Typical U.S. full-time salary would be $102k if wages had kept up with growth
businessinsider.com
businessinsider.com
* "It's easier to achieve the American Dream in China, South Africa, and Brazil than it is in the US." South Africa and Brazil are two of the most unequal countries in the world as measured by the Gini Coefficient. I think the author is reading the data backwards.
* "as US billionaires got $637 billion richer since March" - seems like this is cherry picking a market low. If you start the year with 100, it goes down to 60 in March, and is currently 120, I'd say it's more accurate to say your worth has gone up 20%
I agree with Shiller that growing inequality is a big problem facing the US: https://www.youtube.com/watch?v=NwhUN42BGE8&ab_channel=sssir.... This article is a low quality analysis in my opinion.
I live in Colombia and was in Brazil recently. They're both amazing countries with great people. Go to a comuna or favela and you'll quickly see that it's incredibly difficult for lower income people in these countries to climb into a different social class.
Gini Coefficient and social mobility aren't perfectly correlated. I.e. imagine a society where people's accumulated lifetime wealth is highly unequal but where a 100% inheritance tax effectively resets familial wealth every generation.
Since much of China's wealthy (idk about Brazil and SA) are newly wealthy, any billionaires are likely to be 1st generation wealthy. Before the 80s, being wealthy was basically banned.
The point is to show that the system is rigged so badly that even during (inevitable) times of crisis, the wealth at the top keeps increasing. The idea being that any group completely insulated from disaster is being insulated unfairly by the suffering of the rest.
The BI model is to churn out as many articles on “business” as it can. Clicks are king so headlines are dramatic.
maybe using hyperbole for rhetorical effect.
Brazil is up there. Some of the data is old, let me know if you have a better source. I wasn't trying to exaggerate.
Good deal, heh?
Overseas manufacturing is part of it, but the US still makes tons of money, often in industries other than manufacturing. Some of them do have entry-level jobs in the $75k range, but rarely with just a high school education.
Programming is one of those fields, and realistically, we ought to figure out how to do more with the self-taught developers, sans a $200,000 degree. That won't solve all of the problem -- far from it -- but it's indicative.
The forces that push manufacturing to find ways to lower the cost of production are relentless.
Full automation is very far away. But when it happens I'm afraid it will be Chinese workers building factories designed by Chinese engineers from Chinese steel.
This trend must be reverted.
Who's fault it is? The government has the power to change all that. You cannot pay your rent with a copy of your health insurance bill. I wonder if people still pay way more out of pockets expenses for healthcare now, despite having super-expensive insurance.
And ironically, smokers die so fast that they cost less money than non smokers to support in the healthcare system, so the decline in tobacco usage has probably contributed to rising insurance costs.
I guess my point is that there are tangible changes to our society that contribute to skyrocketing healthcare costs.
(1) https://www.cdc.gov/obesity/data/adult.html
(2) https://www.statista.com/statistics/241494/median-age-of-the...
Part of that is also because they need to cover costs of the people who don't pay and also pay for all the special billing people and lawyers required to deal with insurance and people who don't pay.
It would also depend on the tax structure to support healthcare as to whether that helps the total comp.
For a lot of lower-middle class people in cities, inflation has been much higher than the reported rate. Healthcare, tuition, rent...
A lot of labor activists complain about “greedy corporations moving jobs to low wage countries.” What does replacing one $50k job here with 10 $5k job in India do to inequality? In a global economy, I don’t think you can have a serious conversation about inequality unless you talk about global inequality. I don’t know what the data there says, but there’s no question that there are far fewer people living in extreme poverty now than 50 years ago. Part of that is driven by some (low skilled) Americans living a slightly less cozy lifestyle.
The black unemployment rate - 13% according to the Federal Reserve - is higher than it was a half century ago.
Of course it went up when the gov’t said businesses have to shutdown.
The thesis is that if wage growth kept pace with GDP growth, the median salary would be 102k.
Wages for the bottom 90% have stayed fairly constant, while the top ten percent have quadrupled their wages.
http://2.bp.blogspot.com/-nHfCt5rEDOI/UVqr2tUVvpI/AAAAAAAARA...
https://www.chronofhorse.com/forum/forum/discussion-forums/a...
There was once a promise that schooling would provide the path to allow everyone to contribute their own automation to the economy, allowing everyone’s income to continue to increase with the productivity gains they created, but it hasn’t played out in practice. The burger flipper still flips burgers rather than focusing on developing a burger flipping machine.
A mostly unrelated thought is how stable is the membership in each quantile bucket over time? This is maybe a tone deaf question, bc clearly income inequality is very extreme. But for a tech readership, especially those in startups ... One could earn near the 95p level most years, but when you finally liquidate stock that took you years to acquire, your income can jump up for a year. Similarly, if you're a high earner but you take a year away from work to travel and think, your income drops precipitously. If some fraction of the top k% in any given year were people with infrequent windfalls (selling real estate which appreciated over decades, inheritance, maybe legal settlements?), and some fraction of the lower quantiles is people who are temporarily not working ... then the income distribution is a combination of long term inequality between people, and variability across people's lifetime, which might be hard to disentangle.
[ Edit: as of 2020, the US is roughly middle of the pack for economic mobility among OECD nations, and was not lowest or 2nd lowest, but 4th lowest in 2012 ]
Average people want the opportunity to significantly improve their financial position, and economic mobility doesn't measure that. As a country, the US outperforms most other industrialized countries at the former.
At the extreme, very small differences in relative income can make you "highly mobile" even though you've barely moved your relative financial position. This is seen in smaller industrialized countries with very compressed wage distributions. People in low mobility countries can have better financial outcomes in both relative and absolute terms depending on the mathematical distribution function, and do in practice.
The term "economic mobility" is widely used to push misleading narratives precisely because most people don't understand what it measures.
Freudian slip? Although if they make big bugs perhaps they won't make big bucks...
But they're in there with Warren Buffett and Jeff Bezos, et al. Jeff Bezos is worth something like $140B or more, whereas the engineer is worth ~1.4M. (Probably less because they only own a portion of their house, but it makes the math easy.) Mr. Bezos is worth 10,000x what the engineer is worth.
But a middle income person nearing retirement in the Midwest might outright own their house, which is worth $140,000. If they sell that house, that midwesterner is just in the top 10% of income earners (assuming their salary is modest). The engineer only has a yearly income 5x more than that person and their net worth is only 10x the midwesterner's. It's a really big difference in that last percentile!
[0] https://www.investopedia.com/personal-finance/how-much-incom...
Given the high GDP growth in the same time frame, it feels like a big miss by the federal government.
1. https://www.cnn.com/interactive/2019/business/us-minimum-wag...
2. https://www.healthsystemtracker.org/chart-collection/u-s-spe...
And then for extra credit: what do we do with the children if stupid and lazy people?
How will inequality evolve as technology continues to rapidly progress through automation?
COVID resulted in large unemployment... yet we still function optimally when it comes to manufacturing/supplying/delivering life's basic necessitates, as well as generally performing work function on a large digital infrastructure primarily capitalizing on its continued evolution. To me this is an alarm that makes apparent our market economy is not aligned with technology's true state and our society is very vulnerable to rapid risk we can't rapidly mitigate or adjust to. Also showing that other countries like China are in an operating model (whether humane or not) that is better aligned.
"AI" basically pitches an optimum point called the "singularity" and something I understand simply to be a technology that can make improvements to itself without us helping it. -- implying automation for all aspects of life.
So what happens along the way? ... because we're approaching any singularity very iteratively and where 1 person can own some automation that replaces a million jobs.
Inequality seems like it's only going to get worse. Hoping someone can reference any research in this area or how our market economy can evolve (admit my thought process here is very naive and anecdotal)
Are these household incomes?
- they believe climate change is a real threat.
- they are constantly trying to get rid of weapons and military bases they don’t need to save money. But the civilian leadership won’t allow them because of loss jobs.
- they are constantly warning that the deficits caused in part by military spending put the US at risk. While this may seem counterintuitive, but most wasteful military spending isn’t done for the benefit of the military or the enlisted. It’s done to support the private military industrial complex.
Which of the following 2 example worlds would you prefer:
1. everyone makes exactly 50k (0 inequality)
2. median income is 55k but there is vast inequality.
In one of these scenarios, is child poverty eliminated? People going bankrupt because of medical bills? Are there predatory lending practices and pervasive rent seeking monopolies?
In general people concerned with inequality are worried about people at the low end of the income spectrum not being able to survive and thrive, not abstract dollar amounts which don't equate into purchasing power for someone's next meal or monthly dose of prescriptions. Figure out how to expand the social safety net on the low end, and people will care far less about people on the high end making fairly obscene amounts of money, as long as they don't abuse that into extending their power and privilege.
Then option 1 looks a little appealing as a way to reduce risk (though I get that option 2 has a better expected value).
More important than the median is the floor imo.
1. Out understanding of the differences between capitalism and socialism are freeze-framed in the 1950s, or
2. Our heuristics are updatable as history unfolds.
That has nothing to do with income inequality. GDP itself is a problematic figure, but its relation to income is rather loose.
If everybody earned the mean income, that would be perfect income equality. For the US, mean household income is around $72,000, whereas median household income is around $62,000.
https://en.wikipedia.org/wiki/Household_income_in_the_United...
https://www.rand.org/content/dam/rand/pubs/working_papers/WR...
If you look at table C1b, to keep up with 118% GDP growth, you would have to be in the top 1%, in which case your income growth would've been 138.8%.
We can then see that redistribution of those extra 20% among the bottom 99% could not possibly turn a median of $50,000 into a median of $102,000.
In the paper I didn't find figures that I could use to reconstruct how much money would have to end up in someone else's hands to achieve the counterfactual, just that it's obvious that the 1% average going from $1,384,000 to $630,000 would represent a lot on its own. The other groups above the median would also have received less of a share. Also note that it may have happened that between 2007 and 2018 the 90-98%iles may have already received some of the money that used to accrue to the 99%ile, who knows why.
I think BI properly quoted the article, but there would be a lot of work to do to contextualize the whole thing. If growth were more shared, would there be more or less growth? That depends on whether the top 1% are actually creating GDP or whether they are just better at capturing the income from it. If there was a system in place that had paid the bottom 98% more, would there have been more inflation, eating away at real GDP growth? What does that big swing from 2007 to 2018 really mean for the 99%ile in C1b, not reflected in C1a?
Honestly, this paper raises more questions to me than it answers.
I am not leaving anything out, I am using the same table that the BI article used, the one with the $102,000 counterfactual representing "Full-Year, Full-Time, Prime-Aged Workers". The one you mentioned yourself.
If I were to instead use Table 2b, the median counterfactual would only be $57,000 and I would be making the same argument with different numbers.
> In the paper I didn't find figures that I could use to reconstruct how much money would have to end up in someone else's hands to achieve the counterfactual.
All the figures are there. Just take the delta for every percentile and add it all up. If the sum is negative, you can't achieve the counterfactual by income redistribution. (Spoiler: The sum is negative)
Why the huge disparity? It's because the GDP and income are only loosely related. The US has collectively been spending more than it earned for decades, and all that spending goes into the GDP.
> I think BI properly quoted the article, but there would be a lot of work to do to contextualize the whole thing.
They may have "properly quoted" the article, but they came to a wrong conclusion that feeds into the popular "the rich are taking all our money" narrative.
I guess we'll have to agree to disagree. I don't find the paper very informative, but I find the BI article to be an accurate representation of what the author is trying to say.
Again, you could use table 2a, which specifies the top 1%. You would have to come to the same conclusion, if you do the math.
Of course the top 1% did disproportionately grow their income relative to GDP growth, it's just not enough to redistribute to make everyone else fall in line with GDP growth. Not even close.
> And, in any event, none of these graphs are really representing the size of each slice of the pie for a group of people, they're just looking at the income at that level.
The tables give you all the information you need to infer the slice of the pie. Just add up all the incomes for every percentile and you have the size of the pie, add up the incomes for a percentile group and you have the size of the slice.
For table 2a, the size of the pie is $8,529,000. The bottom 25% earn $375,000, or less than 5% of that. The top 1% on the other hand earn 13% of it. I'm not questioning the existence of income inequality. That's not the point.
The point is that this income inequality is not the reason for why GDP growth is so detached from income growth. Incomes didn't grow in tandem with GDP for almost every income group. For those income groups that did surpass GDP growth, it didn't surpass by the amount necessary to make up for lack of growth for everyone else. Yet, this is the conclusion that the BI insider wants to draw. The paper doesn't draw this conclusion, probably because it is obviously wrong.
> I don't find the paper very informative, but I find the BI article to be an accurate representation of what the author is trying to say.
It's a misrepresentation. Do the math!
The conventional measure for this is "percentage of GDP distributed as wages". This number has mostly dropped for the last 35-40 years, whereas its corollary - "percentage of GDP not distributed as wages" has grown. This is the largest single contributor to current income and wealth inequality.
However, that's about as far as the relation goes. Technological improvement can both reduce the demand for labor and increase GDP. If there is no reason for demand for labor to increase, wages won't rise.
The narrative that a small percentage of people is earning so much and therefore everyone else must earn far less is popular, but mostly wrong. I gave you the source that says perfect income redistribution would cause only a wage increase of less than 20% to the current median. That's the real impact of income inequality, it's not more than 100% like this article would like you to believe.
That's a political statement, not a law of nature. Bundled up in there are a large number of assumptions about how an economy works, how taxation works, what the purpose of a society (or even just technological advancement) really is.
I appreciate that for a lot (most?) people in the USA today, your beliefs about this are the common ones, and they seem self-evident and obviously true. But they are just one choice among many.
If you can't appreciate the difference that every single full time worker making $72k/year would make over the current situation (median of $62k/yr, up dramatically from just a couple of years ago when it was $53k), then I don't think I can help you. Moving the mean of a distribution to "less than 20% higher" than the median is huge!
That's the way it works in our system, which finds wages through supply and demand, which is a law of nature. You may nitpick and find a couple of salaries or other types of income that are not priced in this way, but it is generally true for the average person.
Whether that system is the best system is indeed a political question, but that's besides the point.
> Moving the mean of a distribution to "less than 20% higher" than the median is huge!
Perhaps, but it's nowhere near the 100% change that the article promises.
Is this 8th grade economics? Consider a nation that has strong tariffs on imported goods. Consider another nation that has major obstacles to the investment of foreign capital, and lots of cheap labor. Now consider a political campaign (it doesn't look a campaign, but it is) to remove the tariffs and allow capital to move freely from the first nation to the second.
Result: dramatic changes in the first nation's wages, at least for work that gets moved to the second country.
Remind me again which law(s) of nature is involved here.
In your example, labor supply for the first country has effectively increased while demand has not. In effect, wages must fall in that country.
However, there is now increased demand on that cheaper labor, so those wages must rise, given a limited supply.
Actual labour share of the actual money being made seems to be pretty hard to measure accurately, from what I can tell.
You weren't actually claiming that the overseas labor got the same chunk in wages that used to go to US labor, were you?