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Our Broken Economy, in One Simple Chart
- jgalt212 9y ago1. Thank you Obama. 2. I don't think UBI is the solution. Have you met any trust fund babies who don't have to work? Do you think it's wise to create more of them?
- dsr_ 9y agoIs it wise to create more of them? Yes, if what you mean is "is it wise to let anyone who has no desire or ability to work subsist at a level where their basic needs are met?" Yes, if what you mean is "is it wise to separate subsistence and health care from work, so that creative destruction of jobs does not condemn the displaced to bankruptcy, homelessness and a shorter lifespan?" No, if what you mean is "is it wise to allow the wealthy to create further generations of trust-fund babies who have no incentive to do anything?"
- forkLding 9y agoI think theres a difference between the money received for UBI and from a trust fund. Please correct me if Im wrong with an amount.
- mikeash 9y agoIf you met a trust fund baby who didn't have to work, but still chose to work and live a normal life, would you even know it?
- awj 9y ago> Have you met any trust fund babies who don't have to work? Do you think it's wise to create more of them? What is your basis for believing that UBI would create more of them? UBI would be ... universal, so A) society would better adapt since it's pervasive and B) there's no way any single individual would have access to a trust fund baby lifestyle off it.
- jgalt212 9y agoIf it's truly universal, then the it's good effects will be severely curtailed by the substitution effect. https://en.wikipedia.org/wiki/Substitution_effect https://en.wikipedia.org/wiki/Substitution_effect
- neon_electro 9y agoAs a layperson, could you expand on your point here?
- AnimalMuppet 9y ago> Thank you Obama. Take a look at the animated graph in the middle of the article. There was a lot of movement under Clinton and Bush Jr. as well. Obama didn't fix it, of course (or even stop it), but it's not fair to single out Obama for your scorn.
- damon_c 9y agoYes. The biggest % change was during the years 2003-2008 and as far as I can tell the chart peaked in 2011 and receded slightly after that.
- mcrad 9y ago> not fair to single out Obama for your scorn. You mean for failing to convince the general public that Hope is a good approach when faced with a broken economy?
- zanny 9y agoAlso, changing the tide will required the combined desire of a sitting president and congress to make it happen. The democratic congress of 08-10 was, at best, a neoliberal shitshow. They had no desire to correct this course.
- gehwartzen 9y agoThere is no way anyone will be living off of just a UBI at least in the terms it is currently described. $10k/yr doesn't get you very far especially when it is offset by cutting nearly all other social safety nets.
- cbryn 9y agoThe trust fund babies I know make more money than you could imagine, and are conspicuous consumption incarnate.
- xg15 9y agoI really like the two charts further down, comparing the growth distribution with the growth average. I keep seeing a lot of statements/articles/op-eds/etc saying things are fine because if you look at the data, you see that the average (insert measure here) actually hasn't changed much. Those charts show why such a statement is a fallacy.
- AstralStorm 9y agoHowever median is correct in showing that in general things are not so hot.
- randyrand 9y agoPlease note that is does not include losses from asset devaluations, e.g the housing crash, stock market crash, failed investments, etc.
- wnissen 9y agoThe chart says "Note: Inflation-adjusted annual average growth using income after taxes, transfers and non-cash benefits." Does that include employer-paid health insurance? I assume that is part of what is meant by "non-cash benefits". If so, the reality is even more desperate than the already shocking graph. Because that health insurance is a big chunk of money, especially as a percentage of income, and the employee never sees a dime of of it. It's not available to pay rent because it's going straight into medical care. Not that it's not valuable, health insurance is extremely important. But the take-home paychecks of workers in the lower-income range are actually going down.
- gehwartzen 9y agoGood point. The other thing I often hear from people that don't view this as a problem (not suggesting this is you OP)is that, yes, its true that, the income of the top 1 percent has grown but so has the income of everyone else (save for the bottom 5%) just not at the same rate. Your standard of living has increased slightly over just maintaining (matching inflation). Personally I think its still a problem because like it or not humans tend to get upset when there is perceived (and in this case real) injustice in the distributions of productivity gains despite not strictly being worse off. I notice a lot of this in the hierarchy working at F100 company. The higher up you go the more managers pat themselves on the back for the productivity gains seen at the company. For them increasing productivity is a mater of the size of the bonus. For those on the production floor working harder/smarter becomes a mater of having a job or not.
- SilasX 9y agoExactly. Consider the extreme case where your employer is your doctor (ick, but bear with me). They give you free doctor services for being an employee. "You got a 20% raise this year, because this year I 'billed' you $15k for the medical services and comped it, while last year I 'billed' you $5k and comped it. (Cash salary of $45k.) Yes, the service was physically the same but we wrote it down as being worth a lot more!" Did you really get a raise? You don't know, because that "fee" is almost entirely unhinged from actual market dynamics. That's an extreme version of the current situation, but illustrates why it's not the same as increased real compensation.
- mc32 9y agoApparently, construction work has seen a 30% rise in wages in Texas in the last few months --some attribute it to a tighter market precipitated by fewer undocumented workers. It'd be interesting to see if those results pan out and if tightening labor markets lead to significant rises in wages in other sectors of the economy where imported labor resulted in downward wage pressures.
- deleted 9y ago[deleted]
- neo4sure 9y agoPlease site sources?
- mc32 9y agoPlease use Google. You can pick your own sources rather than rely on mine, but here: http://www.seattletimes.com/business/texas-companies-tie-worker-shortages-to-immigration-fears/ http://www.seattletimes.com/business/texas-companies-tie-wor...
- madamelic 9y agoWouldn't increasing wages increase the cost of those goods? For instance, the reason the US can have cheap produce is cheap, illegal labor https://cis.org/Report/Retail-Produce-Prices-Without-Illegal-Farmworkers https://cis.org/Report/Retail-Produce-Prices-Without-Illegal...
- deleted 9y ago[deleted]
- mc32 9y agoThey would raise prices, not different from Europe or Japan or Korea. Organics and the trend toward bespoke/crafts items seems to indicate people may not be as price sensitive as we might suppose.
- z5h 9y agoIt seems that after inflation, nearly everyone earns more over time. Isn't that good?
- bahjoite 9y ago> The basic problem is that most families used to receive something approaching their fair share of economic growth, and they don’t anymore. Yes it's good, but it's not good enough.
- rayiner 9y agoEarns more relative to what? They earn more than in the past, but they earn less than they would have had growth been distributed the same way it was in 1980.
- gehwartzen 9y agoAnd this is the crux of the situation. Yes, everyone is better off, but humans still don't like feeling there is injustice. Its like going to a lunch time business meeting and there is a slice of pizza waiting for everyone. Great! a free slice of pizza. Next week there is still a slice of pizza for everyone but the senior manager now gets a steak dinner. People naturally get upset and the reason is not just because someone got more than someone else. The food didn't come out of no where but was payed for by extra money the company gained through everyone working harder and smarter (productivity gains). And when everyone asks why they don't get something other than pizza they are told that yes the company did better but it was really only because the work this senior manager put in. Now people are usually okey with not having exactly equal pay and benefits as long as they generally believe that the extra pay is justified because those higher up are working harder or have more valuable experience. I think when you get to the point that the CEO effectively says he is working 1000X harder/smarter than everyone else there is a problem. And really maybe the CEO is 1000x smarter and works that much harder, but, at the end of the day, perceptions matter.
- ptr_void 9y agoThere has been almost no increase in median household income since 1970s. - http://web.stanford.edu/class/polisci120a/immigration/Median%20Household%20Income.pdf http://web.stanford.edu/class/polisci120a/immigration/Median... - https://fred.stlouisfed.org/series/MEHOINUSA672N https://fred.stlouisfed.org/series/MEHOINUSA672N - http://www.usinflationcalculator.com/ http://www.usinflationcalculator.com/
- tengbretson 9y ago> Different policies could produce a different outcome. My list would start with a tax code that does less to favor the affluent, a better-functioning education system, more bargaining power for workers and less tolerance for corporate consolidation. > less to favor the affluent We already have progressive tax brackets. For crying out loud, the top 20% of earners shoulder 84% of the tax burden of the federal government[1]. Where does that number need to be in order to silence the socialist rabble-rousers? 90%? 95%? 1. https://www.wsj.com/articles/top-20-of-earners-pay-84-of-income-tax-1428674384 https://www.wsj.com/articles/top-20-of-earners-pay-84-of-inc... Edit: I've only received 1 answer to my question, and it involved allusions to bloody revolution, so I'll ask again: Where does that number need to be?
- bxrxaxdx 9y agoI think its clear most people would like the distribution to look more like it did 1980 than 2014. I'm sorry I forgot what a socialist nightmare 1980s America was.
- tengbretson 9y agoThe wealthy were responsible for a lower percentage of the total tax revenue in 1980 than they are currently. I get the impression thats not the point you're trying to make, however.
- kfk 9y agoWell, if the top earns more they pay more too. On a serious note, I don't think this is a tax issue, but more of a scary direction for our economy. Where does it stop? How do we deal with inequality? How do we keep things fair? I mean the "best" doctors can all be working for the 1% just by... asking exorbitant prices. Is this ok?
- Footkerchief 9y ago> the top 20% of earners shoulder 84% of the tax burden of the federal government Income tax is not synonymous with the tax burden. The article states it's less than half: > The individual income tax remains the most important levy in the U.S., providing nearly half of federal revenue.
- zip1234 9y agoI wonder how much having to be globally competitive affects the income growth? Non-skilled factory labor is the easiest thing to move to a different country. The 1990s-now were huge for pulling the lowest of the low out of poverty around the world. It seems that unskilled laborers in developed countries took a hit at the same time. Until the world is playing on a level playing field wage-wise, I'm not sure the situation will improve.
- mrmekon 9y agoInternationalization, exponential worldwide population growth, and technological advancement are probably all major factors in making labor, across the board, less valuable. I would imagine that it affects low/non-skilled the most, but also cuts into high-skilled labor. And when labor is cheap, value shifts from the labor itself to the holder of the goods [citation needed]. Isn't it intriguing that in all of these talks and comparisons of now to "the good ol' days", whenever you pick those days to be, it's seldom mentioned that the world population grew by multiple billions since the comparison started? There are twice as many humans on the planet as there were in 1970. What that means for income distribution isn't for me to say, but it seems a safe bet to assume it's at least _related_.
- dmode 9y agoThis is my hypothesis as well. It will be great if someone can juxtapose this graph with growth in China and India's GDP, growth in middle class income in these two countries, and growth in manufacturing and services output in China and India (India more so starting late nineties).
- notfromhere 9y agoIt's probably related in that markets beforehand were more national than international. Nowadays, the national barriers are pretty porous, so lower-skilled workers have to compete with labor at a fraction of a cost of theirs.
- rloc 9y agoI really liked the "income growth" animated graph. Does someone know if the nytimes used a specific library ?
- askmike 9y agoIts d3.js - just follow the debug logging they didn't disable for production in the console ;)
- hashberry 9y agoFinally, I can put my front-end code monkey skills to use! From looking at the source code, the graph uses "d3-chart" class names. Googling this returns: https://d3js.org/ https://d3js.org/
- deleted 9y ago[deleted]
- nateabele 9y ago> Different policies could produce a different outcome. My list would start with a tax code that does less to favor the affluent, a better-functioning education system, more bargaining power for workers and less tolerance for corporate consolidation. It floors me how anyone, especially anyone with even a basic STEM background, could look at a growth curve that approaches infinity that rapidly, then turn around and say 'gee, I wonder if tinkering around the periphery of the system would solve the problem'. No! Clearly some central mechanism has gone horribly awry. The only explanation I've ever seen that adequately accounts for those curves is inflation. Inflation drives up prices, both of goods and of assets. A higher cost of goods narrows the margins for wage-earners (i.e. the poor and middle class), and higher asset prices inflate the net worth of people who earn income from assets (i.e. rich people) — this effect compounds over time. If I'm wrong, please, convince me. Article & book recommendations gladly accepted.
- albertsun 9y agoThey're not really growth curves, the curves show relative growth rates. Not quite the same thing. And if you think some central mechanism has gone horribly awry, what central mechanisms changed around 1980?
- dhimes 9y agoIIRC, one of the things that changed back then was a movement away from workers having retirement plans with the companies they worked for (pensions) and toward managing their retirement individually (IRAs). This could have conceivably led to a new, steady source of investment in the stock market through mutual funds and whatnot (and perhaps even more aggressive investments presumably), which, if the changes shown on that graph could be thought to be generously helped by investment income, may explain some of this. Disclaimer: I don't know enough about this stuff to make a definitive argument.
- pantalaimon 9y ago> what central mechanisms changed around 1980? https://en.wikipedia.org/wiki/Reaganomics https://en.wikipedia.org/wiki/Reaganomics ?
- TwoFactor 9y agoSome speculation - this trend would make sense if wage growth had stagnated, and the upper class earners are making more of their income from capital gains and other similar sources.
- dowjones 9y agoLet's not forget that both inflation and unemployment were in double digits, Iran was holding Americans hostage, and gasoline rationing was barely in the rear view mirror
- keebEz 9y agoWith the 1980 chart: if we should be ensuring high income growth to people according to their income percentile alone then gradually you'd assume they'd move up along the curve (since its income, and not wealth, and income*growth over time would move to the right then). In this world, everyone would slowly move up the curve according to their tenure/age. However, if we believe that people should have income growth more dependent on their willingness to work (rather than just income percentile) then over time, with high income growth on the low end, those most willing to work would move up. In this world, then the income growth is a dependent variable of 'willingness to work' and logically would move up the income percentile over time as labor re-sorts itself into higher income growth percentiles based on that willingness to work. One simple chart doesn't tell you much. It'd be best to see cohort effects across this time period to see if the bottom percentile is a bunch of 18 year old kids now (millennials), versus a bunch of prime age baby boomers itching to work hard. Having said that, the cohort effects I've seen are reassuring, but there are still big issues. The main point is that this chart isn't that great at saying anything conclusive.
- stevenmays 9y agoResult of quantitative easing. When you pump liquidity into the market asset prices rise. Wealthy people have assets. Super wealthy people have more assets.
- jnordwick 9y agoPiketty, Saez, and Zucman think US economy is broken and needs to be more socialist. I think I've read this before.
- devrandomguy 9y agoOne of the authors, Thomas Piketty, wrote Capital in the 21st Century, a fascinating book about the mechanics that drive wealth concentration. He explores the limits of wealth concentration, as a positive feedback loop that inevitably destabilizes, often violently. I don't want to spoil it, but it isn't all just analysis and observation, he does also make recommendations. https://www.goodreads.com/book/show/18736925-capital-in-the-twenty-first-century https://www.goodreads.com/book/show/18736925-capital-in-the-...
- omot 9y agoActually I think the hyper growth of the top 1% is attributed to development of Automation and globalization. Here is a brief explanation of how each move money to the top. Technology - Here is a simple thought experiment. You have 10 cashiers each are paid $100 a day. The total expense for these workers are $1000. The store in total makes $10000 a day. The owner nets $9000 a day. New technology comes out that replaces workers, you now only need one machine that costs $100 to maintain a day. The store owner nets $9900. Now just imagine this kind of replacement happening at every level of society. Globalization - With technology comes better ways to communicate with foreign countries with cheap labor. Take the same experiment but instead of replacing workers that cost $100 a day with machines, we replace them with foreign workers or undocumented immigrants which cost $1 a day. Your total expense is now $10 a day. The store owner now nets $9990 a day. This also happens at every level of society. This is the cost of efficiency and technology.
- yoz-y 9y agoBen Thompson was talking about this on his podcast. His idea was that over time capital earns more money than labor - due to automation, as you say. If the end game is 100% automatised then basically 100% of income will be produced by machines/robots/algorithms owned by a tiny proportion of human population.
- zanny 9y agoThe problem is we might already be too late to stop it, especially since it would require global cooperation to stop. Amassed capital right now can already bribe and control governments due to its scale, and isolated attempts to curb the power of the lauded elite will only either make them use their money to depose the current regime or have them leave the country. Unless we can get international agreement to stop this runaway concentration of wealth scenario from happening - which is extremely unlikely, since the country hosting the rich benefits from their presence in the short term despite the long term detriment - humanity seems destined for that dystopian eventuality.
- ddxxdd 9y agoThe counter to that argument is that if the owners of robots make 100% of the income while customers make 0%, then the owners of the robots will have a very small market to sell their goods and services. If you are capable of making 10 billion fidget spinners, you're going to lower your prices until as many people can afford fidget spinners as possible.
- mizchief2 9y agoI think that the problem is that the middle class is experiencing the "real" growth rate of the economy, and the top classes are just getting the benefits of all of the QE and other tricks on the monetary system.
- randyrand 9y agoA few points: 1. the fixed pie fallacy[0]. You actually need separate evidence to suggest that the 1% are taking away income growth from the rest of the percentiles. 2. The 1% generally makes the most in good times, and loses the most in bad times. The chart did not seem to include asset devaluation loses - e.g. the housing crises, stock market loses, investment losses etc. This is a huge omission. The past 34 years may also not be a very representative prediction of the future. 3. There is nothing morally wrong with income diversity, particularly if the poor still live long lives, are not hungry, have access to modern technology, transportation, and modern entertainment. I personally think income diversity is a good thing. As my right bias, I believe generally that "Disparities are natural and just" , and not "Disparities are due to injustices" - Fired Google Engineer. [0] http://www.aei.org/publication/the-fixed-pie-fallacy/print/ http://www.aei.org/publication/the-fixed-pie-fallacy/print/
- frotak 9y ago> if the poor still live long lives, are not hungry, have access to modern technology, transportation, and modern entertainment They have their bread and circuses, what are they complaining about?
- randyrand 9y agoYou joke, but the sentiment is correct. The poor have it incredibly good today relative to the rich - better than any time in history. In the past ( 2000BCE-1900CE) the disparities in lifestyle were much, much, larger. Stark disparities in access to water, much shorter life expediencies, no transportation beyond walking, limited food. The disparities in lifestyle between the rich and the poor have only continued to decrease over time, despite the dollar amount. That said, I don't deny that disparities still exist. Disparities are natural and just, and I have no problem with that. Along with that, if you still want to help the poor and donate your income, go do it! I think it's a great thing. And importantly, nothing is stopping you. You don't even need to government to help you. There are inumerous private charities more than willing to help you.
- 9y ago
- davidreiss 9y agoIncome growth isn't the biggest "wow" factor in this economy. Check out the wealth/asset/capital growth of the wealthy. Ever since the FED bailout, the wealth of has grown by leaps and bounds. Usually, in economic booms, the wealthy took the lion share of the wealth and threw the crumbs to the middle/lower class in the form of income growth. But not this time. It's also reflected by the decline of unions.
- a3n 9y ago> My list would start with a tax code that does less to favor the affluent, The problem doesn't seem to be taxes, but division of profits. Almost none of the gains seen by the 1% would have happened at all if the bottom 50% hadn't produced them. No one person "earns" 10M or 100M per year. No one's 24/365 is that productive. It's done by keeping a larger share of the pie than the people who do the actual production. Start with the (IMO) problem, not the side-show. I really don't care how much my CEO is taxed. I just want a fair share of gains.