Share of Income Gains by Quintile - Great Depression til Now • Hacker News Board

Re: Share of Income Gains by Quintile - Great Depression til Now

#261

Post by _delirium » Sat, Sep 10, 2011, 10:47 AM UTC

DanielBMarkham wrote: post #14

daniel_solano wrote: post #4

The primary problem with this type of comparison is that it completely ignores economic mobility. Someone simply isn't born into a given income bracket and stays there for life. Most people's earning potential goes up over time. Speaking for myself, I think I've been in all five quintiles.

Your observation is a known flaw with this line of thinking. In fact, it's such a powerful rejoinder I'm really surprised the NYT didn't address it. If I remember correctly, movement among quintiles in the US is such that the average person moves through many. Yes, there are the permanently wealthy, and the permanently poor, but they are the exceptions rather than the rule. So when people say "the rich get richer" wh…

Those statistics aren't actually that encouraging, though they aren't bad per se. If 60% move a quintile over 17 years, that means 40% stay put long-term. And that isn't even a measurement of large income mobility, like jumping more than one quintile. Iirc from data elsewhere, the most common quintile moves by far are churn between the 2nd/3rd/4th quintiles, with 2-or-more-quintile jumps and movement in or out of the top and bottom quintiles being less common than 2nd3rd or 3rd4th drifting.

Re: Share of Income Gains by Quintile - Great Depression til Now

#262

Post by arethuza » Sat, Sep 10, 2011, 10:58 AM UTC

true_religion wrote: post #223

bermanoid wrote: post #206

Earlier quoted context omitted.

I don't automatically assume it's a problem, as so many people seem to. I don't assume that all economic inequality is the medieval type, where the rich are the winners of a zero sum game. The problem I see with growing income inequality is not the "inequality" part, it's the "growing" one. From a purely mathematical point of view, in any economic climate there's some level of income inequality that's going to be eco…

You can have growing inequity whilst at the same time having better non-monetary benefits for all. For example, in medieval times in Europe (and identically in sub-saharan africa), there was very low inequity. The ruling class did not own anything except the shirts off their backs. Their jewels were "crown jewels" and couldn't be sold. They had control of the land, but usually couldn't sell it between themselves. The…

"The ruling class did not own anything except the shirts off their backs."

If they didn't own anything then why do their ancestors still own great chunks of places like the UK - where many members of the upper classes can trace their ancestries, and the lands they own, back to the Norman conquest?

Life as a royal in medieval times was pretty tough, but largely because they were still expected to fight to maintain their position, compared to the lifestyles of most people in the countries they ruled they were well fed, well clothed and had much better accommodation than most.

Re: Share of Income Gains by Quintile - Great Depression til Now

#263

Post by cellularmitosis » Sat, Sep 10, 2011, 11:03 AM UTC

_delirium wrote: post #167

InclinedPlane wrote: post #110

Earlier 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…

This may sound trite, but it's easy if you stay single. When I graduated college (in the middle of the dot com bust), I made $30k at my first programming job. I lived in a cheap ($525/mo) apartment in Houston and drove a used car which was paid off. Not only was I able to live comfortably (see a movie, buy a cd or eat out whenever I felt like it), I was also able to pay off my student loans at an accelerated rate of $500/mo. Subtracting just the student loan payments would have put me at an equivalent salary of $24k.

That being said, I can't imagine raising kids on that wage.

Re: Share of Income Gains by Quintile - Great Depression til Now

#264

Post by arethuza » Sat, Sep 10, 2011, 11:11 AM UTC

sgoranson wrote: post #147

forensic wrote: post #100

Earlier quoted context omitted.

Politics and morality are intimately related. There are SOME free market ideologues who believe that unrestrained corporations will enrich the poor, however I believe they are in the minority. You may be one of them. The majority of libertarians believe that individual property rights are sacrosanct and that it is wrong to forcibly redistribute wealth to prevent poverty, hunger, suffering. This is the argument of the…

Economics is not like religion; there are actual correct and incorrect answers. As a newer field, we not always know how to find the correct answers yet. But that isn't an excuse to start treating it more like religion and less like science. "we can let them keep it and allow people to suffer." Using your feelings to guide your monetary policy decisions is no better than the creationists forcing ID to be taught in sc…

"As a newer field, we not always know how to find the correct answers yet."

If I may say so, that is a rather refreshingly humble statement for an economist to make.

Re: Share of Income Gains by Quintile - Great Depression til Now

#265

Post by arethuza » Sat, Sep 10, 2011, 11:35 AM UTC

OstiaAntica wrote: post #210

joshcrews wrote: post #152

Earlier quoted context omitted.

My explanation of the 1947-1979 middle class bulge is the spoils of World War II for the United States. It gained brain power (smart immigrants), oversees market domination, and a premium on capital (other countries capital and people destroyed by war). Those spoils paid high wages for the US middle class because it needed those workers for its factories and companies. After a few decades the advantages of the spoils…

Indeed, it was U.S. policy to distribute the spoils of war. America created the Marshall Plan, the global trade, finance, and legal arrangements, and generally encouraged other countries to catch up. It was a selfless policy, perhaps unique in world history.

The Marshall Plan was intended to counter Soviet influence in Europe so while it was a sensible policy to say that it was "selfless" is perhaps a bit inaccurate.

Re: Share of Income Gains by Quintile - Great Depression til Now

#266

Post by brycecolquitt » Sat, Sep 10, 2011, 11:40 AM UTC

learc83 wrote: post #227

jberryman wrote: post #221

Earlier quoted context omitted.

> Why do you feel you need to frame the argument as such? While it might not be your view, the notion that the poor "deserve their lot" and even that their being poor is the Will of God (evangelical prosperity theology) is literally a mainstream conservative position. If this doesn't ring a bell then you haven't actually been paying attention.

Myself, I'm libertarian, but I grew up in a very conservative household, surrounded by conservatives at church, and I was a conservative until my early twenties. I have never met a conservative who believed that the poor "deserve their lot." And I can't think of one single conservative I know who wouldn't love to see the elimination of poverty. They just disagree with the liberal method. If this were really the case…

Just as anecdotally, I have met plenty of them.

Re: Share of Income Gains by Quintile - Great Depression til Now

#267

Post by ericd » Sat, Sep 10, 2011, 12:04 PM UTC

Roboprog wrote: post #233

leot wrote: post #182

Earlier quoted context omitted.

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…

Replacing the income tax with an incremental property/savings tax probably would go a long way towards motivating people with wealth to use it or lose it. That idea is dead on arrival in today's heavily lobbied climate, I'm afraid.

It's not just DOA due to lobbying - a great many people just don't agree that rich people should be forced to use or lose their wealth. Why should the govt. have the power to impoverish someone with a lot of money just because they're not generating more with it? That seems to me to be a fairly substantial abuse of their rights.

Re: Share of Income Gains by Quintile - Great Depression til Now

#268

Post by sparkycollier » Sat, Sep 10, 2011, 12:14 PM UTC

_delirium wrote: post #176

Gormo wrote: post #33

Every time I see this kind of chart, I always wonder why the aggregate income distribution of a population is a metric that anyone ought to be concerned about. What does one person's income have to do with anyone else's - why would you aggregate everyone's separate incomes into a single figure in the first place? And if someone's particular income is insufficient to meet their needs, how do the aggregate population d…

I find the lack of increase in (inflation-adjusted) median wages to be the more interesting headline, not the distribution of wages per se. In effect, the average person has not seen any improvement in prosperity from the large productivity improvements that technology has brought us. I think that's problematic, in part because it makes it harder to argue that the tech sector's growth will bring prosperity to the ave…

They may not have more money in their pocket, but they have an iPhone or android in there which I think qualifies as a pretty amazing form of "participation" in the amazing gains driven by technology.

Re: Share of Income Gains by Quintile - Great Depression til Now

#269

Post by brycecolquitt » Sat, Sep 10, 2011, 12:16 PM UTC

michaelochurch wrote: post #116

Short story of American inequality: The economic growth since 1978 was, for the most part, produced by the efforts of 10% of the population. It's true. I'm a leftist and I must admit that. That's not to say that the other 90% aren't working hard and don't deserve to share in the gains-- they obviously do-- but those gains are coming from a small percentage of people. Many, many people work hard and deserve to have go…

>Increasingly, the inequality comes from inherited social connections (social capital, mostly implicitly generational) and, as it increases, the decision-making elite becomes more insular. That's what most elites become (generational social networks, not meritocracies) and that is how societies rot.

Another thing this thread seems to be missing is that these inherited social connections are most definitely divided along racial lines.

Re: Share of Income Gains by Quintile - Great Depression til Now

#270

Post by DanielBMarkham » Sat, Sep 10, 2011, 12:19 PM UTC

_delirium wrote: post #261

DanielBMarkham wrote: post #14

Earlier quoted context omitted.

Your observation is a known flaw with this line of thinking. In fact, it's such a powerful rejoinder I'm really surprised the NYT didn't address it. If I remember correctly, movement among quintiles in the US is such that the average person moves through many. Yes, there are the permanently wealthy, and the permanently poor, but they are the exceptions rather than the rule. So when people say "the rich get richer" wh…

Those statistics aren't actually that encouraging, though they aren't bad per se. If 60% move a quintile over 17 years, that means 40% stay put long-term. And that isn't even a measurement of large income mobility, like jumping more than one quintile. Iirc from data elsewhere, the most common quintile moves by far are churn between the 2nd/3rd/4th quintiles, with 2-or-more-quintile jumps and movement in or out of the…

I'd like to see more data about this, as I find it interesting.

I don't know. I feel pretty assured, however, that if 40% move every year, that the graph as drawn leaves out some very important details. As you noted, the interesting question (from a political viewpoint) is how much mobility is in and out of the top quintile as opposed to the bottom one.

And, reasoning a bit further, if people only move among the bottom three quintiles, to them it's probably evidence that one day they might be in the top quintile, whether or not that's actually likely. This might give them a much more favorable view of lenient tax rates on the wealthy. Don't know.

And from a purely political standpoint, if people feel that they are moving among the quintiles such that anybody has a chance at being in the top bunch, does it matter what the actual data is? In other words, is there a perception problem or are we trying to create one? Once again, I think you could argue this either way from the data I've seen so far.