It's hard to ignore the thought that the inflexion point and the beginning of the Reagan era coincide. I try to push the thought away, but it keeps coming back.
Share of Income Gains by Quintile - Great Depression til Now
181–190 of 302 posts
Re: Share of Income Gains by Quintile - Great Depression til Now
#182Earlier quoted context omitted.
"Technological progress should cause increasing economic inequality " Does that mean you are unfazed by growing inequality, and view it as an unavoidable byproduct of progress? Or do you believe economic inequality is a negative externality (like pollution) that needs to be remedied?
pg's thoughts on inequality: http://paulgraham.com/inequality.html
Well put, as pg's essays usually are. But I think there are rather large gaps:
1) He glosses together reduction of income inequality with elimination of it. The zero inequality thing has been tried and failed.
2) one of his arguments is that better education of the poor will increase wealth inequality, because it will increase the number of customers and the number of possible entrepreneurs.
While the premises are no doubt true, the conclusion isn't. There are other inequality-decreasing factors that might well have a stronger impact. At the very least, a better educated population might have the wherewithal to organize and vote for increased taxes on wealthy people. Less cynically, better educated people need less stuff to get by (e.g. their cars last longer), and they are savvier consumers. And empirically, if one excludes the U.S., the best educated countries tend to also have the lowest income inequality.
3) pg neglects the costs of U.S. monetary policy on risk taking. The past 20 years have seen low inflation. When inflation is low, there is less need for money to be invested in order to preserve wealth. With higher rates of inflation, investors have no choice but to try and extract greater value out of the wealth they have if they want to keep up.
4) A related point: pg's argument is that high taxes reduce the large rewards founders get, causing them to take smaller risks. Yet there is nothing intrinsic about taxation that necessitates the burden fall primarily on the recently wealthy. PG's argument doesn't easily apply to "old money" -- would the decrease in upside of a wealth tax outweigh the incentives to invest imposed by a wealth tax?
From a tech progress/startup perspective, wouldn't the elimination of capital gains in favor of a tax on wealth cause exactly the right kinds of incentives for starting companies?
Re: Share of Income Gains by Quintile - Great Depression til Now
#183Technological progress should cause increasing economic inequality, because the bottom end of the scale is firmly anchored at zero (someone taking a vacation), while technology gives the top end ever more powerful levers. So the interesting question is not why economic inequality is increasing, but why for a few decades in the mid twentieth century the trend was reversed. There are probably several factors at work he…
As a US citizen you may not be aware of this, but the time between 1970 and 1980 was also when full employment was effectively abandoned as a policy goal in most Western countries. In countries like France, Germany and Australia, unemployment was constantly below 4% for many decades after WWII, even below 1% in many cases. What's more, rises in the unemployment rate due to recessions were quickly and successfully fou…
In fairness (in the UK at least) the decoupling of unemployment and inflation occurred in the 1970s well before minimising unemployment rates ceased to become an objective of government policy at the end of that decade. Exogenous shocks like oil prices and trend decline in the competitiveness of (UK) manufacturing helped drive this.
Thatcher's shock doctrine may have had many flaws of its own but the abandonment of targeting unemployment via monetary policy was preceded by the previous administrations' failures to actually achieve their unemployment objectives.
Re: Share of Income Gains by Quintile - Great Depression til Now
#184Earlier quoted context omitted.
>The economic growth since 1978 was, for the most part, produced by the efforts of 10% of the population I don't see how that could be true. productivity gains have been experienced across all levels of the income scale so surely that growth is attributable to more than just the top 10%. Just because that's where the most income growth has been doesn't mean that that is where the growth has been produced, its just wh…
I suspect that supply and demand have a lot to do with it. Capital and innovation is scarcer than labor, especially unskilled or lower skilled labor.
yeah that is definitely true, but the underlying issue is fairness (which is trickier).
Re: Share of Income Gains by Quintile - Great Depression til Now
#185Technological progress should cause increasing economic inequality, because the bottom end of the scale is firmly anchored at zero (someone taking a vacation), while technology gives the top end ever more powerful levers. So the interesting question is not why economic inequality is increasing, but why for a few decades in the mid twentieth century the trend was reversed. There are probably several factors at work he…
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Re: Share of Income Gains by Quintile - Great Depression til Now
#186Technological progress should cause increasing economic inequality, because the bottom end of the scale is firmly anchored at zero (someone taking a vacation), while technology gives the top end ever more powerful levers. So the interesting question is not why economic inequality is increasing, but why for a few decades in the mid twentieth century the trend was reversed. There are probably several factors at work he…
"I think the key to the answer is the large corporation. The period of flattening coincides with the heyday of the large corporation. Large corporations tend to decrease economic inequality. " I think this is off the mark. This time period corresponds directly to the rise of the financial industry which is mostly independent of firm size.
I'm inclined to agree. It's striking how the graph showing the wealth flow to the top 1% correlates with changes to the capital gains tax rate. There are benefits to a low cap gains rate, but below a certain level, it seems associated with slower growth, more of the income flowing to the top, and more volatility and crashes.
You can make the argument it's goosing the economy to concentrate more and more capital into a single point of failure, a deeply interconnected network of financial firms. And you gotta wonder what the economy would look like, if Wall Street hadn't been siphoning off so much of the brains and capital to play card tricks. It might otherwise have gone towards, say, innovations in healthcare, transportation, energy, even domestic manufacturing.
Re: Share of Income Gains by Quintile - Great Depression til Now
#187Earlier quoted context omitted.
The poor are not getting poorer. In absolute terms real income for the bottom quintile has increased. In addition, technological progress has drastically reduced the cost of many luxury items and put them in reach of the poor. Today the "poor" in America not only have clean drinking water and electricity they also have cell phones, internet access, large screen tvs, dvrs, cars, refrigerators, dish and clothes washers…
In what world can someone making $25k/yr (according to your graph of the 20th percentile) afford rent, cell phones, internet access, large screen tvs, dvrs, cars, refrigerators, dish and clothes washers, etc.? In most metropolitan areas just rent will eat up half of that, health insurance much of the rest, and a car all the rest. And don't even think about trying to buy a family with kids health insurance -- the aver…
Outside of a metropolitan area, it's easy (I've done it, and had plenty of money to spare). Inside of a metropolitan area it's a lot harder and probably requires roommates or living in the suburbs or finding a particularly cheap area to live.
Re: Share of Income Gains by Quintile - Great Depression til Now
#188Earlier quoted context omitted.
Yes -- many families have shifted from single to dual-earner in order to maintain the same standard of living, so the household income charts really understate the decline in individual wages over this period.
That is not true. They vastly overstate the decline in wages, due to the rise of more single person households. See: http://www.google.com/publicdata/explore?ds=a7jenngfc4um7_&#... Individual wages have risen steadily since 1910, with no gaps. The household income chart is a misleading chart.
That chart shows per capita income without adjusting for inflation. It's not very useful for drawing conclusions about real income.
And per capita is a simple average, while looking at medians or quintiles gives you a clearer picture. Per capita, a roomful of middle class workers all become billionaires if Bill Gates walks in.
Re: Share of Income Gains by Quintile - Great Depression til Now
#189The more relevant question in this global age is: what are the global stats? How many people were lifted out of poverty during these "bad" decades on a global scale? Country specific stats just don't mean as much as they used to.
Re: Share of Income Gains by Quintile - Great Depression til Now
#190Earlier quoted context omitted.
>All the extra stuff we have. It's NOT that stuff though. That stuff is cheap. It's rent, food, childcare, healthcare, and education. These are not luxuries. Cellphones cost nothing compared to these real costs, which can't be reduced by a "low impact" life.
Food - I read a report recently that said the amount of hours the average person has to work to feed himself has dropped dramatically over the last 100 years. Rent - accept 60s level housing and you can easily afford it, 1 bathroom each kid doesn't get his own bedroom etc.. Childcare - not applicable if you are living a 60s lifestyle you're wife won't work. Education - Expensive b/c the govt subsidizes it. Healthcare…
Rent -- I've lived in multiple places built in the 1960s and all had enough bedrooms for 2 kids and a separate bathroom for parents and kids. These places were built for middle class families.
This comparison also matters where you are. At least in the SF Bay Area, housing prices have doubled in real terms since the mid 1980s (for the same house!). You aren't getting better housing now.. just more expensive housing. (Note: Such price rises are not the case in areas w/ plenty of land, e.g. outside major coastal metro areas)