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Do the Rich Capture All the Gains from Economic Growth?

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Re: Do the Rich Capture All the Gains from Economic Growth?

#111

Post by snikeris »

TheOtherHobbes wrote: post #96
snikeris wrote: post #91

Earlier quoted context omitted.

Would you please elaborate on this: > society itself is becoming horrifyingly unequal

https://www.cnbc.com/2018/07/19/income-inequality-continues-... https://inequality.stanford.edu/publications/20-facts-about-... https://www.businessinsider.com/inequality-is-deepening-us-e... Will that do, or do you need more elaboration?

Thanks, I'll check these out. Inequality seems like a fact of life, so I'm wondering what's so horrifying about it.

Edit:

I was really hopeful for this Stanford resource, but I'm not even sure these "are facts that everyone should know".

> 10. Residential Segregation

tldr: Rich people and poor people don't live in the same areas.

> 13. Bad Jobs

tldr: Some people have bad jobs, and if you don't work full-time somewhere you're more likely to have a bad job.

This just seems like common sense. Was anyone surprised by this?

Certainly not horrified.

Re: Do the Rich Capture All the Gains from Economic Growth?

#112

Post by weberc2 »

eiaoa wrote: post #107
weberc2 wrote: post #69

Earlier quoted context omitted.

It's not "shitting on" anyone; it's how (efficient) economics works. You don't earn more money unless you're producing more value. If a steel mill increases its output by way of some new automation, the accounting department and janitorial staff are unlikely to see a wage increase. The folks on the assembly line are also unlikely to see a wage increase because they're not more productive. The people who will be princ…

> It's not "shitting on" anyone; it's how (efficient) economics works. You don't earn more money unless you're producing more value. If a steel mill increases its output by way of some new automation, the accounting department and janitorial staff are unlikely to see a wage increase. The folks on the assembly line are also unlikely to see a wage increase because they're not more productive. The people who will be pri…

Good question! That’s the “investment” part. They risked the funds to create the value in the first place in exchange for returns on their investment.

Re: Do the Rich Capture All the Gains from Economic Growth?

#114

Post by refurb »

JAlexoid wrote: post #95
refurb wrote: post #83

Earlier quoted context omitted.

I think you're missing the point of the article. When you actually follow the same people , the poor see the greater increase in income than the most wealthy. You may poo-poo a $30K inflation-adjusted increase in pay, but that moves someone from the lower class to the middle class. Isn't that the goal?

That's social mobility, not wage growth. Those are not the same thing. It's akin to arguing that wage growth is looking at income of a person that was flipping burgers while in school 10 years ago now leads an engineering team. It's not the same job, not the adequate comparison. I presume you work in IT related field, so imagine you decided to take a break and be a parking lot attendant... You cannot then quote your…

You can't have social mobility without wage growth, so I'm not sure what you're getting at.

And it doesn't matter if it's not the same job. The argument has always been about opportunity and the key point of this article is for people who start out in the lowest income quintile, the average wages doubles over time.

That's opportunity.

Re: Do the Rich Capture All the Gains from Economic Growth?

#115

Post by [deleted] »

ryandrake wrote: post #106
esotericn wrote: post #58

The problem with most economic analysis is that adjustments are generally based on arbitrary metrics like PPP or inflation. If a child (or couple) in Britain earns three times as much, in "real" terms, that their parent (or parents) did at that stage of life, they will probably have to live in a smaller house, further from the center of town, with a worse commute. Pretty much the biggest QoL improvements knocked out.…

Exactly. I probably earn 2X what my father made, inflation adjusted, when he was my age. Buuuut, I pay 5X what he paid for housing, 20X what he paid for healthcare, ∞X what he paid in student loans, have a commute 6X longer than his, live in a house 75% the size of his (he also had two houses at my age, by the way), work 1.25X his hours and have a crappy 401k rather than a nice defined-benefit pension. Comparing just…

[deleted]

Re: Do the Rich Capture All the Gains from Economic Growth?

#116

Post by wahern »

xhrpost wrote: post #22
irq11 wrote: post #9

I find it somewhat unsurprising that if you follow individuals over time, you would see that poor people gain more than rich people on a percentage basis. The question is, what percentage of people are gaining? One success story can significantly affect the mean when you’re starting from a small number.

Another issue with just using averages and math: say you're looking at the housing crisis 10 years ago. Math says that the middle class actually had a net gain in wealth because when your house gets foreclosed on, you no longer have all that debt. 2006 -> buy $200k house with $190k mortgage. 2008 -> House worth $130k, still owe $175k. So net worth is -$45k. (This is not yet accounting for toxic assets in which you co…

A home mortgage is secured by the home and is usually non-recourse. Your personal net worth can never go negative because of the mortgage liability. It's all upside as far as the homeowner is concerned, or at least loss is limited to your initial down payment. The price for this is the interest rate you pay, which has factored into it a risk premium; and if you don't make the industry standard 20% down payment you literally pay for additional mortgage insurance.

A secured, non-recourse loan is not a personal liability. In terms of accounting, it's its own thing, like a limited liability company. That's how you need to think of it. For better or worse there's no place in a cut-throat capitalist society for people who can't wrap their heads around that.

Re: Do the Rich Capture All the Gains from Economic Growth?

#118

Post by curun1r »

rwcarlsen wrote: post #51

While attempting to refute the idea that the poor haven't improved their station since the 70s, they cite a lot of stats that show most households make more income than their parents did (inflation adjusted), but they completely neglect to account for the huge factor that is the number of people working (or cumulative hours worked) per household in order to achieve that improvement. In the 1970s, there were a lot mor…

They also likely use inflation statistics that are problematic, at best.

When considering consumables, we've had pretty reasonable inflation and people are making more than their parents. But if you were to calculate inflation based on prices for things that don't benefit from advances in our production abilities (commodities, equities, housing, education, health care, etc), we'd be making nowhere near as much as previous generations when adjusted for inflation using that calculation.

Affording a car, TV, computer and food to feed ourselves isn't that difficult for many people. It's the life-altering purchases that are slipping farther and farther from the reach of the middle class.

Re: Do the Rich Capture All the Gains from Economic Growth?

#119

Post by JAlexoid »

TangoTrotFox wrote: post #41

On top of the studies within the article, there are other really interesting papers. Some time back I was searching information on the chiseling out of the middle class, and I found this paper [1]. And the paper does describe that chiseling out. In 1979 the middle class controlled 46% of all income, and the upper/rich classes controlled 30%. Today (as of 2014) the rich and upper class control 63% with the middle clas…

What does Upper Middle Class mean?

Re: Do the Rich Capture All the Gains from Economic Growth?

#120

Post by krapp »

poulsbohemian wrote: post #18
rukittenme wrote: post #6

I'd like to add to this argument. If Ohio's steel industry grows by 500% who reaps the benefits? Me? The guy writing code in Portland, Oregon? No... its pretty clear that a specific subset of people receive the benefits. The people who own the steel mill. The people who receive employment from the steel mill. The governments which tax the steel mill. But not me. Economic growth isn't uniform. Its an uneven field that…

>I don't know why anyone should feel entitled to economic growth if they didn't participate in it in any way. Maybe that's the real question then - what prevents people from participating in the economic growth? The economy has seen strong growth for about a decade now, yet stock ownership in the broader population remains low. Unemployment is low, but incomes also remain low outside the top 10% of earners. Overall s…

>but it does lead one to question what's preventing greater participation.

It seems as if capitalism is designed to concentrate wealth in the hands of owners and shareholders. Employees were never intended to participate beyond the means granted them by their wages, and the incentives behind the financial systems with which they could tend to fleece anyone but the wealthy.

Somehow we've convinced ourselves that capitalism is supposed to be more egalitarian than it is. I think solutions begin with recognizing that the inequities we see in society are not a flaw in the system, but the system working as intended.

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