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Even if most corporate stock is owned by the wealthy, in terms of relative wealth changes all that matters is a person's personal percentage investment in the
by mjfl 9y ago
Even if most corporate stock is owned by the wealthy, in terms of relative wealth changes all that matters is a person's personal percentage investment in the stock market. For example, if you have a middle class person who has 80% of their retirement savings (wealth) in stocks and a rich person who has 50% of their wealth in stock (because of liquidity concerns for example - and this is common) then if the stock market goes up by 20%, then the middle class person's wealth increases by 16% while the rich person's wealth only increases by 10%. In that situation inequality is reduced by maximizing shareholder value, so I think it's totally incorrect to say that maximizing shareholder value increases inequality in general.
People need to educate themselves on personal finance matters like this because inaccurate thinking towards seriously emotional issues like this has dangerous consequences.
- kartan 9y agoYou didn't took into account that rich people can use more of their income for investments, to leverage and to spend more time to use marked fluctuations in their favor. Your example looks correct. But I don't see how is the common case. Middle class investors usually don't have more percentage in the market that the 0.1%. Most middle class main investment is the home they live in.
- laurencerowe 9y agoMaximizing shareholder value concentrates returns in the hands of shareholders over employees. This has a significant distributional impact as for most income from employment dwarfs income from investments.
- mjfl 9y agoagain, why do you treat employees as a distinct group from shareholders? At many companies, employees are the shareholders.
- FridgeSeal 9y agoShareholders in that they have some shares, but not nearly on the same scale: shareholders have far more available money to invest and as such, investments pay off in a far larger way than for your average employee.
- laurencerowe 9y agoBecause employees and shareholders have distinct and sometimes opposing interests. Increasing pay for employees reduces the profits available for distribution to shareholders.
- knuththetruth 9y agoThis is just a convoluted appeal for trickle-down economics.
- JamesBarney 9y agoThe wealthy tend to have more wealth invested in the stock market. Most middle class wealth is invested in real estate, specifically the house they are living in.
- rizwank 9y agoCitation? While this is true for many, the extent of 401(k) might signal differently. Also, most of the wealthy I know have far less in the stock market than you might imagine. Real Estate, development and private placements. Stock Market is too tax inefficient.
- spikels 9y agohttp://www.visualcapitalist.com/chart-assets-make-wealth/ http://www.visualcapitalist.com/chart-assets-make-wealth/ Keep in mind that when referring to real estate the value is often the equity (asset - debt) not the asset value itself. Pretty sure that is the case with SCF data from the Census.