The wealth gap between young and old people • Hacker News Board

Re: The wealth gap between young and old people

#41

Post by bmelton » Fri, Jul 31, 2015, 1:54 AM UTC

mikeash wrote: post #39

twoodfin wrote: post #18

Earlier quoted context omitted.

It's not absurd: Social Security's benefits formula has significant "bend points" that make it an increasingly bad "investment" for higher income workers. Eliminating the wage cap would remove any remaining fig leaf covering its essentially redistributive nature: High income workers would have to live to 140 to get back what they "paid in" even without interest.

Why do we need to keep a fig leaf to cover up what everybody already knows is there? We should either accept that Social Security is a form of welfare and rationalize it accordingly (my preference) or we should overhaul it to actually be the mandated savings scheme that it's said to be.

Because welfare isn't popular, it makes it more subject to the political climate, and because as a mandated savings scheme, social security isn't terribly performant.

Re: The wealth gap between young and old people

#42

Post by rhino369 » Fri, Jul 31, 2015, 1:57 AM UTC

falcolas wrote: post #22

Speaking only for myself and my parents - the factor here has been land. They both inherited several hundred acres of farm and ranch land, and purchased some land in-town when it was (inflation adjusted) $90,000, and is now in the $2-3 million range. They're both terrible at saving, their combined income was never over 50% of what I'm currently making, yet they have both been retired and comfortably living off these…

I assume the housing market is the majority of this wealth disparity. The nations northern cities have seen huge increases in property values. For those who bought cheaply before the run up, the benefits are clear. You buy a house for 150k in Palo Alto, CA in 1981. And in 2015 it's worth 1.5 mil.

For millenials, we are stuck in a market where you got to pony up 1.5 mil to buy a family sized house.

Maybe the market will just keep going and going. But I don't think our economy can support that sort of thing. At least not the extremes that happened since the 70s.

Re: The wealth gap between young and old people

#43

Post by mistermann » Fri, Jul 31, 2015, 1:59 AM UTC

falcolas wrote: post #22

Speaking only for myself and my parents - the factor here has been land. They both inherited several hundred acres of farm and ranch land, and purchased some land in-town when it was (inflation adjusted) $90,000, and is now in the $2-3 million range. They're both terrible at saving, their combined income was never over 50% of what I'm currently making, yet they have both been retired and comfortably living off these…

In Canada it's very similar, LOTS of people are millionaires simply from massive real estate appreciation. Vancouver is particularly shocking, but all of Canada in general has seen huge appreciation. Basically, we had the same bubble as the US did, but ours didn't burst in 2008, it just paused and then kept on going. It's kind of funny reading how after the fact, everyone knew the US bubble had to burst, yet the affordability ratios in Canada are far beyond those of the US at its peak and almost no one bats an eye.

I really feel sorry for people who are merely middle class or not in a marriage where both people have professional level incomes, I just don't know how they can afford anything reasonable in this market. And personally, I thought I'd do the smart thing, rent and live modestly and invest the difference - after all, minimizing your housing expenses by living in 700 sq ft instead of 2500 sq feet should be the financially wise thing to do, right? As it turns out, no, that was EXACTLY the wrong thing to do....the right thing to do was borrow absolutely as much money as possible, and buy as much house as you could afford - anyone who did that is laughing all the way to the bank.

As for retirement for me, I am slowly coming to the realization that I will never be able to retire, ever, whereas my parents retired in their mid 50's.

Re: The wealth gap between young and old people

#44

Post by mikeash » Fri, Jul 31, 2015, 2:22 AM UTC

toomuchtodo wrote: post #40

mikeash wrote: post #38

Earlier quoted context omitted.

Why does that count employee social security contributions, but not employer contributions? Both ultimately come out of your paycheck. The fact that social security contributions are split is just a fiction that makes the tax rate look lower. It also sounds like it doesn't count state and local income taxes, nor property taxes or any of the many other taxes we have the privilege of paying. The conclusion may well be…

> Why does that count employee social security contributions, but not employer contributions? Both ultimately come out of your paycheck. Employer contributions don't come out of your paycheck though; for the business, its a cost of doing business.

It's specifically a cost of labor. The business spends $X on you as an employee, and you receive $Y. The difference between X and Y is tax. The fact that some of the difference is technically removed before the money is transferred to you, and some of it is technically removed after the money is transferred, makes no difference in the end.

Re: The wealth gap between young and old people

#45

Post by ams6110 » Fri, Jul 31, 2015, 2:24 AM UTC

The answer (which is the same as it has always been) is buried at the end:

If young people want to increase their chances of being wealthy, one strategy is to emulate the behavior of older people: keeping an emergency fund, paying down debt, avoiding high-cost credit, and putting money into higher-returning investments

Re: The wealth gap between young and old people

#46

Post by refurb » Fri, Jul 31, 2015, 2:52 AM UTC

toomuchtodo wrote: post #37

refurb wrote: post #34

Earlier quoted context omitted.

Wage stagnation is only true if you ignore non-monetary compensation. Add that in and total compensation has grown.

What would you define as non-monetary compensation besides health care benefits (which increase so quickly you could consider those benefits to stagnate as well).

Pension, 401k match, stock options, disability insurance, tuition reimbursement, etc.

If you look at median income levels, they have grown substantially over the last 30 years.

Re: The wealth gap between young and old people

#47

Post by pcurve » Fri, Jul 31, 2015, 3:38 AM UTC

ams6110 wrote: post #45

The answer (which is the same as it has always been) is buried at the end: If young people want to increase their chances of being wealthy, one strategy is to emulate the behavior of older people: keeping an emergency fund, paying down debt, avoiding high-cost credit, and putting money into higher-returning investments

It's a sound premise, but young(er) people will never see the kind of boom that their parents experienced.

Younger generation is permanently hosed.

What this article fails to mention is all the privatization and regulations that have caused capital misallocation and favored certain classes of people.

Re: The wealth gap between young and old people

#48

Post by jondubois » Fri, Jul 31, 2015, 3:39 AM UTC

falcolas wrote: post #22

Speaking only for myself and my parents - the factor here has been land. They both inherited several hundred acres of farm and ranch land, and purchased some land in-town when it was (inflation adjusted) $90,000, and is now in the $2-3 million range. They're both terrible at saving, their combined income was never over 50% of what I'm currently making, yet they have both been retired and comfortably living off these…

I can relate to this - The older generation owns all the land and use hard-working young people to pay the rent so that they don't have to lift a finger. In the western world, older generations tend to not be very generous with their children (interestingly, as I found out, this is often not the case in ex-communist countries like Russia where well-off parents tend to spoil their children rotten - Note that this is a gross generalisation though).

In the west, we have a situation which is just like we had in the middle ages when peasants had to pay their lords commission to work on their own farms (because the land technically belonged to the barons, knights, dukes, kings...). Except in the middle ages, work was based on manual labour and that didn't help any of the peasants to 'grow' intellectually - In fact, only high-society had the time to cultivate their intellect.

In today's society - Now that a lot of jobs are highly specialised and increasingly technical - By working, today's peasant class is accumulating highly specialised intellect. For the first time in history, we have a case where the lower class 'the scum' of society is becoming more intelligent than the high class of society (though not necessarily wiser - In that case, I would suggest the opposite).

I think that's why this idea of 'disruption' is so critical - Disruption is a mechanism which allows the younger generation to acquire wealth from older generations. Older generations have a collective monopoly (lock-in) on the world's wealth, disruption is about pulling the rug from under them one industry at a time.

Re: The wealth gap between young and old people

#49

Post by jtzhou » Fri, Jul 31, 2015, 4:27 AM UTC

rhino369 wrote: post #42

falcolas wrote: post #22

Speaking only for myself and my parents - the factor here has been land. They both inherited several hundred acres of farm and ranch land, and purchased some land in-town when it was (inflation adjusted) $90,000, and is now in the $2-3 million range. They're both terrible at saving, their combined income was never over 50% of what I'm currently making, yet they have both been retired and comfortably living off these…

I assume the housing market is the majority of this wealth disparity. The nations northern cities have seen huge increases in property values. For those who bought cheaply before the run up, the benefits are clear. You buy a house for 150k in Palo Alto, CA in 1981. And in 2015 it's worth 1.5 mil. For millenials, we are stuck in a market where you got to pony up 1.5 mil to buy a family sized house. Maybe the market wi…

And the person who bought the home in Palo Alto in 1981 is only paying 1/5 of the property taxes as the person in a comparable home who bought recently. California is really the epitome of having a tax code favoring land owners and the older generation over those relatively new to the job market.

Re: The wealth gap between young and old people

#50

Post by plonh » Fri, Jul 31, 2015, 7:48 AM UTC

jmulho wrote: post #20

ForHackernews wrote: post #8

Earlier quoted context omitted.

> removing the maximum wage for Social Security contributions This sounds like a great idea to me. It's absurd that only the first $118,500 of earnings are subject to to social security tax, and it means that our tax structure is much less progressive than it appears at first glance (which is one reason certain people strenuously avoid talking about any taxes except Federal Income Taxes).

The goal of the tax is not redistribution of wealth. The goal is to fund the benefits. The tax is capped because the benefits are capped.

That is nonsense. The first social security recipients paid 0 in. SS has always been a redistribution from workers to retirees, with no actuarial basis for the connection between how much you put it and how much you get out.