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Comment by bloppe | Hacker News Reader

Inequality can increase while the poorest are still getting richer in real terms (inflation-adjusted income). That's been the case for a decades now: https://archive.is/HcRsU

"It is the mechanic and teaching assistant in the middle who have the best claim to having missed the party: median real income rose by 57% from 1990 to 2019. But that is still a healthy 1.6% per year—a far cry from the stagnation in median earnings that is sometimes alleged".

For the record, I think inheritance tax should be way higher, and allowing the value of money to outstrip the value of labor is a travesty, but it's important to keep in mind that people across the income spectrum are getting richer in real terms. It's better to be poor in America than median income in most countries.

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How does that work with so many people being worse off? I.e. most of my friends can't afford a home, avoid going to the doctor, can barely make ends meet in dead end jobs, etc. Maybe, the measurements they are using for inflation aren't measuring the right things?

Do you live in a major liberal city? Then your cost of housing is probably unreasonable by national standards. The CPI for 2025 is 44% determined by housing costs, so if you spend ~44% of your income on housing then it's probably a reasonably accurate measure of the inflation you're experiencing.

The extreme example is NYC where 1 in 3 spend more than 50% of their income on rent, and rent has appreciated there much faster than nationwide. So those people experiencing far higher inflation than the national average.

It's also pretty easy to overestimate how easy previous generations had it. It's called survivorship bias. This recent bout of inflation is bad, but it doesn't hold a candle to what happened in the 70s / 80s, which is still regarded as the good ole days by some

Is 1.6% a healthy median rise in income? According to Statista the inflation rate has been equal or more than that with the exception of four years during that time frame. https://www.statista.com/statistics/191077/inflation-rate-in...

It's already adjusted for inflation, like most economic statistics posted by non-cranks. "Real" means inflation adjusted, "nominal" means not adjusted

>According to Statista the inflation rate has been equal or more than that with the exception of four years during that time frame.

The 57% growth is after inflation:

>>...median real income rose by 57% from 1990 to 2019.

('real' income means after inflation, 'nominal' income means before inflation.)

An annual rise of 1.6% means income doubles ever 44 years.

Again: These number are already adjusted for inflation.

"...allowing the value of money to outstrip the value of labor is a travesty..."

I am NOT an economist, and wonder what you mean here? It feels contradictory to me, given a system that makes labor fungible with money.

I've armchair puzzled over this aspect of capitalism and human nature. It seems to me that we, as individuals in this system, most fundamentally want to be able to use capital to time-shift the fruits of our labor, i.e. for rainy days, retirement, and unforeseen events. We need to be able to convert labor to capital, hold it, then convert it back to gain benefits of someone else's labor later.

But it seems inherent that this ability to make labor and capital fungible will enable some to amass and wield much more capital than others. In a population with differing wages, lifestyles, life events, and appetites for risk, it seems inevitable that the integral of these net savings effects will be divergent.

If you introduce a "reset" or leveling function, it seems like it will contradict this stored labor feature. It pushes us back on the continuum towards living hand-to-mouth, since our stored efforts are diminished in the future. And, I think human nature is such that we will "optimize" to stop trying to store effort that we can't expect to get back...

Is this an inherent feature of economics (or of society)? Do we need a fiction of security and potential future wealth to motivate our contributions, yet eventually need discontinuity to terminate the outcomes of this fiction?

> We need to be able to convert labor to capital, hold it, then convert it back to gain benefits of someone else's labor later.

That part seems fine to me. The thing that feels intuitively "wrong" is that it's possible to amass money/capital way out of proportion to the amount of labor input.

The example of the "four hour work week" concept comes to mind, where the goal is explicitly to minimize the ratio of input labor to output capital. Why should 4 hours of my work now entitle me to, say, 40 (or 400, or 4000...) hours of someone else's work later?

I am also not an economist, so perhaps someone else can explain what other mechanism is working alongside your "labor is fungible with capital" that leads to this result, and whether it's a feature or a buy of the economic machine...

To partly answer my own question - clearly there is work we can do that is net-positive. I can spend my time turning a crank to charge a battery, and sometime later get back a subset of the energy I put in. Or, I can spend that amount of time digging up coal, or building a solar panel, and then sometime later have access to many multiples of the amount of energy that I put in.

I'm not sure I follow what you mean. But, you can trace inductively how sellers of goods and services start to amass wealth, because prices are set by what buyers see as worthwhile rather than at a minimized "cost plus" basis.

And eventually, once you have enough capital, your new job becomes managing your capital instead of whatever you did before. There's two ways to look at that. Your labor is research and planning of your own investments. Alternatively, you are "selling" capital to others who are seeking investments, and they are "buying" it with labor. But the same story as above holds true. The price of capital (in terms of labor) becomes what the market will bear rather than a minimized "cost plus" pricing.

This duality is what it means for labor and capital to be fungible, right?

"value" here is referring to the potential to generate new income, not to store already-acquired wealth for later. Wealth can be invested to generate interest.

Let's say you can get a risk-free 5% return on capital and the average wage for labor is $80k. If you have $1.6M, then you can generate $80k in income every year without lifting a finger and without diminishing your principle. The richer you are, the more "free income" you get. Very rich people never have to work and they still get richer faster than the average laborer working full time. That's bad for society.

This is not an inherent feature of capitalism. A progressive capital gains tax regime can correct this. There has to be some return on capital, because otherwise it would be impossible find investors and secure loans when you need it, but that return should not be enough to mean the rich don't have to work at all and still get richer. The travesty is that effective capital gains taxes are often lower than income taxes in America, making this problem especially pronounced.

Your "reset" concept sounds like a wealth tax, not a capital gains tax. Alas, I'm not an economist either, but I believe wealth taxes are much more controversial than capital gains taxes among economists.

> How can people not see that Trump is weakening USA?

Yes, but once income inceeases beyond starvation levels, relative deprivation predicts misery more than absolute deprivation, so in a relatively developed country, that's still a bad thing.

> poorest are still getting richer in real terms

Perhaps. So what? Their wealth/incomes were increasing much slower than worker productivity. Technological progress compensates for the massively increasing inequality to some extent.

Also other figures show that median and bottom 10th percentile incomes were almost completely stagnant between 1967 and 2014.

https://www.census.gov/library/visualizations/2015/demo/real...

Of course real median income increased massively (compared to previous decades) in the last 10 years but it's not clear yet how sustainable is that

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