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To Understand Rising Inequality, Consider Janitors

nytimes.com

191–200 of 694 posts

Re: To Understand Rising Inequality, Consider Janitors

#191

It sounds like the real reason for inequality is that the pay for "janitorial work" has simply decreased. The article makes a point to say that the pay is the same, accounting for inflation, but it's disingenuous not to highlight total comp, which Ramos had significantly less of than Evans.

The reason for inequality is that people are not equal. The work they do produce is not equal in value. More people can do a janitor's job, and/or do without a janitor, so the value of a janitor's work is less. More supply, elastic demand, means lower price point. Through technology, some people are able to produce much more than others, so inequality is inevitable unless there is a balancing force (aka taxation).

Your first paragraph, on supply and demand, is fairly accurate, but to say that "some people are able to produce much more than others" is oversimplifying.

Consider a fast food restaurant with one cleaner, two people at the tills, three people in the kitchen, and one manager. Remove any of them and the lines will become too long, the place will become unacceptably dirty, etc. However, none of the employees is "producing" more than any other.

Re: To Understand Rising Inequality, Consider Janitors

#192
post #103

Earlier quoted context omitted.

The reason for inequality is that people are not equal. The work they do produce is not equal in value. More people can do a janitor's job, and/or do without a janitor, so the value of a janitor's work is less. More supply, elastic demand, means lower price point. Through technology, some people are able to produce much more than others, so inequality is inevitable unless there is a balancing force (aka taxation).

Indeed, the value of keeping toilets sanitary is far greater than that of creating the next web app. "This work is essential to the health of the population, but because of something to do with marginal economics and supply and demand and weak labor laws and class power and reserve supply of labor, I don't have to pay a proper wage, or even treat them like human beings!"

I'd say most web app developers can keep the toilets sanitary, if needed, with little training.

Re: To Understand Rising Inequality, Consider Janitors

#193

Earlier quoted context omitted.

I'm curious where you think their money is.

invested in siloed low risk fixed income vehicles ensuring that the funds don't circulate through the broader economy.

The reason fixed income vehicles pay out income is because those funds are spent on productive investments.

So, they do circulate through the broader economy. There's no silo of cash sitting somewhere paying dividends.

Re: To Understand Rising Inequality, Consider Janitors

#194
post #153

Earlier quoted context omitted.

I see you have been down voted, yet no one has given an explanation as to why you are wrong. I was thinking the same thing. I would appreciate it if someone could explain to me why this line of thinking is wrong.

I will take a shot at explaining the problem with a gold standard. 1. We want slight 1%-2% inflation to prevent hoarding from slowing the economy to a crawl. Why invest or buy something today when the cash stuffed in my mattress will buy something better in 6 months. 2. If you agree with the first statement, why tie the rate of growth of money to how fast you can dig a metal out of the ground? Let "experts" survey th…

Again, that is not disputing the facts I laid out. We can argue about the gold standard but that isn't what my argument was. I was pointing out that the currency is worthless because it's fiat. Also inflation is a hidden tax.

Re: To Understand Rising Inequality, Consider Janitors

#195
post #180

We should tax wealth, not income. [1] The majority of income the top 0.1% make is from investments and gets taxed as capital gains, only about 15% of their income is taxed as ordinary income. [2][3] We have an economic system where it's dramatically easier to make money the more money you already have. If you have $50M, you can park it in an index fund to get 4% returns and make $2M every year just off of your invest…

I agree, but how would we enforce a wealth tax? Seems like it'd be really easy for rich people to hide their money in assets. What about just printing money? Not ideal obviously, but there'd be no way to avoid the inflation "tax".

Inflation harms wage earners farrrr more than capital holders. Capital holders can put it into assets that rise with inflation. IMO it's one of the driving factors of inequality of the past few decades.

Those with capital / assets can leverage up, borrow more money, and then pay it back with lesser inflated dollars.

Re: To Understand Rising Inequality, Consider Janitors

#196

Earlier quoted context omitted.

"Rich people invest all of their money back into the economy" - if it really worked like that we wouldn't be discussing inequality.

I'm curious where you think their money is.

I suspect a lot of it has been invested in overseas locations, including manufacturing operations globally. It may be that the money did indeed "trickle down", but not into the US.

Re: To Understand Rising Inequality, Consider Janitors

#197

The underlying cause of this whole issue is the changes in tax policy instated in the Tax Reform Act of 1986, previously income was taxed at higher rates unless deductions were utilized which forced those earnings back into the economy creating jobs funding research, etc.. As it's become easier to retain more earnings there's little incentive not to optimize an entire corporation solely with the purpose of generating…

Income inequality has been increasing since the 1970s, so I submit the underlying cause cannot have been a policy change in 1986.

Look at this chart, you can see that inflation started to increase really fast since the 70's: http://www.wolframalpha.com/input/?i=1000+1776+dollars+in+20...

(sometime WolframAlpha doesn't display the chart you might need to reload the page until it does, then click on the button that say "Linear scale" to display in a linear scale instead of a log scale)

Re: To Understand Rising Inequality, Consider Janitors

#198
post #180

We should tax wealth, not income. [1] The majority of income the top 0.1% make is from investments and gets taxed as capital gains, only about 15% of their income is taxed as ordinary income. [2][3] We have an economic system where it's dramatically easier to make money the more money you already have. If you have $50M, you can park it in an index fund to get 4% returns and make $2M every year just off of your invest…

I agree, but how would we enforce a wealth tax? Seems like it'd be really easy for rich people to hide their money in assets. What about just printing money? Not ideal obviously, but there'd be no way to avoid the inflation "tax".

Avoiding inflation due to printing more cash would look like not holding cash. Your proposal would tax people whose lives involve mostly currency, not other assets. I think it would actually have the opposite of the effect you intend.

Re: To Understand Rising Inequality, Consider Janitors

#199

Earlier quoted context omitted.

I'm not sure that tasking the government with job creation is a good solution. There are many kinds of wealth redistribution that people are talking about these days and I'm only pointing out that it may be necessary. What fraction of wealth are the richest among us spending and investing rather than saving? Yes Bill Gates and Warren Buffett are saving millions of lives, and yes we have Facebook now. But what should…

> What fraction of wealth are the richest among us spending and investing rather than saving? 100%. Nobody has a Scrooge McDuck cash vault. Bank deposits are also spent, in the form of depositor's money being loaned out by the bank.

I should said: "Investing in things that help society." Arguably, the bit of money in banks that gets loaned out as mortgages and then repackaged and sold off as mortgage-backed securities which then get bet on with even more leverage as collateralized debt obligations is helping the financial industry middle-men who cash out on the fees a lot.

Obviously the classic depositing/loaning service of banks is essential for progress. But hundreds of billions of those deposits are going to making the rich richer. It would be nice if we could come up with a way to provide capital to people who need it while also maintaining a strong middle class. I don't know how to do this but it's worth talking about.

What I really want to know is how much of people's savings (passively invested in banks and things like index funds) is going to fund things like the new Facebook vs. how much is not really doing that much.

Re: To Understand Rising Inequality, Consider Janitors

#200
post #180

We should tax wealth, not income. [1] The majority of income the top 0.1% make is from investments and gets taxed as capital gains, only about 15% of their income is taxed as ordinary income. [2][3] We have an economic system where it's dramatically easier to make money the more money you already have. If you have $50M, you can park it in an index fund to get 4% returns and make $2M every year just off of your invest…

Maybe we should stop thinking taxes are the solution to inequality. "Cutting all the high trees so the forest looks even".
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