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Share of Income Gains by Quintile - Great Depression til Now

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

#251

Post by nhaehnle »

yummyfajitas wrote: post #193
nhaehnle wrote: post #138

Earlier quoted context omitted.

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…

This is pretty much the situation we're in right now, where there is no shortage of capital, but rather a shortage of possibilities for profitable investments because consumers have become more careful with their spending. This is simply not true - personal consumption is at an all time high. It is even higher now than it was before our recently ended recession. http://research.stlouisfed.org/fred2/series/PCEC96 http…

Thank you for the data.

As is so often the case, it comes down to how you interpret it and put it into relation to other things going on in the economy.

So real consumption is slightly above the previous peak. Now if productivity has increased in the three years that consumption had this "U" shape, it means the same amount of consumption goods and services can now be produced using less labour. This means that even though GDP may have returned to its previous peak level, this level of GDP is now accompanied by higher unemployment - unless new jobs have been created by something else.

A typical candidate for such job creation would be investment. However, given that consumption has only barely increased over the previous peak, there is currently little need for companies to make investments to satisfy consumption demand.

So I admit to not looking up the latest numbers before making my post, then I would have rephrased my statement. What's clear is that consumption hasn't returned to the previous trend (and probably won't), and that's a problem for the recovery (especially compared to the recovery from the 2000 recession, for example, where consumption did not deviate from the trend as the graph you linked to shows).

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

#252

Post by illumin8 »

usaar333 wrote: post #160
learc83 wrote: post #111

Earlier quoted context omitted.

Why don't you go back to a 60s lifestyle? It is definitely possible; plenty of people live low impact non material focussed lives. My point is that there is a reason that it takes 2 incomes to support a household now--All the extra stuff we have. I was refuting the people who keep asking why we have to work so hard just to have a normal life.

I don't share grandparent's views of the 1960s, but the cost of additional material goods are trivial. The main reason you need 2 incomes to support a household is because you assume you have 2 incomes when building the household. In other words, (if 1 income was desirable), a couple lives in way too nice of a house. They also end up with two nice cars instead of one average one and probably eat out more than they co…

It's not extra stuff, it's the price of housing and education. You might be perfectly fine living in a single room in SF, but what if you have a family and actually care about what school your kids go to? Maybe you don't want to live in a neighborhood where there is crime right out in front of your house all day long.

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

#253

Post by nhaehnle »

OstiaAntica wrote: post #203
nhaehnle wrote: post #138

Earlier quoted context omitted.

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.

It seems to me that you are implicitly assuming that savings always equal investments. This is not true. Savings minus investments is the private sector balance, which has varied wildly, see e.g. the graph here: http://pragcap.com/sectoral-balances-and-the-united-states

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

#254

Post by yason »

So, looking at the charts it seems that since productivity went up, more people should be enjoying more spare time and less work. And to an extent, this has indeed happened despite our resistance: it's just that in our society we call it unemployment and in fact punish people for it, both socially and bureaucratically.

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

#255

Post by HSO »

pg wrote: post #72
portman wrote: 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…

Although my instincts are the same (i.e. inequality per se should not be a problem, logically), both introspection and some academic studies* suggest inequality actually is a problem. While the incremental benefits of more _absolute_ wealth seem to vanish in the limit, the psychological cost of _relative_ poverty seems to be constant. In his excellent book "Fault Lines", for example, Raghuram Rajan attributes a lot of the pressure on US politicians to funnel credit to ever wider segments of society to growing inequality in the US.

The problem is compounded by growing inequality of opportunity or decreasing social mobility (lower now than in many parts of supposedly "socialist" Europe, even!). Indeed, from my perspective -- as a European of East-Asian stock and traveling between the two regions -- the US looks more and more like a plutocracy, not unlike post-communist Russia, and not like a liberal democracy. The start-up system acts like a pressure valve in that system, but that just means there is pressure to begin with.

Which indicates another problem with high inequality: it seems to be self-reinforcing (ossification is the keyword here). You can see this on so many levels, starting with the fact that higher education in the US costs real money.

_____________________

* which I'm too lazy to locate and properly cite here and now

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

#256

Post by zallarak »

pg wrote: 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, 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." - does an increase in the range of possibilities necessarily imply a larger gap? What if technology causes the range to widen, but the average gap to lessen. Not sure if its true or not, concrete data on this would be interesting.

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

#257

Post by Klinky »

dpatru wrote: post #220
msutherl wrote: post #195

Earlier quoted context omitted.

The reason that the government should take care of the poor and the sick is not because it is the most efficient and moral way to do so. Indeed, given appropriate conditions, I concede that "the market" and the goodwill of "the people" would be capable of ensuring that their needs are met in a more efficient and, according to libertarian logic, more ethical manner. The reason that the government should provide this w…

> The reason that the government should provide . . . welfare . . . is that it results in an incredibly desirable situation where any citizen of the United States would know that, no matter what . . . it is guaranteed that they will be taken care of. I don't see it desirable to disconnect causes from consequences. Quite the opposite. Society functions best when people are very aware that their choices have consequenc…

>If all the unmotivated students would be put to work for a few weeks in picking crops, with the promise that this will be their lot in life if they don't learn, I suspect the education problem would solve itself quickly.

Except this wouldn't work for the kids of rich parents who wouldn't have to worry about that actually being their lot in life. Also people can say "fuck that" & go to a life of crime. This also assumes that our agriculture sector would even want these legal workers who they'd have to provide at least minimum wage to.

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

#258

Post by egiva »

Roboprog wrote: post #240
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…

With all due respect, your graph ends in 2007, right before it hit the fan. The income of the bottom 20% is virtually flat from 1980 to 2007 in that graph, with a slight, temporary, swell in the late 1990s. Add in the last 2 or 3 years on the tail of the graph, and that seems quite consistent with the article showing the bottom quintile (20%) losing a few percent of income between 1980 and then. The other quintiles,…

I had similar experiences in the Sacramento area, but almost exactly one decade after you (probably ten years younger) - the idea that stings me the most is the "door to inexpensive public education" being slammed shut - I've got to say that the door being slammed has greatly accelerated these past 6 years, as tuition has jumped. In the 70s, education at a UC school was nearly free. Today it costs $30k/year including your fees, books and living expenses.

In light of flat income growth, that means families either work more or do without. The scary thing (for me) is that we're reaching the maximum of the "work more" strategy when both parents work 1+ jobs. Where do people go from here, considering that they've reached the maximum of their family's earning potential while prices are still rising? I suspect that we're seeing the beginning of the real decline these past few years - with not only stagnant real income growth, but a decline in the amount of things we can afford, and that means less college education, a less educated work force, and rapidly accelerating (if it wasn't already) income inequality.

When you're priced out of a good education (can't afford one) that's when we cease to be a merit-based society where able people work their way up. That's the end of the American Dream in not so many words.

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

#259

Post by HSO »

pg wrote: post #46
wanorris wrote: post #40

Earlier quoted context omitted.

Don't you think that the top tax bracket being slashed from over 70% to well below 50% had something to do with it as well?

Less than people think. Back when taxes were so high, the rich were really good at tax avoidance. So the rate doesn't tell you the whole story. As one of the people whose opinion about working for a large company changed during the 1970s, I know I didn't consciously think about tax rates. (It's possible they affected me unconsciously though, via the examples of people who'd cleared more after tax due to lower rates.)

"The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.

Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion."

--> http://www.nytimes.com/2011/03/25/business/economy/25tax.htm...

Also: "Back when taxes were so high, the rich were really good at tax avoidance."

I have yet to see any time-series on tax avoidance or loopholes. If you do have some data on this claim, please give a reference; otherwise, you know...

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

#260

Post by cellularmitosis »

anamax wrote: post #78
[deleted] wrote: post #67

Earlier quoted context omitted.

[deleted]

> Please, point to me one example of this blue collar utopia. Much of the "oil states" are like that. > What about CPAs, lawyers, and their must be some sort of corporate hierarchy wherever these people are employed right? (1) In other words, you don't actually know anything about these biz,so you're hoping that what you picked up watching "The Office" is reasonably close. It isn't. (2) Not really. How many lawyers d…

Taking a few welding courses at the local community college was an eye opening experience for me. Welding is a means by which someone with essentially no education (but a steady hand) can earn a very decent living. Additionally, I've heard the age of the average weldor is something like 58. There's a coming glut in the market for skilled weldors, and it's going to be big. http://bit.ly/pmZVkz
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