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The Biggest Economic Divides Aren’t Regional, They’re Local

nytimes.com

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Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#31
post #20

Earlier quoted context omitted.

https://www.theatlantic.com/business/archive/2017/06/the-hoa... > They then pass those advantages onto their children, with parents placing a “glass floor” under their kids. They ensure they grow up in nice zip codes, provide social connections that make a difference when entering the labor force, help with internships, aid with tuition and home-buying, and schmooze with college admissions officers. All the while, th…

The belief system here makes me incredulous. How exactly does the average upper middle class worker support 'occupational licensing' and 'restrictions on the immigration of white-collar professionals'? Can you outline the exact steps that they've taken to, say, support occupational licensing? When did a pro-occupational licensing candidate run for office? The latter is especially ironic because so many people believe…

All of this is covered in Dream Horders (the linked book).

Occupational licensing is a weaker argument (it's not covered in Reeve's original nytimes article: https://www.nytimes.com/2017/06/10/opinion/sunday/stop-prete...), but there's something to be said for how expensive it is to get through medical or law school (in part due to licensing requirements).

I haven't read the book, but I imagine immigration and licensing connect. It's known to be difficult for foreign-trained doctors to ramp up in the US (https://www.pri.org/stories/2018-03-26/highly-trained-and-ed...) and lawyers have difficulties just changing states due to state-level bar exams.

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#32
post #26

Earlier quoted context omitted.

> Top 1% income earners are typically business founder-owners No, they're not. The top 1% are people who work "normal" high-paying jobs [1]. You're probably thinking a smaller slice like 0.1%. Also if you're going to claim that someone's work is debunked, at least point to some references to back that up. [1] https://archive.nytimes.com/www.nytimes.com/packages/html/ne...

https://www.nber.org/papers/w25442 'Have the idle rich replaced the working rich at the top of the U.S. income distribution? Using tax data linking 11 million firms to their owners, this paper finds that entrepreneurs who actively manage their firms are key for top income inequality. Most top income is non-wage income, a primary source of which is private business profit. These profits accrue to working-age owners of…

A simple way to put this is that today's 1% isn't yesterday's 1%. Static inequality is oppressive. Dynamic inequality is entrepreneurship. PG explains this well in his inequality essay.

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#33
post #26

Earlier quoted context omitted.

> Top 1% income earners are typically business founder-owners No, they're not. The top 1% are people who work "normal" high-paying jobs [1]. You're probably thinking a smaller slice like 0.1%. Also if you're going to claim that someone's work is debunked, at least point to some references to back that up. [1] https://archive.nytimes.com/www.nytimes.com/packages/html/ne...

https://www.nber.org/papers/w25442 'Have the idle rich replaced the working rich at the top of the U.S. income distribution? Using tax data linking 11 million firms to their owners, this paper finds that entrepreneurs who actively manage their firms are key for top income inequality. Most top income is non-wage income, a primary source of which is private business profit. These profits accrue to working-age owners of…

I went to the trouble of actually buying the paper you cited and, surprise, it doesn't say what you seem to think (did you only read the abstract?). Here are the key findings:

- Among the top 1%, 69% earn pass-through business income in some form

- At the 99th percentile, business income only accounts for about 40% of total income

The majority of what is described in the abstract (and a lot of the focus in the paper) is on the 0.1%, not the 1%. If you dig through their data and filter out the clear focus on $1M+ earners, the picture is pretty clear: the 1% are mostly working people who supplement wage income with some kind of side business income. This is exactly what you would expect if you think about lawyers, doctors, software developers, consultants, etc. When you get near the 0.1% level the picture changes significantly and business income takes over along with number of employees at owned businesses.

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#34
post #30

Earlier quoted context omitted.

Forbes 400 for 2018: https://www.forbes.com/forbes-400/#715eb42a7e2f Looking at top 40 (because it gets boring to look up bios after a while), I see the following folks who inherited companies founded by their family members: Charles Koch, David Koch, Jim Walton, Alice Walton, Robson Walton, Jacqueline Mars, John Mars, Abigail Johnson, Donald Bren, Lukas Walton, Leonard Lauder. That is 11 out of top 40 (or 27.5%) hav…

The Kochs are active executives within their companies, which is a huge % of net worth. Wikipedia states that their stakes were worth $1.1 billion in 1983 when the brothers took them over, obviously they are worth vastly more now. It's not like they're rentiers who never worked- they still created most of their current wealth. This seems to be true for a number of 2nd generation wealthy. If r > g is true- why are the…

You seem to be assuming that the ultra rich keep their wealth as personal wealth. This is pretty far from what actually happens. In most cases they setup foundations with large endowments instead of directly passing it to heirs (though the heirs are often board members and never have to work a day in their life). You mention the Rockefellers as an example. Guess what foundation has a $4.1 billion endowment, 105 years after its founding? Where is Bill Gates putting all his money? A foundation.

See where I'm going with this? I'll take arguments against r > g seriously when they account for institutional wealth instead of just personal wealth.

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#35

This seems like an obvious consequence of globalism and the nature of the labor market. Also seems consistent with Picketty’s thesis about capital growth. The days when being a US citizen gauranteed affluence are coming to a close. To see the future look at California; refugees from Guatemala living amongst young millionaires, mostly immigrants also. A global community, sliced into ever narrower tranches by the invis…

> The days when being a US citizen gauranteed affluence are coming to a close.

Those days never existed. The US offered opportunities, not guarantees.

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#36
post #8

This seems like an obvious consequence of globalism and the nature of the labor market. Also seems consistent with Picketty’s thesis about capital growth. The days when being a US citizen gauranteed affluence are coming to a close. To see the future look at California; refugees from Guatemala living amongst young millionaires, mostly immigrants also. A global community, sliced into ever narrower tranches by the invis…

Much of Piketty's work has been widely debunked, especially r > g, so I'm not sure why one would start with his thesis. Top 1% income earners are typically business founder-owners, and reams of evidence from the Forbes 400 to tax data show that the wealthiest in US society are entrepreneurs who again created their own business- not rentiers living off of inherited wealth. (Anecdotally, children of inherited wealth th…

>Top 1% income earners are typically business founder-owners,

First, 1% in income puts you around $450K/yr... and that's usually household, so if two software engineers get married and move to the bay area, they have a reasonable shot of making that cut mid to late career. (from what I've seen, if they get a job at a big company and then talk that company into transferring them, they have a good shot at keeping that ridiculous income and living somewhere where it means something. They have less of a shot at getting the really sweet raises and bonuses at those other places, though.)

I know a bunch of people in that box. For that matter, most of them would argue they aren't rich at all. I remember the other day, one of my co-workers, who I am fairly certain meets the above standard, was claiming that in the bay area, this salary is not rich, "just normal" - I explained to him that the median household income in santa clara county was like $70K/yr, and he was aghast. "How would you even live on that?" and he has a point... I mean, I lived on less than that when I was running a company and living here, but yeah, rent is nuts to the point where I know several people who would be 1%ers if they married someone of their own income who live with roommates.

(I still have to laugh at people who are literal millionaires who claim they are "just normal." - but I kind of see their point; I don't make quite that much, but it's really pretty reasonable to think that if I worked a little harder that I could.)

>wealthiest in US society are entrepreneurs who again created their own business- not rentiers living off of inherited wealth.

See... it's very often not entirely one or the other. Would Bill Gates be super rich if his mom wasn't on the United Way board with the chairman of IBM? I mean, I'm not saying that Bill didn't do any of the work or that it was all inherited... I'm just saying that his parents handed him... certain advantages, and while I'm sure his intelligence and hard work would take him far no matter how poor he was born, if he started where most people start? while I'm sure he wouldn't stay poor, it's pretty unlikely that he would have gotten so rich that you or I would know his name today.

Nearly all those 1%ers I work with? they came from families that were at least dentist rich, and were sent to really good schools. Nearly all the folks on H1B visas I know are really sharp, very educated and have parents who are very politically connected, and rich for their country of origin (even if not always rich by US standards)

Hell, compared to most of my co-workers, I grew up poor, but even I had parents who worked in the computer industry. I got several jobs at critical points in my career through neighborhood and family connections. I know people who are just as good as me who didn't have those family connections early in their career, and several of them fell out of the industry entirely in 2001; me? I got a job a company started by someone who had interned for my father, many years ago, and I worked through the dot-com crash. I mean, clearly my connections were not good enough to get me a job I couldn't reasonably do, but it certainly got me the interview, at a time when such things were hard to come by, and probably gave me a leg up over the other applicants who could hurdle the minimum bar. (Incidentally, a few years later, I started my own company, and hired a few of those less connected but just as good as I am people... It didn't work out; Business is a lot harder than it looks, and I don't have those sorts of connections, but it was really interesting how I became technically bourgeois (and not in the poor taste in lawn furniture sense... I mean that I owned means of production and employed other people, combining my labor and capital to produce a product) but at the same time, my income dropped precipitously. Like i made rent, sure, but the total revenue was about a L6 bay area SWE total comp number, there were were other employees to pay, datacenter bills, and servers to buy. So when I sold out and got a regular job, it was like a 4x raise for me.)

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#37
post #26

Earlier quoted context omitted.

> Top 1% income earners are typically business founder-owners No, they're not. The top 1% are people who work "normal" high-paying jobs [1]. You're probably thinking a smaller slice like 0.1%. Also if you're going to claim that someone's work is debunked, at least point to some references to back that up. [1] https://archive.nytimes.com/www.nytimes.com/packages/html/ne...

https://www.nber.org/papers/w25442 'Have the idle rich replaced the working rich at the top of the U.S. income distribution? Using tax data linking 11 million firms to their owners, this paper finds that entrepreneurs who actively manage their firms are key for top income inequality. Most top income is non-wage income, a primary source of which is private business profit. These profits accrue to working-age owners of…

One reason the Forbes list is so dominated by self-made entrepreneurs is that it's relatively easy to verify their wealth based on public records. Jeff Bezos' net worth is, to a first approximation, the same as his stake in Amazon, which is regularly reported in SEC filings. The wealth of the Rockefellers/Morgans/Vanderbilts is less concentrated in any single company, so if they don't voluntarily disclose their finances to Forbes, they stay off the list, regardless of what their net worth is.

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#38

This seems like an obvious consequence of globalism and the nature of the labor market. Also seems consistent with Picketty’s thesis about capital growth. The days when being a US citizen gauranteed affluence are coming to a close. To see the future look at California; refugees from Guatemala living amongst young millionaires, mostly immigrants also. A global community, sliced into ever narrower tranches by the invis…

I don’t see how this conclusion is supported, much less cited, by the NYT article.

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#39
post #26

Earlier quoted context omitted.

https://www.nber.org/papers/w25442 'Have the idle rich replaced the working rich at the top of the U.S. income distribution? Using tax data linking 11 million firms to their owners, this paper finds that entrepreneurs who actively manage their firms are key for top income inequality. Most top income is non-wage income, a primary source of which is private business profit. These profits accrue to working-age owners of…

Forbes 400 for 2018: https://www.forbes.com/forbes-400/#715eb42a7e2f Looking at top 40 (because it gets boring to look up bios after a while), I see the following folks who inherited companies founded by their family members: Charles Koch, David Koch, Jim Walton, Alice Walton, Robson Walton, Jacqueline Mars, John Mars, Abigail Johnson, Donald Bren, Lukas Walton, Leonard Lauder. That is 11 out of top 40 (or 27.5%) hav…

The Koch brothers would be nowhere near the top 40 based on the wealth they inherited. They may have inherited the companies but their wealth is not mostly inherited. I’m not saying they could have done it from a standing start but the Koch brothers are closer to Bezos or Gates than the Walton heirs.

Re: The Biggest Economic Divides Aren’t Regional, They’re Local

#40
post #30

Earlier quoted context omitted.

The Kochs are active executives within their companies, which is a huge % of net worth. Wikipedia states that their stakes were worth $1.1 billion in 1983 when the brothers took them over, obviously they are worth vastly more now. It's not like they're rentiers who never worked- they still created most of their current wealth. This seems to be true for a number of 2nd generation wealthy. If r > g is true- why are the…

You seem to be assuming that the ultra rich keep their wealth as personal wealth. This is pretty far from what actually happens. In most cases they setup foundations with large endowments instead of directly passing it to heirs (though the heirs are often board members and never have to work a day in their life). You mention the Rockefellers as an example. Guess what foundation has a $4.1 billion endowment, 105 years…

If you don’t hold wealth as personal wealth you don’t hold it at all. It’s not yours.

There are no Rockefellers on the board of the Rockefeller Foundation.

https://www.bloomberg.com/research/stocks/private/board.asp?...

One of the directors of the Ford Foundation is a Ford.

https://www.tfff.org/who-we-are/board-directors

None of the directors of the Carnegie Corporation are Carnegies.

https://www.carnegie.org/about/trustees-and-staff/

Two of the directors of the Hearst Foundation are Hearsts, of thirteen.

If these foundations are attempts to keep wealth in the family they’re utter failures. At the peak of his personal wealth Rockefeller was worth over 1% of US GDP. $4 billion is nothing compared to that.

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