6 ms·

The median might have done well, but we know for a fact that inequality has risen dramatically in the past 40 years, mostly as an effect of big tax cuts to the

by carlob 6y ago

The median might have done well, but we know for a fact that inequality has risen dramatically in the past 40 years, mostly as an effect of big tax cuts to the wealthy. I'd be interested in seeing an analysis dividing the population in bottom 50, top 10 and middle 40, post-tax. This is the most similar thing I could quickly find http://piketty.pse.ens.fr/files/ideologie/pdf/G11.7.pdf http://piketty.pse.ens.fr/files/ideologie/pdf/G11.7.pdf and it seems to show that low-income salaries have largely stagnated for the last 50 years. I don't think it's debatable that places like the Greater Boston area have seen increases in rent that have gone faster than inflation. Combine the two phenomena and you'll see how many people are priced out of large attractive cities.

collyw 6y ago
Thomas Sowell makes an interesting point that very few people stay in the same categories of rich or poor in their lifetimes. Young people make up the majority of the poor, but after working and gaining experience the vast majority move out of that category. I am pretty sure I am an example of that. Graduated in the dot com bust in 2001 and was unemployed for a year and a half. Apparently my partner and I are now in the top 10% of household earnings for our country. (Household earnings being another very misleading statistic - as people become paid better they move out of shared houses, making things look worse when they are actually getting better).
- watwut 6y ago
  I dont think that describes accurately the economy. Socioeconomic mobility is declining too, people who were born to rich families become rich and those where were born in poor families become poor. It is not all young people who will earn a lot of money later.
- bhupy 6y ago
  It’s actually been quantified -> https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0116370 https://journals.plos.org/plosone/article?id=10.1371/journal... Based on the empirical tax analysis, 12% of the population found themselves in the top 1% of the income distribution for at least one year. 39% of Americans spent a year in the top 5% of the income distribution, 56% found themselves in the top 10%, and a whopping 73% spent a year in the top 20% of the income distribution.
  - scarmig 6y ago
    Interesting. Is that from windfalls like inheritances or big insurance payouts?
    - bhupy 6y ago
      > inheritances No, because this study analyzes historical tax filings, and inheritances are not counted as taxable income. > big insurance payouts On average, probably not, because big insurance payouts are (by definition) actuarial anomalies. They're tail-risk events.
      - staticman2 6y ago
        I don't see how so many people can be in the top 5% unless selling your house counts as income and you are counting the econonic activity when someone sells the family home to downsize in their senior years. At any rate without an illustration of how the claims about income works in practice I don't know what to make of this article. Most people aren't going to spend a year as high level executives.
        bhupy 6y ago
        > Most people aren't going to spend a year as high level executives. I think you might be over-estimating what it takes to be in the top 5% Here are the numbers -> https://dqydj.com/income-percentile-calculator/ https://dqydj.com/income-percentile-calculator/ If you earn $170,000, you're in the top 5%. That's absolutely attainable within 5 years of graduating into a high-skill job. That's also attainable within one's lifetime if they end up doing any sort of management or decision-making (as opposed to just manual labor all their lives).
        staticman2 6y ago
        It's my understanding that 170,000 per year is more than most managers will ever make in most parts of the country. However I can maybe see 170,000 making sense if it's based on household income and a household may have two manager class employees making 90,000 a year. That said i'm still having a hard time believing the claim that a large number of households will have top 5% earnings. I'd love to see a blog post or something along those lines contexualizing that journal article.
- leetcrew 6y ago
  aren't household earnings calculated using the tax definition of household? if I live with three other engineers as roommates, that's not a $400k household; it's four $100k "households", despite the fact that we share the same roof.
airstrike 6y ago
> mostly as an effect of big tax cuts to the wealthy Maybe partially so, particularly capital gains taxes. But I'd wager globalization likely had a much more pronounced impact on American inequality by pushing labor out to Asia
bhupy 6y ago
Low income salaries actually experienced a higher increase than higher income salaries between 2014-2019 (basically pre-COVID) -> https://www.cbsnews.com/news/low-wage-workers-are-getting-bigger-raises-than-bosses/ https://www.cbsnews.com/news/low-wage-workers-are-getting-bi... And while Piketty's work is popular, he isn't gospel. The IMF was unable to reproduce Piketty's findings in empirical data -> https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf, and then Auten & Splinter further refuted the findings by taking into account taxes & transfers -> http://davidsplinter.com/AutenSplinter-Tax_Data_and_Inequality.pdf http://davidsplinter.com/AutenSplinter-Tax_Data_and_Inequali...
- joppy 6y ago
  Taking some vague numbers from that article, a low-income salary might be $20,000, which gets an increase of 5%, so $1000. Meanwhile a high-income salary of say $100,000 gets an increase of 2.5%, so $2500. Which one is the bigger increase? Measuring these things in percentages hides the fact that the underlying numbers are immensely different. Perhaps if we reported numbers differently, we would say that the pay increase for the high-paid worker was 2.5x the pay increase for the low-paid worker.
  - read_if_gay_ 6y ago
    In terms of what it'll do for you, an extra $1000 at $20,000 p.a. is definitely a bigger increase than $2500 when you're making six figures.
- jahaja 6y ago
  Alright, let's actually follow up on two of your links for once. Regarding "The IMF was unable to reproduce": "Piketty's response[54] noted, however, that Góes used measures of income inequality rather than wealth inequality, and inappropriately took the interest rate on sovereign debt as his index of the rate of return on capital, which makes his results not commensurate with those of Piketty's study." Regarding "Auten & Splinter further refuted": "There’s plenty of other literature, mentioned in the Auten-Splinter paper, the Economist articles and elsewhere, that challenges the methods used by Piketty and his collaborators. Such challenges are mainly possible because tax data draw an incomplete and often difficult-to-interpret picture of the income distribution. Tax systems are complex, different governments choose not to tax different kinds of income, and of course people, rich and poor, cheat on their tax returns. Measuring wealth inequality rises to a whole new level of difficulty: Since so few countries have wealth taxes these days, only guesstimates of the wealth distribution are possible. So on Tuesday, Piketty, Saez, Zucman and a long list of other signatories issued a sweeping response to critics of the popular inequality narrative, pointing out that all the data-based arguments can be settled by making solid data available." Unsurprisingly, these two doesn't seem to very convincing "refutations".
clarkmoody 6y ago
Something big happened in 1971 that affected the core of the economy: we unhitched the US Dollar from gold. https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/

by carlob 6y ago

collyw 6y ago

Thomas Sowell makes an interesting point that very few people stay in the same categories of rich or poor in their lifetimes. Young people make up the majority of the poor, but after working and gaining experience the vast majority move out of that category. I am pretty sure I am an example of that. Graduated in the dot com bust in 2001 and was unemployed for a year and a half. Apparently my partner and I are now in the top 10% of household earnings for our country. (Household earnings being another very misleading statistic - as people become paid better they move out of shared houses, making things look worse when they are actually getting better).

watwut 6y ago
I dont think that describes accurately the economy. Socioeconomic mobility is declining too, people who were born to rich families become rich and those where were born in poor families become poor. It is not all young people who will earn a lot of money later.
bhupy 6y ago
It’s actually been quantified -> https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0116370 https://journals.plos.org/plosone/article?id=10.1371/journal... Based on the empirical tax analysis, 12% of the population found themselves in the top 1% of the income distribution for at least one year. 39% of Americans spent a year in the top 5% of the income distribution, 56% found themselves in the top 10%, and a whopping 73% spent a year in the top 20% of the income distribution.
- scarmig 6y ago
  Interesting. Is that from windfalls like inheritances or big insurance payouts?
  - bhupy 6y ago
    > inheritances No, because this study analyzes historical tax filings, and inheritances are not counted as taxable income. > big insurance payouts On average, probably not, because big insurance payouts are (by definition) actuarial anomalies. They're tail-risk events.
    - staticman2 6y ago
      I don't see how so many people can be in the top 5% unless selling your house counts as income and you are counting the econonic activity when someone sells the family home to downsize in their senior years. At any rate without an illustration of how the claims about income works in practice I don't know what to make of this article. Most people aren't going to spend a year as high level executives.
      - bhupy 6y ago
        > Most people aren't going to spend a year as high level executives. I think you might be over-estimating what it takes to be in the top 5% Here are the numbers -> https://dqydj.com/income-percentile-calculator/ https://dqydj.com/income-percentile-calculator/ If you earn $170,000, you're in the top 5%. That's absolutely attainable within 5 years of graduating into a high-skill job. That's also attainable within one's lifetime if they end up doing any sort of management or decision-making (as opposed to just manual labor all their lives).
        staticman2 6y ago
        It's my understanding that 170,000 per year is more than most managers will ever make in most parts of the country. However I can maybe see 170,000 making sense if it's based on household income and a household may have two manager class employees making 90,000 a year. That said i'm still having a hard time believing the claim that a large number of households will have top 5% earnings. I'd love to see a blog post or something along those lines contexualizing that journal article.
leetcrew 6y ago
aren't household earnings calculated using the tax definition of household? if I live with three other engineers as roommates, that's not a $400k household; it's four $100k "households", despite the fact that we share the same roof.

airstrike 6y ago

> mostly as an effect of big tax cuts to the wealthy Maybe partially so, particularly capital gains taxes. But I'd wager globalization likely had a much more pronounced impact on American inequality by pushing labor out to Asia

bhupy 6y ago

Low income salaries actually experienced a higher increase than higher income salaries between 2014-2019 (basically pre-COVID) -> https://www.cbsnews.com/news/low-wage-workers-are-getting-bigger-raises-than-bosses/ https://www.cbsnews.com/news/low-wage-workers-are-getting-bi... And while Piketty's work is popular, he isn't gospel. The IMF was unable to reproduce Piketty's findings in empirical data -> https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf https://www.imf.org/external/pubs/ft/wp/2016/wp16160.pdf, and then Auten & Splinter further refuted the findings by taking into account taxes & transfers -> http://davidsplinter.com/AutenSplinter-Tax_Data_and_Inequality.pdf http://davidsplinter.com/AutenSplinter-Tax_Data_and_Inequali...

joppy 6y ago
Taking some vague numbers from that article, a low-income salary might be $20,000, which gets an increase of 5%, so $1000. Meanwhile a high-income salary of say $100,000 gets an increase of 2.5%, so $2500. Which one is the bigger increase? Measuring these things in percentages hides the fact that the underlying numbers are immensely different. Perhaps if we reported numbers differently, we would say that the pay increase for the high-paid worker was 2.5x the pay increase for the low-paid worker.
- read_if_gay_ 6y ago
  In terms of what it'll do for you, an extra $1000 at $20,000 p.a. is definitely a bigger increase than $2500 when you're making six figures.
jahaja 6y ago
Alright, let's actually follow up on two of your links for once. Regarding "The IMF was unable to reproduce": "Piketty's response[54] noted, however, that Góes used measures of income inequality rather than wealth inequality, and inappropriately took the interest rate on sovereign debt as his index of the rate of return on capital, which makes his results not commensurate with those of Piketty's study." Regarding "Auten & Splinter further refuted": "There’s plenty of other literature, mentioned in the Auten-Splinter paper, the Economist articles and elsewhere, that challenges the methods used by Piketty and his collaborators. Such challenges are mainly possible because tax data draw an incomplete and often difficult-to-interpret picture of the income distribution. Tax systems are complex, different governments choose not to tax different kinds of income, and of course people, rich and poor, cheat on their tax returns. Measuring wealth inequality rises to a whole new level of difficulty: Since so few countries have wealth taxes these days, only guesstimates of the wealth distribution are possible. So on Tuesday, Piketty, Saez, Zucman and a long list of other signatories issued a sweeping response to critics of the popular inequality narrative, pointing out that all the data-based arguments can be settled by making solid data available." Unsurprisingly, these two doesn't seem to very convincing "refutations".

clarkmoody 6y ago

Something big happened in 1971 that affected the core of the economy: we unhitched the US Dollar from gold. https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/