Have US Income and Wealth Inequality Actually Increased?
chawkins.org
chawkins.org
There is massive income inequality. Its trajectory isn't nearly as large of an issue as the status quo, which is pretty dismal.
Until that gini coefficient is much better, and we have no one living below the poverty line, we still have a ton of work to do.
This article seems to be making a shallow point only to encourage inaction on the core problem. The trajectory of income inequality is a red herring trying to distract us from the harsh reality of our present wealth, opportunity, and income inequality.
The right thing to do is to keep working to solve the core problem. Restore the US to a progressive tax system instead of regressive. Pass living wage laws. Improve the social safety net. Maybe even consider doing what Switzerland is considering, and give everyone (rich and poor) a reasonable guaranteed income as an alternative to expensive and sometimes ineffective welfare programs.
At the small scale, volunteer locally, especially anything having to do children and improving their education.
Unfortunately, along the way we will be fed a constant stream of garbage articles like this, held up with straight faces by a chorus of onlookers telling us there is no problem to fix. Look outside. There are poor and hard working people out there who aren't being rewarded for their hard work and are severely struggling. No amount of fancy statistics bending will justify inaction.
No one who has wealth created it by themselves. You don't print your own money, you don't extract wealth from a vaccum. Wealth is built by extracting that wealth from a shared economy. Asking those who were able to extract the most wealth to help the most in paying to protect this shared system, and help those who were exploited by it, is not theft.
You are being intellectually dishonest. I would not be surprised if deliberately so.
This is a very old argument, but the economy is not a zero-sum game.
This is wrong. First wealth is not extracted from people...it is created from a voluntary exchange. Think about why people handed over money to the "wealthy" in the first place. It was in exchange for a good or service that made that person wealthy where wealth is defined by being better off than they were before. Money is just a unit of exchange that we use to move wealth around. Following this logic the wealthy have already paid their dues so to speak by making other people more wealthy.
Again they do not EXTRACT wealth, they GENERATE wealth for their customers. People with a ton of money should be applauded for delivering so much wealth to society not vilified as if they stole it from them.
I think you may be trying to point out that the inheritance isnt deserved because the receiver didnt create the wealth. I see inheritances as how the rich choose to spend their money. Some give it to charity, some give it to their kids (which could be a form of charity), some spend it frivolously. Doenst change the fact that the money was generated by creating wealth in the first place.
Wow, so simplistic. Answer this, then: Why are poor people poor?
So for the simple economic answer: Poor people are poor because they consume more wealth than they create (or at least break even).
Again as to not offend, I fully understand that economic well-being is still dependent on circumstance to a degree that needs to be addressed. But this fact does not change the economic answer to why poor people are poor.
That is already what happens. e.g. the top 10% by income already contribute >70% of the total federal income tax revenue.
Which would be meaningful, if "federal income tax" was the only federal tax, or even the only federal tax on income.
Or would be if it were original.
I create wealth by pure thought. Sure that sounds stupid to some, but it's quite true: with about a thousand dollars' worth of borrowed equipment, I sit here writing software to do things useful to my employer. I am not "extracting wealth", I am creating it, organizing electron flows to do things useful to clients, things they are willing to pay for whereby both of us (client & developer) benefit. It is my right to write software, my client's right to use that software, and our right to work out an exchange of representations of wealth. The only "extraction" happens by contracting the exchange of one thing/service for another, facilitated by the abstraction of currency; this creates more wealth in the system, leaving both in a better place than they would be otherwise.
My country's government was created to facilitate the exercise of rights by delegating limited powers to government. Insofar as the "shared system" goes, taxation exists to fund those limited powers, and arguably provide a minimal safety net to the truly destitute (insofar as charity is unable to). Beyond that, ownership is a respected & protected right, and the economy functions by people creating things to own (wealth) and exchanging representations of that wealth (money).
What you & other "wealth inequality" agitators "ask" for is theft, insofar as it demands - under threat of violence by those unrelated to that wealth - those who create or negotiate more wealth than others must, with no objective basis in ownership & contract, give to those who have done nothing for it.
I understand what we have is not a perfect system; that imperfection is a consequence of what some deem "original sin" (adjust terminology as your values see fit to match the point). Bad as it may be, it is better than any other system wherein one group extorts wealth from others without agreement or moral right thereto. Just because one manages to leverage opportunity better than others does not mean those others can "rectify" the situation by saying "we outnumber you, we've decided what you own belongs to us, and if you don't hand it over we'll do horrible things to you."
Yes, progressive taxation is institutionalized theft. Taxation should fund the costs of government carrying out limited powers to facilitate rights as delegated by the national constitution; insofar as income taxation is the current method, it should be blind (as justice should be). The counterpart to your notion that the wealthy exploit the system, is that the wealth pump the system too: their wealth is not squirreled away out of reach of the shared economy, it is rammed right back in thru investments, creation of markets for luxury goods, and prolific charity; the evil you impute is at minimum balanced by the good it creates. Every dollar should be taxed equally, as (on the whole) those who acquire more income do much in the shared economy with it. Insofar as sheer poverty fits in, I'll acquiesce to deducting a minimum income; if you're better off than objectively poor, you can do your fair share too.
Those agitating about "wealth inequality" always fail to objectively address the charity which the rich give to. Just because someone isn't giving money via taxation doesn't mean they're not doing tremendous good; confiscating more by taxation reduces what they can and do give by other ways.
And, just to hammer the point home yet another way (however palatable it may or not be): in a well-armed population, "majority rules" is not sufficient grounds for confiscation. There are a LOT of people prepared to fight back against the self-appointed redistributors of wealth. They know the consequences, so don't want to go there, but will if it comes to that.
TL;DR:
It's.
Not.
Yours.
Considering most of what you post is full of insults and attacks on people who have moral views which differ from yours in good faith, I would suggest you start at home with this advice. "I think the poors should stay poor because they're worthless while I create wealth, and I'm prepared to shoot anyone who tries to implement a contrary policy, be warned" is not a reasoned debate.
And yes there are lines which, when crossed with threat of force, will be met with force.
The Nordic countries of the 19th century looked much different, and much worse. Huge income inequality, entrenched aristocracy, terrible living conditions for the urban working class, etc.
The figure that nets these out is the "net international investment position", which subtracts liabilities from assets. The Scandinavian countries have very good positions here. Denmark's NIIP is +27% of GDP, versus the U.S.'s -17%.
The Scandinavian countries have high debt positions basically because they are advanced (i.e. highly financialized) economies with good credit ratings, so make a lot of use of cheap bonds. Same reason Apple issued a bunch of bonds last year despite their huge cash pile. Due to some quirks at the moment Denmark is actually making money on their bonds, as they are issued at negative interest rates— there has been an influx of EUR into DKK due to fears over the EUR, and to discourage that influx (to protect its pegged exchange rate) Denmark is offering negative rates...
This is in addition to mjn's sibling post noting why "external debt" may not be the right thing to be concerned about to start with.
In modern society, we have many brothers who we've never met, but that doesn't mean that we shouldn't be helping them prosper.
The very title "Atlas Shrugged" exemplifies the mistake. Your typical "Atlas" in modern society does not look like this: http://static2.wikia.nocookie.net/__cb20131015180238/monster.... He looks like this: http://techrights.org/wp-content/uploads/2011/01/Lloyd-Blank....
The rich do not pay taxes to keep the masses from using violence upon them. They do it so the masses will suppress the "men of war" that would otherwise dominate them. In reality, John Galt is not in charge once he shrugs off the yoke of society. Instead, men skilled in violence and war take advantage of that power vacuum and subjugate him, and he works to serve them. This state of affairs is not unprecedented. You only have to look back to Europe during feudal times to see it in operation. The technologists of that time didn't run the world. Barons and Earls and other military men ran the world. The technologists served the military class.
Historical precedents are not, historically, very useful.
Lots of things that worked at some point in time for some country (e.g a revolution) failed at other points in time for some other country and vice versa.
Each era has unique factors -- from technology to culture. You cannot make assumptions based on what happenned in this or that case 50 or 1000 years ago.
Plus, the notion of "institutionalized theft" is politically charged itself. Whole lotta assumptions there ("those who have lots of wealth deserve it", "they got it all by themselves", "society is better off if they don't be made to share it", etc).
How about inequality being "institutionalized theft" and redistribution being "justice"?
By those in power, now and in the past.
>In a society of voluntary contracts, those who have lots of wealth DO deserve it
For one, the form and reach of those "voluntary contracts" were made with no direct involvement from the population. Were you consulted when you grew up on how they'd be, apart from voting every 4 years or so?
Do the grandchildren of an industrial robber barron, "DO deserve" the money they inherited?
How about all the families that got rich by exploiting slaves? Do their descendants deserve their higher status in society they enjoy?
How about people with large real estate? How exactly Native American territories become the property of some real estate tycoons back in the day (and are passed forward now)?
Just because the law accepts a transition from then to now, doesn't mean the "deserve" question is settled.
>"Society" is a mythical being: it has no right to forcibly steal from some more wealthy individuals.
Well, society is the people. Nothing mythical about it. It's the origins of property that are mythical, as land and resources start off as free for all.
Rather, it's a social contract that allows the wealthy individuals to be wealthy. There's no "right" in that (except if you believe in God given rights), just what is deemed acceptable. That's something that can be reversed at any time, as the kings in France found out.
"There is massive income inequality. Its trajectory isn't nearly as large of an issue as the status quo, which is pretty dismal." The point of the article is that inequality is itself isn't a good metric.
"The right thing to do is to keep working to solve the core problem....Maybe even consider doing what Switzerland is considering, and give everyone (rich and poor) a reasonable guaranteed income as an alternative to expensive and sometimes ineffective welfare program" -I suggest this briefly as my preferred solution.
I still feel the overall point attacking the statistics of income inequality is much more likely to be used as a gavel to silence those working to improve the status quo. Articles like this are often cited when people try to take action to correct income inequality, regardless of what the article ultimately advocates.
That said, I do think its important to get the statistics correct. I don't think you said anything wrong (except maybe with your definition of gini, as others have noted). Your headline is a bit salacious, but ultimately my concern is how this article might be used by others.
I was surprised by how confusing the statistics were about the trend of income disparity. How the numbers varied widely by source, and how much definitions mattered. I think we both agree that the trend of this is not important.
I'm not sure if we agree or disagree on whether relative status is important or not. I would argue it is not important, except to the extent someone else pointed out that it provides political influence (which I do think I have a solution for). I prefer to look at absolute measures of improving the standard of living (life expectancy, health, food, entertainment, etc).
There's an Economist article[2] that puts the US's pre-tax Gini at 0.57 for 2013.
So yeah, income inequality has increased astronomically, undeniably, conclusively. The author seems to write off income inequality as a metric because it "doesn't track societal progress" and "isn't helpful for policy making purposes" both of which I would strongly reject.
First, let's explicitly state the axiom that money is equal to political and social power. An increasing Gini means we're moving farther and farther away from an equitable society and closer to feudalism or a plutocracy where the richest control everything via their ability to manipulate the political process with money. I think that it's fairly clear that our current government has been repeatedly bought, sold, and manipulated by a few plutocrats with special interests for the sake of making them and their buddies even more money. If you're looking for an example to support this argument, consider the billionaire Koch brothers and their political empire.
Next, let's consider what a rising Gini means for policy making purposes. If you are a policymaker whose primary constituents are the rich, a rising Gini is a stat which you can bring out at your fundraisers (a bit ridiculous, sure) to show that you're on average channeling wealth into the right pockets with your policies. On the flip side (and more realistic side), if you're an Elizabeth Warren type, you can connect your constituent's cries for a stronger safety net to a statistic which proves they're not just perpetually hungry for more. If you bring a piece of information like a Gini to the public, it's possible to win over people who may have been skeptical about supporting stronger social programs because they're unwilling to support "deadbeats" or the like-- after all, this Gini thing says that even if they're productive members of society, they're still not as well off as before. Their piece of the pie has actually become smaller over time, and their complaints are not baseless.
That said, I like the author's plug for basic income. The sooner we chop up the concept of capitalism and move on to a more just system, the sooner we'll unlock the underclass from the survival grind and free them to pursue more socially useful ends.
[1]: http://en.wikipedia.org/wiki/Gini_coefficient [2]: http://www.economist.com/blogs/democracyinamerica/2013/11/in...
I understand the concern about political power, and agree that this is the best reason to be concerned about inequality. I think I have a long term solution to that problem that I will announce later this year.
I've never encountered the Gini coefficient before, but reading up on it on Wikipedia, the author appears to have the measure flat backward.
"A score of "0" on the Gini coefficient represents complete equality, i.e., every person has the same income. A score of 1 would represent complete inequality, i.e., where one person has all the income and others have none."
Source: http://en.wikipedia.org/wiki/List_of_U.S._states_by_Gini_coe...
Also see the chart here, with the US rising toward inequality ever since the 60's. Again, the caption says "where 0 is perfect equality, and 100 is perfect inequality." http://en.wikipedia.org/wiki/Gini_coefficient#Gini_coefficie...
TL;DR: The Gini coefficient is a shitty metric to make any conclusions, especially when taken in a vacuum.
Well, people more frequently cite the Gini coefficient of income, but you can take a Gini coefficient of any measure, including wealth [1].
> It's well known that the rich don't make their money via income but rather through ownership.
The money made through ownership is income -- making money is equivalent to income. Its true that source of that income is different for the richest than most other people (most of the richest derive most of their income through capital, while most of the rest derive most of their income through labor), but its still income.
[1] Gini coefficients of wealth are, e.g., presented here: http://en.wikipedia.org/wiki/List_of_countries_by_distributi...
That said, the main takeaway here is that the author doesn't consider growing income disparity to be a problem. Perhaps a better way to look at it is this: growing income disparity is a symptom of the real problem, which is that the economy hasn't really done all that well since the end of the 90s.
A strong economy that's serving all individual participants well would result in shrinking income disparity over time. The fact that we don't see this is indicative of some major problems.
Because people in a free society with access to capital and mass production and distribution can be incredible productive.
And others can do manual work with no mastery of technology at all and not sell their work to the world.
Those two extremes are going to get more extreme over time, not less.
I think psychologically you are correct in that most people would probably be less upset with income disparity if the economy was doing better overall. We are in a long, slow recovery.
I do disagree with your main premise. I think in the technology economy we would see increasing income disparity over time. My only real solution to this problem is basic income.
Part of the inequality picture is that demographic changes in recent decades, with women becoming a significant part of the workforce, and the rise of single-parent households, has skewed family-based inequality significantly. In the referenced article, Douthat considers the underlying causes of that. Essentially, are the changing rules in society (taboos about sex, marriage, divorce, etc.) dooming those who already don't have a strong societal backdrop to guide them?
[1] http://douthat.blogs.nytimes.com/?module=BlogMain&action=Cli...
Even still, the goal should not be balanced wealth but continual upward mobility for all people - or more aptly distance from poverty. There will always be rich and poor but the standard of living and equity of opportunity for the poor is what we should focus on. It is more important that a poor kid have good education, healthcare and living standards than it is to rebuke the rich guy for having a yacht. It seems we are in this stage where we recognize something isn't right but we are immaturely blaming the rich guy and saying he should give his money to the poor kid rather than finding real solutions to the plight of the poor kid.
A high level of wealth comes with disproportionate political power. One shouldn't disregard this aspect and confine the discussion to most people having a fairly comfortable life.
Poverty used to be living in a shanty town during the dust bowl where you could possibly die of dehydration any day. Poverty now is living in a house where you only get basic cable and don't have the money to buy a nice steak dinner.
Without everyone sharing a sensible consistent definition of the word, the discussion will come to nothing but blows.
Comparing the numerical figure of the poverty line around to world is nonsensical.
You make my point: it is nonsensical to argue about "poor" when wildly contradictory definitions are being used. A great many legally "poor" in the USA have homes, cars, running hot/cold clean water, HVAC, cable TV, smartphones, etc. and a livable income plus generous free food. For other areas, having a little more than an objectively minimal nutritional intake, survivable shelter, adequate clothing, and mundane healthcare counts one as "not poor" despite still being well below the official US standard.
We need an objective definition of "poor" better than "can't get by on $X in the world's most expensive cities".
Most of the US doesn't save a significant percentage of their income. And while that may prove a problem when they go to retire, it doesn't mean they aren't receiving their fair share.
I carelessly posted a story with a headline like this a week or two ago, but a more accurate statement would be that 85 people have as much wealth as the poorest half of the world's population.
that's still a pretty startling concept though - that you could make half the people in the world twice as well off as they are now by disenfranchising a mere 85 individuals, or that each of those on average holds as much wealth as 41 million very poor people. Of course there would be a knock-on effect that would hurt all the people who work for or do business with those 85. And as a statistic I'm not sure how valuable it is; even my averaging comment is misleading because the distribution of wealth within those 85 individuals likely has a rough Pareto distribution.
Like the author I'm not entirely convinced that this is bad, for the same reason that I don't consider elephants and whales to be in opposition to ants or plankton; Pareto distributions seem to be a fact of the natural world and so we shouldn't be too surprised to see them appear in distributions of wealth. Of course there are lots of natural things that are widely considered undesirable, so I anticipate increasing political pressure to alter such imbalances.
I think it would be ridiculous to suggest that those 85 people worked 41 million times harder to get where they are compared to the other 3.5 billion, that's simply impossible. The successful seem to have a hard time grasping or accepting the amount of opportunity (luck) involved in their success.
I personally think its better to look at the economy as a game and the game must have arbitrary rules defined to "level the playing field". These rules must followed and enforced to maximize the enjoyment of the games participants. After all thats what a modern economy does, improve quality of life, not just survival. The rules will need to be modified and tuned over time to find the sweet spot. As with all games there will be super-stars and weak players that get compensated differently, however the ruleset will limit inequality to something "fair" and "enjoyable" to all participants.
One quote that always comes to mind: "The free market should be a prize fight not a barroom brawl".
If you want to produce paper napkins by hand 10 hours a week and someone else chooses to make them by machine 40 hours a week and its the same product, why should you both take home an equal income?
"Oh" they say "we just want to make it less unequal than it is, not equal." Isn't that why we pay all these taxes and have all these government programs?
It literally never ends.
One plausible answer could be, "because there's no workable way of making it otherwise". I could buy that, although then we're arguing pragmatics, not ethics.
As an aside, have you ever noticed that (certified) plumbers and electricians make a lot of money? Same reasoning.
I don't have a problem making more money now that I made myself valuable. I started off in retail, where you literally are one step away from being replaced by an automated kiosk.
That could be part of our differences in outlook. I don't feel I've really "made myself" valuable, I just have skills and interests that happened to be valuable. I've liked computers since I was a kid, and am reasonably adept with them. When I grew up, somewhat to my surprise, I found out people paid quite a bit of money for that kind of thing. It feels sort of like playing careers on easy-mode; even if I were to totally wash out into a low-end programming position, I could still easily make high 5 figures slinging web templates or Ruby or PHP or something.
Other people who're harder-working and more talented than me make less, because they happened to be adept in the wrong thing (art or carpentry instead of coding, say). Were the era different, it could be the other way around, so I have a bit of a "there but for the grace of god go I" outlook: there are times when engineering was a poorly paid blue-collar occupation and skilled painters were highly rewarded. In that economy, I'd be poorer and some of my friends would be richer, through no change in our own skills...
It should be this way if you want people to solve hard problems. If you want everyone working at the drive thru, pay everyone the same.
Then it will be other countries that master the future.
If anything, I think this part is probably backwards. The market does not reward you on the basis of how difficult the technology you mastered was, but on how marketable it is. The most marketable technology-related skills are not technologically very complex, but involve coupling fairly basic technology with good sales and product/market fit skills. Having ungodly levels of technical skill produces a Sun Microsystems: great technology (ZFS, DTrace, Zones, etc.), but out of business. Having relatively poor levels of technical skill but a good product idea produces Facebook or Groupon.
How rewarding it is governs whether people endure the difficulty. This is what matters in the long run.
And overall success happens in the long run.
You can't just do a 'reset' and re-allocate everything. And even if you did, the people who are smarter (sneakier?), work harder/more, and are luckier are going to end up winning out again.
It's pretty hard to have a conversation about a problem and how to fix it, when the data being flung around doesn't measure the problem, and doesn't measure the fix either.
As an example, looks like any data on poverty (often the basis economic inequality conversations) from US govt prior to 2011 is useless to measure the "war on poverty", because it doesn't measure most of the financial efforts to fight poverty. http://www.nytimes.com/2011/11/04/us/experts-say-bleak-accou...
On the other hand people aren't really starving, and I don't see things like the Haymarket Affair yet. Maybe it won't be an issue this time around because factory farming has fed the world for cheap enough that people don't starve.
1. Is anyone worse off because Mark Zuckerberg is very rich? 2. If policies to reduce income inequality made the poor worse off, would you be in favor of them?
Mark Zuckerberg? Probably not directly; Facebook's employees are treated well, as far as I'm aware. But that's an awfully narrow example to cherry-pick. How about the Waltons, or Jeff Bezos? Employees in Wal-Mart stores and Amazon warehouses go without benefits, unemployment compensation, a living wage, and sometimes basic climate control, so that the wealthy can line their pockets.
The wealth of CEOs does not descend upon them from heaven as a divine reward for good management. Every million dollars they get is a million that is not being spent on compensating employees. (Or on growing the business, etc.) Obviously CEOs deserve compensation for their work just like anyone else, and I haven't done the math on how much the Waltons and Jeff Bezos are worth vs. how much it would cost to treat all of their employees decently; but when a boss is worth billions and their employees can't afford food or medicine for their children, it's obscene.
> 2. If policies to reduce income inequality made the poor worse off, would you be in favor of them?
No. Obviously. I favor policies in general that aid those who need it most. Reducing income inequality is only one obvious way to help do that.
You've got a "gotcha" planned here, I assume?
For example if you own your home outright, your living costs will be substantially lower than someone who has to rent or has a mortgage. In other words having wealth allows you to substantially lower the income you need for the same standard of living. This argument doesn't account for wealth at all as I'm reading it.
It's pretty clear: http://www.youtube.com/watch?v=akVL7QY0S8A&t=6m30s
He picked the worse possible moment to measure rich people wealth in the past 40 years.
I don't know his deal, but it's obvious that income inequality has been on the rise around the world the past 40 years.
Sure, let's just leave it at that then...
If we just gave $3,000 to each person below poverty we would have 23 million people above the poverty line.
Please tell me that this can't even be a question on inequality of the super rich and the poor? Next thing Global Warming is a fraud?
We already give an enormous amount to the "poor". If you make less than a given amount, various welfare programs will fill the gap (some pushing you WAY above the line). It's enough that another problem is arising: many on welfare receive so much that they can't afford to work, lest they lose all those benefits and reap less net income as a consequence.
Again, I come back to the issue of defining the word "poor". As is, it's not objective relative to the recipient's survival.
So, yeah, income and wealth inequality have gotten worse, and are at a level that was considered very bad for social stability.
So when you show me the Gini coefficient over time, the first thing I wonder is if either the methods of calculating it or the methods of collecting the data have changed during that time.
Anecdotally, it is readily apparent to me that inequality is increasing, and not just in wealth or income. It is also increasing with respect to health care, legal processes, job satisfaction, consumer confidence, and trust in institutions.
It feels a lot like the guy trying to figure out what is stuck to the seat of his pants in the instant before the bartender gives him the bum's rush out the door. And the bartender himself doesn't realize that the guy is the only one left in the bar that actually intends to pay for his drinks. So really, just cruel and sad all the way around--America since 1970.
The only people who now have the ability to change the system see absolutely no benefit to themselves in doing so.
What I find odd is the article mentions 0.0 as the 'one person has all the income', where the wikipedia article on the Gini coefficient says 'A Gini coefficient of one (or 100%) expresses maximal inequality among values (for example where only one person has all the income).'
How do you figure "it does not include army of unemployed people"? Census data should reflect members of the population regardless of employment status.