Wealth Inequality (Read 404 times)

Radical wealth inequality has proven to be economically stable through human history.

Since I'm taking the other side and all, if this picture is to be believed I guess your statement depends what you mean by economically stable.

 Starting wages have stagnated so badly (while top level wages have risen exponentially) that it is now more and more common that college graduates will NEVER make enough more than highschool graduates to cover the college costs.  

 

Won't that fix itself in a free society?  What's the rational reason for going to college, then?  The rational decision if this is true will be to not go to college at all (unless one is SO talented that they are very confident they will win the cost/benefit).  Or, go to college and move to another country where the skill one acquires is valued more appropriately.  Meanwhile, if this happens, colleges will either have to adjust pricing, skill development, or both.

 

Yes!!! That is exactly what I got out of the video.

Thank you!

It becomes a problem when you talk net worth and salary at the same time.  I dont give a rats ass what your net worth is.  Once you reach a certain level, tax breaks or no, you have enough free capital not needed to live to have your money make money for you.  The system DEPENDS on that.  Companies would go belly up if everyone pulled out of the stock market.  So I dont have a problem with the Buffets of the world (heh) . 

But when worker wages dont increase for 10 years because of poor economy but the CEO's wages do?  problem

When CEO's drive their company into the ground and receive huge buyouts at taxpayer expense?  problem

When the same CEO's threaten that if minimum wage was raised, they would have to slash jobs even though the TOTAL of all worker raises in the entire company would be a tiny fraction of upper echelon salaries...problem

As a CEO do you think your workers are gving you their best work when they have to go home to a second job? 

And FWIW - this is not a poverty level crying foul.  I am very comfortable with where I am in the spectrum.   

To begin, KerCanDo140 - I appreciate the informaiton you sent me last week after discussion in a similar article.  Much appreciated!  I am learning alot.  I understand alot about economics, but certainly am interested in learning alot more.

Secondly, this statement:  "No, I dont think the top 1% have too much, I think the bottom 20% have too little.  When you are working a full time job and still below the poverty line, that is too little" -- I fully agree.  The main point is exactly that.  If a fellow is working a full time job, he should be earning at least enough to pay rent and food + other basic survival needs.

Finally, concerning the culture of keeping up with the Joneses in the USA and "spending 100% of their income, no matter what their income level is", does anyone have a chart that shows what the various income brackets save?  (Example:  50,000-75,000 earhers in America sabe 4% of their income, 75,000-100,000 earners save 6% of their income, or whatever those figures are?)

---- I think there are 2 major issues here, one being that full time workers in America cannot even cover the cost of their needs at the low end of the scale, and this hurts all of society.    And second that Americans who make more than the low end (say, 80,000-100,000 a year on average for example) merely adjust their standard of living higher and do not save any money, or as much as they should.  These 2 reasons responsible for the middle class not having much wealth, some not making enough, but also the others who do, but merely spend more + save 0.).  

 

Of course you could say the same of people who've made it big through gambling. There are lots of gamblers who lose everything, but a few who make millions. This will be true in the absence of any particular skill where outcomes are distributed according to entirely random factors.

 

The trouble is we tend to view things through 20/20 hindsight. Two guys might make different business decisions that on the information available at the time look equally rational. Some subsequent external events operate to mean that one of them makes millions and the other ends up bankrupt. But in reality it may be no more than blind luck.

Gambling vs business success is a terribly false analogy.  While gamblers like to pretend they are skilled, the game is rigged against them statistically and in the long term the house always wins.  Name one gambler who made millions in the long term; the few famous gamblers I have heard about died broke.

Yes, there is an element of luck involved; there is in most things.  In my industry and through my education I've known a lot of people who built business (or tried to) from nothing.  There are a number of stark commonalities among those who succeeded:  an incredible appetite for risk, an unwavering belief in themselves, a vision for the future, the ability to convince others to trust/follow/invest in them, and the ability to learn from their inevitable failures.  There are things these people cannot control (luck), but they have what it takes to control the things within their ability to do so.  This doesn't guarantee success but it is what makes it possible.

I have thought many times about starting various businesses.  But the fact is I'm pretty happy where I am at and I am simply too risk-adverse to bet my family's future on it.  It is true that people who have a safety net (other fall-back options, family wealth) have greater opportunity to take risks.

Regarding why the rate of inequality is accelerating...  I have not heard anyone mention uncertainty.  When companies can't read the future, they tend to stop hiring (that is an investment in the future) and hoard cash.  That's pretty much what we are seeing now.  There is a ton of uncertainty in our current politics and economics.

2010 He paid $6.9M

His secretary must make a lot to pay more than $6.9M

I am sure as a % it was lower as most of his income is from Capital Gains and he does not pay social security on most of his income.

http://blogs.wsj.com/totalreturn/2011/10/20/dissecting-warren-buffetts-taxes-part-two/

He also live a lifestyle that is much lower than people making less than $100,000 a year

The government has added many things to help reduce taxes in the name of getting people to invest in the market.  401K would be the biggest ~ goes in tax free, build up tax free, taxed at the end when it come out.  But make no mistake if it went in after tax, was taxed on growth and came out tax free 2 things would happen:  People would have a lot less money in their 401ks and they would have no reason to invest in the market.  With the 2 kids - they paid negative federal tax (although did pay Social Secutiy)

Another Roth IRAs and Regular IRAs.  Capital Gains.

These all help to drive more money in the market.

The governement also has tried to drive us into Home ownership with tax loopholes for mortgage interest and exclusion of gain on sale of home.  They let us take out home equity lones to spend even more money of stuff.

My problem with the whole thing is that the system is set up to favor the rich.  It's easy to make money when you have money.

 

Take the fact that Warren Buffet pays less in taxes than his secretary through all of the tax loopholes.

Way overpaying for college degrees (people spend $20-30K/yr for liberal arts degrees that are lucky to make more than that in salary upon graduation), home equity loans to buy crap you don't need, buying too much house for your income level or renting, not saving money...

 

Sounds like people are making a lot of poor financial decisions.

 

I am all for making information available to people so they have the opportunity to make good decisions, but in the end is it really the government's responsibility to save us from the consequences of our own bad decision-making?  Or is this looking in the wrong place for solutions?

I was thinking of the comment about not being able to get a job that pays for the college degree and came to the same conclusion.

I know several college graduates that are essentially doing nothing with their degrees.  Not because the economy is poor and they can find a job, but because they simply got a college degree in a field that they liked without ever contemplating needing to use that degree to get a decent job in the future.  One has an undergraduate degree in History, another in English.  One does have a degree in business, but no specialization and they really don't have the skills to get a good job and has moved from job to job ever since graduating.

I know you need to try to find something that you can enjoy, but undergraduate degrees in liberal arts aren't going to pay many bills in the future.