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Share of Income Gains by Quintile - Great Depression til Now

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201–210 of 302 posts

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

#201
post #170

Earlier quoted context omitted.

The main problem statistically is how we account income. Generally the employer-paid health insurance and other benefits are not included, even though these can often vastly increase total compensation. Scott Winship did a good job following this but tends to shade into triumphalism.

At least the top graph about productivity refers to "overall compensation." I don't have a chance to find the original source for the numbers, but unless the graph has been grossly mislabeled, benefits are probably included.

"Overall compensation" refers to salary plus bonus and options, rarely does it include things like health insurance, employer payroll taxes and the like. If it did, the lower numbers would be much higher than they are, IIRC.

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

#202
post #47
post #36

Technological 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…

"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?

inequality is freedom. equality is not! So... if you believe in a free society and open markets then inequality is neither good or bad, it is what happens.

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

#203
post #72

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. At the high end of the scale it doesn't seem to be a problem. I've seen a lot of people go from middle class to rich when their startups succeeded. Most live pretty quietly. I would guess most of the damage done by economic inequal…

On some level, income inequality is intrinsically problematic even if you don't care about social issues at all, or don't think it's a zero sum game. Rich people have higher savings ratios than poor people. As a larger amount of income goes to those who have more than enough money than enough already, the average savings ratio increases. This is a drag on aggregate demand that hurts the economy. Supply side economist…

There's no loss in aggregate demand from savings and investment...investment is still spent, just on factories and equipment and research instead of consumer goods.

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

#204

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…

>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 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%.

This statement betrays a misunderstanding of how productivity is defined. There is no macro-level measure of individual productivity, so it's simply not possible to determine which levels of the income scale experienced productivity growth.

Productivity is only measured, in the most granular cases, at the organizational level. The data available simply cannot determine which workers are more productive.

I'll give you an example. My startup involves a lot of categorization - we get a data feed full of poorly labelled fashion items, and we have a team of 6 girls categorizing them (item 1 -> "Handbags", item 2 -> "Dresses", etc). At the macro level, my organization recently increased categorizing productivity by 1000% (i.e., we categorize 10x more items than before).

This didn't happen because my girls suddenly started clicking 10x faster. This happened because I wrote a program which can parse item names ("Marc by Marc Jacobs sleeveless shift dress" -> "Dresses") with about 90% accuracy [1].

Macroeconomic statistics have no way of knowing which worker to attribute this productivity gain to.

[1] Categorizing natural language is surprisingly hard - stuff like "dress shoes" and "swimwear top" confuses the matter tremendously. Some items also get names like "Cherry Pie"...

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

#205
I have a simple theory, which is well.. simple: - Most people look for paid work when they need the money. This puts them in a position where they are unable to negotiate a market wage. This adds tremendous downward pressure on wages and keeps the middle-class down.

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

#206
post #72
post #47

Earlier 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?

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. At the high end of the scale it doesn't seem to be a problem. I've seen a lot of people go from middle class to rich when their startups succeeded. Most live pretty quietly. I would guess most of the damage done by economic inequal…

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 economically optimal for whatever it is that we want to optimize about our economy (some combination of jobs, happiness, wealth, or whatever). This is trivially true, as zero income inequality is a really crappy situation by most realistic measures of economic health, as is ultimate income inequality (i.e. a small handful of people holding all the wealth). In between those extremes there's got to be some optimal distribution of wealth.

But when I see a march towards higher levels of inequality, I'm left to wonder whether there are actually any forces in play that will keep us anywhere near that optimum, or if we're just seeing a runaway "wealth begets wealth" situation, as folks like Mandelbrot have suggested. Sure, it could be the case that the changing technological climate means that the optimal level of inequality is going up, and we're actually keeping pace with that, but that's just a "could be", and I've never seen a particularly compelling argument that our economy should work more efficiently now at higher levels of income inequality than, say, twenty years ago. An argument that increasing income inequality is inevitable, or even that it's fair, is not an argument that it's economically helpful.

I completely agree with your thesis that technology is a perfectly valid reason for the growing gaps, FWIW, it's a pretty unassailable argument. But I don't agree that it's not cause for concern: we're sliding at an increasing pace down the slippery slope, and at the bottom is complete human level AI, where a vanishing percentage of humans have anything at all of value to offer to the economy. Are you really comfortable with the wealth distribution that's going to result from such a thing?

Personally (and this is quite controversial, I admit), I think that we have to start taking that inevitable outcome to heart, and realizing that the next 50 years should be a period where we move a lot closer to a full welfare state, with full acceptance of the fact that more and more of us will be at the unemployed and useless end of the spectrum as time goes on. Then again, an economy where humans are less useful than their machines, even as far as designing and running those machines, is a completely different world than we've ever considered before, so perhaps it's premature to even consider what that means...

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

#207
post #90

Earlier quoted context omitted.

Just because I might disagree with your methods of equalizing income, doesn't mean I "believe poor people deserve their lot and should wallow in it." You've turned a political disagreement about the methods to accomplish some desirable goal do so into a moral argument. You've decided that if I think there is a better way to elevate the poor than your way, I must want them to stay poor and thus must be evil. Why do yo…

For one thing, because there is no evidence I'm aware of that any tangible, real-world action originates from the belief that the poor should be "elevated" in some other manner. When the government gives poor single moms peanut butter to make sure that her kids have protein to eat, that gets measured, and we can perform efficacy studies on it. When the government gives housing stipends to poor families so that they h…

The government has largely crowded out private action. Before the American welfare state was created, mutual aid societies and churches filled the welfare gap. These institutions were generally more effective in their mission than government today, and the fabric of our society was far richer for it.

Today, helping the poor largely means lobbying for more spending for some program.

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

#208

Earlier quoted context omitted.

The first half of your comment is idiotic and unworthy of HN. Find me someone who has actually stated that the poor deserve their lot. The Tea Party's primary gripe is that the government is picking winners and losers and the best way to get rich is now to lobby rather than to work hard. Even Reagan, the godlike idol of the small-government right, never thought the poor deserved it, he just thought that the best way…

The Tea Party has millions of people, so there may be a few different views in there. However my impression was that the bulk of the Tea Party harbors a lot of hate for welfare recipients and social services in general. They believe the poor should pull themselves up via bootstraps and should not receive direct help from the government. Am I wrong about this?

It is quite the opposite of "hate" to believe that independence and self-reliance are the best approach to solving poverty.

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

#209

Earlier quoted context omitted.

The gap between what you can do and what Larry Ellison can do isn't as relevant as the gap between what you and Larry Ellison can do and what your average single mom living in welfare in Durham can do.

This is exactly the point that HN seems to be oblivious toward. HN people live in a bubble and seemingly have never met anyone who is in real poverty -- they think because in college they had to eat Ramen they were poor. They are clueless. Real poverty is being illiterate, being malnourished in the womb, being raised in a crime-zone, growing up without dental care.

This type of "Real Poverty" has massively increased since the government launched its "War on Poverty" in the 1960s. The dropout rate is higher, crime is higher, more families are broken.

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

#210
post #36

Technological 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…

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.

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