[onoway]

http://www.ted.com/t...tml?fb_ref=talk

[Winstonm]

The latest news on the inequality front:

Quote

Another day, another mind-blowing fact about the staggering difference between the haves and the have-nots.

Incomes for the bottom 90 percent of Americans only grew by $59 on average between 1966 and 2011 (when you adjust those incomes for inflation), according to an analysis by Pulitzer Prize-winning journalist David Cay Johnston for Tax Analysts. During the same period, the average income for the top 10 percent of Americans rose by $116,071, Johnston found.

[mike777]

Winstonm, on 2013-March-25, 16:01, said:

The latest news on the inequality front:

Winston see my post which explains this effect.

[barmar]

Winstonm, on 2013-March-25, 16:01, said:

The latest news on the inequality front:

Reporting changes in income in dollars is meaningless if you don't relate it to the starting income amounts. E.g. if the average income for the bottom 90% started out at $69, their incomes doubled during that time, while if the top 10% were making $1 million in 1966 their incomes only increased 11%.

I know the bottom 90% weren't making only $69 in 1966, but I don't know what the figure actually was so I can't interpret the $69 increase.

[blackshoe]

Income per what period? I well remember MSGT "Moonbeam" Smith, USA, who circa 1969 said proudly "I been in th' Army eighteen and a half year, and in uhnothe' yea' and a half, I c'n retire and move to Florida and make seventy five dollah a week!"

[WellSpyder]

blackshoe, on 2013-March-26, 00:51, said:

Income per what period?

Indeed! The quoted increase is pretty hard to understand without knowing what periodicity it refers to. It would also be helpful to know when adjusting for inflation whether the 2011 figures were put into 1966 prices or the 1966 figures put into 2011 prices.....

[Winstonm]

blackshoe, on 2013-March-26, 00:51, said:

Income per what period? I well remember MSGT "Moonbeam" Smith, USA, who circa 1969 said proudly "I been in th' Army eighteen and a half year, and in uhnothe' yea' and a half, I c'n retire and move to Florida and make seventy five dollah a week!"

Income growth for the lower 90% if equal to 1 inch means the upper 90% gained 168 feet.

[dwar0123]

Winstonm, on 2013-March-26, 12:42, said:

Income growth for the lower 90% if equal to 1 inch means the upper 90% gained 168 feet.

Yes, but if the lower 90% had started with a nanometer, their growth would be phenomenal, while if the top 10% had started with a Parsec, their growth would be statistical noise.

Your rephrasing it with this analogy did nothing to elucidate the problems people were posing.

[Winstonm]

dwar0123, on 2013-March-26, 13:12, said:

Yes, but if the lower 90% had started with a nanometer, their growth would be phenomenal, while if the top 10% had started with a Parsec, their growth would be statistical noise.

Your rephrasing it with this analogy did nothing to elucidate the problems people were posing.

The link was posted if anyone wished more information.

Here is the entire article by David Cay Johnston.

[mike777]

Winstonm, on 2013-March-26, 13:24, said:

The link was posted if anyone wished more information.

Here is the entire article by David Cay Johnston.

"Incomes and tax revenues have grown from 2009 to 2011 as the economy recovered, but an astonishing 149 percent of the increased income went to the top 10 percent of earners"

Winston again see my post which explains this effect,it has nothing to do with growth and total wealth formation

The one percent of the one percent of the population is vastly more sensitive to inequality than total GDP growth (which explains why the
superrich are doing well now, and should do better under globalization, and why it is a segment that doesn’t correlate well with the economy).
For the super-rich, one point of GINI causes an increase equivalent to 6-10% increase in total income (say, GDP). More generally, the partial
expectation in the tail is vastly more sensitive to changes in scale of the distribution than in its centering

---------------
---------------


The Gini coefficient measures the inequality among values of a frequency distribution (for example levels of income). A Gini

http://en.wikipedia....ini_coefficient
=================================

the money of the superrich reacts to inequality rather than total wealth in the world, wealth multiplies by close to 50 times in response to a change of 25% in dispersion of wealth. it has nothing to do with growth and total wealth formation

[helene_t]

mike777, on 2013-March-26, 13:30, said:

149 percent of the increased income went to the top 10 percent of earners

Literally this would mean that the low 90% had negative income but obviously it should read "increase in income", so the 90% just saw their income decrease. Still it is a funny way of putting it, and it makes me wonder if it should read "the top 10% saw their income increase by 149%". Or maybe it is just a typo?

[kenberg]

It seems pretty clear to me that the claim amounts to:

The total income, obtained by adding all AGI figures for all taxpayers, increased by a certain amount, call it x, between 2009 and 2011. The total income of the top 10% increased by 1.49 times x, the total income of the lower 90% decreased by 0.49 times x. I think that is what he is saying.

Is this plausible? Perhaps. Is it meaningful? I am not sure. He says:
" In 2011 the average AGI of the vast majority fell to $30,437 per taxpayer"
There are many places for ambiguity. I think he is using "vast majority" to mean "lower 90%". I am guessing that if a married couple filing jointly have an AGI of $60,000 he is counting this as two incomes of $30,000 each but I don't know. Early on he speaks fo "real income reported by the bottom 90 percent of earners" so maybe he counts this as one income of $60,000 if it is all earned by one person, even if they are filing jointly. I don't think he says anywhere how this works.. I also am not sure who gets counted. If I recall correctly, some of the time when I was a teenager working part time I made enough to pay a (very) small amount in taxes. So I would be counted as an earner? I suppose so. It would bring the average down.

The problem with these statistics is that it is often pretty hard to figure out what they mean and even harder to figure out what to do about it. Suppose you are 20 years old looking for a job. If someone creates a job paying $14 an hour and hires you, probably you consider this a good thing. But uh oh. $14 an hour, 40 hours a week for 50 weeks, that's $28,000 per year, This average of $30,437 just went down a bit. Gotta do something about that, shoot the employer maybe.

Statistics can be useful, but care is needed. Some time back a guy from some educational study was speaking of the declining mathematics scores of high school students. But there was "good news" mixed in with this. Boy's scores were declining more than girl's scores so the gender gap was narrowing. Well, break out the champagne!

In my view, lack of opportunity to live in a safe neighborhood and get a decent education is a very serious problem in this country. Ann Romney owning three Cadillacs, or however many it is, is not a pressing national problem.

[helene_t]

kenberg, on 2013-March-27, 07:34, said:

I am guessing that if a married couple filing jointly have an AGI of $60,000 he is counting this as two incomes of $30,000 each but I don't know.

No it is sqrt(2) incomes of 60,000/sqrt(2) each, you should know

[kenberg]

helene_t, on 2013-March-27, 08:16, said:

No it is sqrt(2) incomes of 60,000/sqrt(2) each, you should know

I was hoping the square root stuff had gone the way of the Dodo.

[Winstonm]

mike777, on 2013-March-26, 13:30, said:

"Incomes and tax revenues have grown from 2009 to 2011 as the economy recovered, but an astonishing 149 percent of the increased income went to the top 10 percent of earners"

Winston again see my post which explains this effect,it has nothing to do with growth and total wealth formation

The one percent of the one percent of the population is vastly more sensitive to inequality than total GDP growth (which explains why the
superrich are doing well now, and should do better under globalization, and why it is a segment that doesn’t correlate well with the economy).
For the super-rich, one point of GINI causes an increase equivalent to 6-10% increase in total income (say, GDP). More generally, the partial
expectation in the tail is vastly more sensitive to changes in scale of the distribution than in its centering

---------------
---------------


The Gini coefficient measures the inequality among values of a frequency distribution (for example levels of income). A Gini

http://en.wikipedia....ini_coefficient
=================================

the money of the superrich reacts to inequality rather than total wealth in the world, wealth multiplies by close to 50 times in response to a change of 25% in dispersion of wealth. it has nothing to do with growth and total wealth formation

The issue that is of importance is not how the wealth of the upper 10% grows rather the significance lies in the stagnation of incomes of the bottom 90%.

[awm]

Inequality is more of a symptom than a problem.

The real issue is that financial success ought to be primarily determined by hard work and skill/talent. If this fails to be the case, it leads to a significant misallocation of resources and hurts society as a whole in myriad ways. For example: someone willing and able to work a full-time job ought to be able to support herself and her family. A child's ability to get nutrition and an education ought not to be wholly dependent on his parent's economic status. And a person whose parents were very wealthy ought not to be able to maintain and even increase that wealth without putting forward some substantial contribution to society (either through work or innovation or taxation). If any of these fail, we have people in our society who could be contributing and are either unable or unmotivated to do so.

The current level of inequality gives evidence (and there are many other statistics which support this) that economic success is more determined by the parents' economic status than by anything else. There are many cases of children relegated to failing schools and even homeless and hungry. At the same time, the children and grandchildren of the rich and successful are typically able to increase their fortunes simply by investing the money, and have no incentive to work (some of them do some amount of charitable work, but many don't). Small businesses struggle, in part because they must compete with much larger businesses which, in addition to the advantages economies of scale provide, are also taxed at a much lower rate.

Of course, the above is not really an argument for socialism per se, in the sense that government often determines winners based on connections and party loyalty rather than hard work and skill/talent. The point is that a completely unregulated free market often generates monopolies and perpetual pools of inherited wealth. The government needs to step in and break these up, without moving to control the market directly. Raising the minimum wage and prosecuting some of the criminal conduct in the financial collapse would be a good start.

[mike777]

Something I think we all can agree on. No one is advocating for a world with no regulations from the central govt or a world where traditional criminal conduct is not prosecuted or a world with no taxes.


Some posters do the raise the interesting issue of size and I think there would be an interesting discussion whether size may in fact be a detriment to companies rather than a competitive advantage in the long run. Not only to companies but possible to countries.

For example an owner of a too big to fail company may have access to cheaper capital but being to big to fail may also act as a barrier to respond to innovation. You always run the risk of the govt stepping in, wiping out the owners and taking over.


--


As an aside free capital markets dont try and reward based on hard work or talent. Example a teacher or an artist may work harder and have more "talent" but that may not be the most important factor for an investor. But it is important.

A feedback mechanism comes from capital markets putting pressure on company managers to become more efficient, invest only in profitable investments and be accountable to investors. A big problem comes when the link between risk and benefits is broken.This is an area where government may be helpful, in maintaining that link and where government is harmful when they try and break that linkage.

[kenberg]

awm, on 2013-March-28, 11:06, said:

Inequality is more of a symptom than a problem.

This much I definitely agree with. Exactly what it is a symptom of, I am less sure. I do believe that the world was somehow easier when I was young. I am having trouble pinning down just why this is.
We are helping someone with problems, and this has led to some evaluation of schools. Some really suck. My Kindergarten day was three hours long, and mostly we sang and drew pictures. Kids today have full day Kindergarten, they have pre-Kindergarten, they have homework in Kindergarten. We learned more. Very strange.

But of course in the better areas, they now learn more than I did. A lot more.

It's this educational inequality that keeps me fretting. I just don't care about yacht counting.

[mike777]

Ken I think the entire question of the "education arrow" deserves its own thread.

Does our formal education system make us richer or does the fact we are rich gives a decent education system.

Or to put it another way the notion that university knowledge generates economic wealth.


“Soccer moms are the enemy of natural history and the full development of a child.”

E.O. Wilson

[kenberg]

Yes, perhaps so Mike.

As far as financial inequality goes, again life used to be simpler. Growing up, I saw it as the corporations take care of making profits for the owners, the unions take care of the working man. This pretty much worked. Yes I saw On The Waterfront but all in all, as I saw the process in action, it worked. Somehow it's not working so well anymore. Globalization is the obvious culprit but that oversimplifies matters. Some forty years ago everyone was talking about converting from a manufacturing economy to a service economy. At that time I thought this meant that we would all become servants. Something to that, I think.

A guy who is willing to learn a skill and hold a job should be able to raise a family. If we start with that as the fundamental axiom, we might be able to prove some theorems.