1945 and 1970. People have such a rosy
view of that time period. The graphs shows that is really the only time that
the middle class made gains at around the same rate as the richest 10%

------
benmmurphy
one problem with this graph is it based on gross income before transfers. it
is quite possibly that if we take the actions to make a more 'just' society by
increasing taxes on the rich and making greater transfers to the poor that
this graph will look even worse. i think after tax and after transfer income
is what really matters so I think it would be better if the graph showed this.
but possibly it doesn't because the story would not be as bad.

------
spindritf
The richest and most leveraged always gain and lose the most. Pretty obvious
but nice graph. And you can link to any period, like the dotcom bubble
bursting

[http://www.stateofworkingamerica.org/who-
gains/#/?start=2000...](http://www.stateofworkingamerica.org/who-
gains/#/?start=2000&end=2002)

------
Theodores
Clever infographic, however, in the words of Leonard Cohen:

Everybody knows that the dice are loaded

Everybody rolls with their fingers crossed

Everybody knows that the war is over

Everybody knows the good guys lost

Everybody knows the fight was fixed

The poor stay poor, the rich get rich

That's how it goes

Everybody knows

Everybody knows that the boat is leaking

Everybody knows that the captain lied

Everybody got this broken feeling

Like their father or their dog just died

Everybody talking to their pockets

Everybody wants a box of chocolates

And a long stem rose

Everybody knows

