Massive new data set suggests economic inequality is about to get even worse | Hacker News Reader

Massive new data set suggests economic inequality is about to get even worse

washingtonpost.com

40 pointsclumsysmurf42 comments

It'd be nice if the article this news story bases it's premise around (https://scholar.google.com/scholar?hl=en&as_sdt=0%2C38&q=%22...) wasn't a non-peer reviewed working paper that self-cited unpublished research.

That would be far too close to careful journalism in the empirical tradition. Can't you see we're in the middle of a culture war, and we need articles on the front-line every 24 hours?

I don't see how income inequality can change without higher taxes on the rich. The middle class earns 10 spends 10. The rich earn 100 spends 20 is taxed 20 invests the remaining 60. So next year middle class earns the same 10 the rich earn 100+investment returns. Add inflation and the middle class each year looses purchasing power and more wealth shifts to upper class. It's simple math and the way the tax systems in most of the world work is not going to change.

The middle class is quite capable of investing in the stock market. 50% of Americans own stock.

This story suggests (to me) that number is high, rapidly decreasing, and somewhat misleading, since it includes people with any level of 401k/similar. What’s your source?

http://www.businessinsider.com/why-so-few-millennials-invest...

I read in the Seattle Times recently, sorry I don't remember the particular article. The figure did include indirect investments, such as via pension plans.

That may be true, but even Walmart encourages associates to invest part of their paychecks in its matched stock programs, which many will pay $25 to sell off for "extra spending money" during the holidays.

That's obviously not producing dividends enough to live off of or to reinvest, which is the test here. How many people in the middle class own stock at that level?

I didn't think middle class people worked at Walmart.

Nevertheless, many corporations offer employees company stock at a discount (these aren't the same as stock options). Those are usually well worth taking advantage of. But still, many choose not to, and that is their choice. They aren't being excluded from stock investing.

I’ve often wondered when the cognitive dissonance between belief in the promise of achievable prosperity, and the reality of a vanishingly small chance of achieving it, would become too much to bear for an armed and increasingly dispossessed populace.

Brings to mind psychohistory from the Foundation series. To what degree could you develop an equation for a population's willingness to bear certain circumstances, and from that draw conclusions about when that threshold may be passed.

With a hundred bucks anyone can start an investment program in stocks. In contrast, I saw on the news the other day that the average lottery ticket "investor" puts in $250/yr, and lottery investors skew heavily towards lower income people.

$100 in the S&P 500 last January would be worth $120 today. And low income people are pretty much exempt from capital gains taxes.

The democratization of the ability to invest in companies like Microsoft and Amazon is one of the great opportunities that exist in America today.

How do stock market gains compare to lottery gains?

Statistically, stocks return maybe positive 6-7% on average, while lottery tickets are negative 50%.

And given that these people are willing to invest in lottery tickets, what's the odds that they'll make good stock market investors?

Given that monkeys randomly throwing darts seem to do better than professionals, I'd say the odds are very good they'll do better than the lottery.

The ROI (Return On Investment) for lottery tickets is negative 53%.

https://www.theawl.com/2012/02/how-much-can-you-expect-as-a-...

lottery tickets are purchased for entertainment purposes, not as an investment vehicle.

Stock investing can be very entertaining - there's news on it all day every business day. And the returns are +7%, not -50%.

Personally, I find negative 50% returns about as entertaining as having my teeth drilled. And the median return is about -100%.

You missed the point that 20% return on $100 won't change a person's life but a lottery jackpot will.

I find it odd that when a wealthy person hits the jackpot on a speculative trade or alt-coin I can't help but feel they were clever. Perhaps it is because buying and holding takes discipline whereas no discipline is required to buy a lottery ticket.

Investing regularly will change your life, and the odds are in your favor.

You're probably more likely to have a jetliner fall out of the sky on your head than win the lottery.

But hey, do what you like. Feel free to "invest" in the lottery. Don't forget that you won't get any tax breaks on the jackpot if you win it, either.

He's not saying it's financially better to play the lottery than to invest in stocks. I interpreted it more as 'poor people play the lottery because it gives them hope that things will change'. A lottery ticket is more of an emotional choice because when you buy one, you get to imagine yourself in a life where you win.

Meanwhile, investing $250 in stocks once a year won't do much to change that person's life. Even if the total value of those stocks double in value in 10 years, that's 10 years of the person's life gone and they've managed to save only $5,000. That's pretty grim

$5000 is about $7500 ahead of losing $2500 in the lottery. At $15/hr wages, that puts you 500 hours of your life ahead.

>if you were a typical investor

I’m not sure what “typical investor” means in this context. Shoveling money away in a diversified account and never touching it? Investment practices aren’t static and have changed quite a bit over the time measured.

Even if investment practices were static you still need to factor in human emotion to investing. It’s easy in retrospect to see “If I kept my money in a diversified market I would have received +x% over y time”.

But humans don’t think this way. Day to day events have much more influence on how someone makes a decision than long term forecasts.

The Great Depression wasn’t just a slow down to our economy, many people believed capitalism was coming to an end. This happened weeks after one of the strongest bull market periods in United States history.

If you were to travel back in time and tell someone on Black Tuesday “don’t worry, use dollar cost averaging and you’ll be rich in 90 years” they would think you were insane.

This research also fails to recognize most millionaires in that time period were immigrants from poor families. Their frugality and tolerance for high risk entrepreneurial activities is what made them wealthy to begin with. Trustfund children rarely make as much as their parents. They settle for low risk careers like “doctor” or “lawyer” which pay high salaries but do not generate large sums of wealth. They also tend to be UAWs (Under Accumulator of Wealth).

“A $250,000 per year doctor is an "Under Accumulator of Wealth" if his/her net worth is less than the product of their age and one tenth of his/her realized pretax income.” - The Millionaire Next Door

And Republicans want to give more tax breaks to millionaires and billionaires.

Lowering corporate tax rates helps stock values, and 50% of Americans own stock directly or indirectly (via pension plans).

What about the other half?

It was in reply to the person who implied breaks were only for millionaires and billionaires, unless one believes that 50% of Americans are millioniares.

See my other post in this thread on this topic about the democratization of stock investing in America. Of course, one must also choose to invest in stocks as opposed to, say, lottery tickets.

80% of the value is held by 10% of the population. https://www.washingtonpost.com/posteverything/wp/2017/03/02/...

"The workers own the means of production." ;-)

Yes, but based on a market economy of capital.

I still fail to see how "economic inequality" is a bad thing.

If you accept that we will never be equal (aka aren't a communist) then the question becomes, what is a "good" level of inequality? How do you determine that? Does inequality increasing actually mean anything?

I'd argue inequality is quite meaningless. Especially on a national basis. Everyone can be equally poor, what good did lower inequality do then? Why focus on inequality instead of something like poverty? As Louis CK tells his daughter in an episode of Louis "The only time you look in your neighbor's bowl is to make sure that they have enough. You don't look in your neighbor's bowl to see if you have as much as them."

https://www.youtube.com/watch?v=Jtxuy-GJwCo

> I still fail to see how "economic inequality" is a bad thing.

It's a bad thing because it is an objective fact that it is a source of human suffering. You might have a moral or aesthetic preference that humans should not respond to inequality that way, but that is no more meaningful than a belief that they should not adversely react to oxygen deprivation.

Is it? I would love to see the proof of that. Afghanistan has one of the lowest Gini coefficients in the world. So inequality doesn't seem to be their problem.

You can look at the large body of work in the field of relative deprivation then; there's strong evidence that it is a powerful factor for most in developed countries, and it some evidence that it also is outside of the worst-off in less developed countries, but the poorest in LDCs seem to have absolute deprivation dominant as a source of disutility. (The research on LDCs is thinner and more recent, as historically most of the work has been done in relatively developed countries.)

Sounds like envy to me. Which doesn't really seem like something we as a society should cater to. Instead people should learn to either be happy with what they have, or actively attempt to make steps to improve their life. There is no option to take from others for your own benefit or the supposed benefit of others, as that is theft.

But let's say that's just not how the world is, envy is certainly a very real human emotion. What level of inequality is necessary to cause broad social unrest? Do we have anything close to a situation like in Venezuela?

It is really cool how you are telling me to do the legwork and make your argument for you. Definitely productive.

> Sounds like envy to me. Which doesn't really seem like something we as a society should cater to.

I'll repeat what i said before, anticipating exactly this line: You might have a moral or aesthetic preference that humans should not respond to inequality that way, but that is no more meaningful than a belief that they should not adversely react to oxygen deprivation.

> It is really cool how you are telling me to do the legwork and make your argument for you.

If you need a simple starting point that is freely available online, Income Satisfaction and Relative Deprivation: An Empirical Link, D’Ambrosio, C. & Frick, J.R. Soc Indic Res (2007) 81: 497. https://www.researchgate.net/profile/Conchita_DAmbrosio/publ...

But it's a big area of research, and if you are genuinely unfamiliar with it and concerned at all with economic development and related public policy, you are going to want to spend some time with the area

Can't say I'm surprised...my amateur investor tip is to buy stocks that cater to the emerging poor or super rich and short or avoid anything in between. There's a reason Dollar General has been rallying ($DG)...

I'm long CVS ($CVS) for the same reason...especially after having bought Aetna I predict their "Minute Clinic" concept will cater to the emerging poor that will become increasingly sensitive to rising healthcare costs for acute care at traditional urgent care/hospital settings...

I guess this is one way to summarize the idiom - It takes money to make money.

okay, silicon valley: disrupt income inequality. find a way to get rich by un-riching the rich.

You could confusing you solved housing.

What happened to that company where everyone was paid the same?

Edit: Gravity Payments, minimum salary $70k experiment: https://en.m.wikipedia.org/wiki/Gravity_Payments

See this is the sort of comment that makes me feel like people get upset about economic inequality, rather than poverty, because poverty truly is not what they see as the problem.

The money has to come from somewhere! And all the wealth generation attributed to government practices goes by far into pockets of the rich. Reducing income inequality is the only trickle-down economics that works.

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