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Sorry, Folks, Rich People Don't Create The Jobs

106 points by Shivetya 12y ago

jpetersonmn 12y ago
I wonder how many of these "Job Creators" really believes that the wealthy create jobs, or if they are fully aware it's BS?
- wmeredith 12y ago
  “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” ― Upton Sinclair[1] 1) http://www.goodreads.com/quotes/21810-it-is-difficult-to-get-a-man-to-understand-something http://www.goodreads.com/quotes/21810-it-is-difficult-to-get...
- wodenokoto 12y ago
  As far as I am to understand, most of the 1%'ers wealth is tied up in investments. And this is why they consider themselves the job creators. They invest in all sorts of companies and markets and without the initial investment to start a company, there wouldn't be anything for the middle-class to purchase with their middle class salary, not to say no one to pay that salary either. If they just bought gold and hid it in a vault, then I expect them not to consider themselves job creators.
  - tdaltonc 12y ago
    If that's the idea, then I guess the members of working class should start calling themselves "wealth creators", "return creators", or "investment opertunity creators."
  - krisdol 12y ago
    It's precisely why high income taxes on the wealthy should exist. With high income tax, they have an incentive to invest more money than they keep (rather than hand it over to the government). With low taxation, they can take a small hit and hoard whatever amount they feel like they should. Not taxing the "job creators" stops making them "job creators". Furthermore, keeping wages low prevents regular workers from ever becoming "job creators".
    - akmiller 12y ago
      The wealth disparity that is increasing is mostly due to investments and an extremely low capital gains tax. We can't just increase the income tax because the wealthiest 1% probably don't even have much of an income...they have capital gains from investments. Yes, the income tax needs to be increased (or actually more brackets need to be created) but we also need to raise the capital gains tax for higher amounts of capital gains.
    - sp332 12y ago
      I think you have something backwards. A high income tax on the rich would decrease the amount of money they get to invest, and also reduce their returns on that investment.
  - pdonis 12y ago
    As far as I am to understand, most of the 1%'ers wealth is tied up in investments. And this is why they consider themselves the job creators. But this is a very inefficient way of creating jobs; that's one of the main points of the article. Most of the 1%'ers wealth is in investments that they do not actively manage. That has to be the case, because a single person just doesn't scale. There's no way any single person can efficiently determine how best to spend billions of dollars. But if you spread the billions of dollars out among thousands (or even millions) of people, they'll find much better ways to spend it--where "better" means "creating more wealth in aggregate".
bkcooper 12y ago
The threshold for the 1% is "centi-millionaire," eh? I'm apparently substantially more baller than I realized.
- jameshart 12y ago
  I guess you, like me, initially read it as an SI prefix, and were a bit confused about someone with a net worth of $10,000 being touted as a one-percenter... I mentally rewrote it as hecto-millionnaire and it made more sense. But I guess a centipede doesn't have a hundredth of a foot, and it's not like millionnaire/billionnaire follows an SI naming scheme in the first place. Maybe we should introduce a new scale: megalonnaire gigalonnaire ... Successful tech entrepreneurs could rather aspire to becoming binary prefixed mebilonnaires or gibilonnaires.
  - eCa 12y ago
    Hecto[1] would have been a better choice for a prefix. [1] http://en.wikipedia.org/wiki/Hecto- http://en.wikipedia.org/wiki/Hecto-
- steveklabnik 12y ago
  > I'm apparently substantially more baller than I realized. We all are. The poverty threshhold estimate for 2013 is $12,119/year for a single adult under 65.[1] 49 million people in the US are in 'food insecure households',[2], which means '“limited or uncertain availability of nutritionally adequate and safe foods or limited or uncertain ability to acquire acceptable foods in socially acceptable ways.” 16 million of those 49 are children.[3] Furthermore, if you don't just look at poverty, but at 'the middle class', whatever that means, as of 2004, the median income for a _household_ was $44,389[4]. The 2011 WSJ "What Percent Are You" calculator says that for a $120,000 income, (which is anecdotally what you can expect as a Bay Area programmer, at least, according to my anecdata), you are in the top 16% of earners. Glassdoor says that it's $100,000,[6], which puts you in the top 19%. Software development is a very lucrative profession. 1: https://www.census.gov/hhes/www/poverty/data/threshld/ https://www.census.gov/hhes/www/poverty/data/threshld/ 2: http://en.wikipedia.org/wiki/Food_security#Food_Security_in_the_US http://en.wikipedia.org/wiki/Food_security#Food_Security_in_... 3: https://feedingamerica.org/hunger-in-america/hunger-studies/map-the-meal-gap/~/media/Files/research/map-meal-gap/2014-MMG-web-2014.ashx?.pdf https://feedingamerica.org/hunger-in-america/hunger-studies/... 4: http://en.wikipedia.org/wiki/Household_income_in_the_United_States#Median_income http://en.wikipedia.org/wiki/Household_income_in_the_United_... 5: http://blogs.wsj.com/economics/2011/10/19/what-percent-are-you/ http://blogs.wsj.com/economics/2011/10/19/what-percent-are-y... 6: http://www.glassdoor.com/Salaries/san-francisco-software-engineer-salary-SRCH_IL.0,13_IM759_KO14,31.htm http://www.glassdoor.com/Salaries/san-francisco-software-eng...
spindritf 12y ago
What about clickbait sites selling demand-side economy story as some sort of revelation despite being heavily represented in the field of economics and government policy for the last hundred years? Do they create jobs? Or just confusion? While it's true that Americans take less money home, it's not true that compensation has fallen. In fact, "total compensation reflects growth in productivity."[1] BTW What actually allows trees to grow is the CO2 from the air. That's what they're made of. Partial credit for mentioning water. [1] http://www.nber.org/digest/oct08/w13953.html http://www.nber.org/digest/oct08/w13953.html
- Jtsummers 12y ago
  > BTW What actually allows trees to grow is the CO2 from the air. That's what they're made of. Partial credit for mentioning water. But what actually grows and sustains trees is the combination of the DNA in the seed and the soil, sunshine, water, atmosphere, nutrients, and other factors in the environment that nurture them. Pretty sure they cover CO2 in that list under the broader category of atmosphere.
taeric 12y ago
The source essay for this is equally as good of a read. If not better, honestly.
- taeric 12y ago
  Oddly, I posted it and it got turned into a dead link. :( I'm not even sure what that means. I'm assuming I messed up the posting.
paulhauggis 12y ago
It's like saying: you didn't earn that PhD, since we all pay tuition that fund the school, we all earned it for you. it seems it's cool these days to never give the "rich" any credit. When hey leave, and take many of the jobs with them, will we still be parroting this nonsense that they don't create jobs?
- Jtsummers 12y ago
  That's not really analagous to Hanauer's thesis. His point is that believing the rich, on their own, to be the job creators is absurd. That it's the entire economic system that enables job creation, and the wealthy are only one component. And given his attitude in the original essay [1], he doesn't deny them their credit, he just thinks "Job Creators" is a loftier title than they deserve. [1] http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014.html http://www.politico.com/magazine/story/2014/06/the-pitchfork...
- paulhauggis 12y ago
  it figures: free speech is down voted and circle-jerk propaganda is up voted. 1984 is here. It's just not the government we have to worry about
hansy 12y ago
For anyone interested in learning more about the growing inequality gap in America, I recommend watching the documentary "Inequality For All" (http://imdb.com/title/tt2215151/ http://imdb.com/title/tt2215151/).
- ancap 12y ago
  I have not seen the movie but it is laughable that almost without fail the voices for "equality" are those who are quite rich themselves. Just look at the cast for that movie.
  - ceallen 12y ago
    And if they were poor, they'd just be people jealous of the success of others. Ad-hominems are an easy way to sidestep discussion.
  - sp332 12y ago
    Russell Brand: When I was poor and I complained about inequality people said I was bitter, now I'm rich and I complain about inequality they say I'm a hypocrite. I'm beginning to think they just don't want inequality on the agenda http://www.theguardian.com/commentisfree/2013/nov/05/russell-brand-democratic-system-newsnight http://www.theguardian.com/commentisfree/2013/nov/05/russell...
ancap 12y ago
>To anyone reared on the political orthodoxy of the moment... "higher wages cause higher unemployment," This is not political orthodoxy at all this is economic law. Anyone who understands the basic principle of supply and demand knows that higher price lowers demand. http://www.economicpolicyjournal.com/2014/06/asian-community-letter-explains-damage.html http://www.economicpolicyjournal.com/2014/06/asian-community...
- jameshart 12y ago
  or does lower demand raise prices? And you focus on the fact that demand falls but ignore that supply increases. All economic 'law' says is that price and quantity for supply and demand are correlated - all other things being equal. But when other things change, they move the supply and demand curves and the equilibrium price will move. It's possible to have things change in the marketplace which cause the demand or supply curves to shift in a way which increases both the price of labor AND the quantity of labor exchanged in a market at the same time - meaning that wages would go up and unemployment down. The open question for politicians is whether it's possible for them to enact policies which cause that. And the open question for economists is whether that would actually be a good thing.
  - ancap 12y ago
    >or does lower demand raise prices? No. Draw a supply and demand curve. Shift the demand curve to the left (representing lower demand). Clearly the lower demand causes lower prices. >But when other things change, they move the supply and demand curves and the equilibrium price will move. And that is exactly the problem. Raising the minimum wage does not cause "other things [to] change." It is changing a single variable. With just a rudimentary understanding of economics the result is lower demand for labor (unemployment).
    - jre 12y ago
      > And that is exactly the problem. Raising the minimum wage does not cause "other things [to] change." It is changing a single variable. It will increase the income of people paid minimum wage, allowing them to buy more things, therefore increasing demand for some products.
richcollins 12y ago
Nobody creates the jobs, they exist to be discovered. If you adopt the viewpoint that other people create jobs for you then your fate is not in your own hands. People want things. If you can create something that other people want and they can create something that you want, you both have a job.
- bryanlarsen 12y ago
  You missed a key qualifier: if you can create something that other people want and can afford.
  - richcollins 12y ago
    They can afford it if they can create something of value that you're willing to accept in return. If they can't then that is the real problem. You have to ask why they can't create enough wealth to trade for the things they want / need.
    - bryanlarsen 12y ago
      They can't because there are huge factories in China that can produce widgets cheaper than they can, because there are farmers with million dollar combine harvesters that can produce food cheaper than they can, et cetera. We live in an industrial economy. Most people can create more value for the economy by working for somebody else and/or don't have the safety net that allows them to take the risks necessary to start their own business.
      - richcollins 12y ago
        Software developers make $100+ an hour. The jobs are there for people willing to adapt to them. You can't just wait to be handed a job that matches your current abilities.
        sp332 12y ago
        A few software developers make that kind of money. I certainly don't. There is not an infinite demand for high-paid programmers.
ancap 12y ago
The line of reasoning of this article can be applied to all things and by extrapolating out the logic it becomes evident how absurd the logic really is. Examples: 1) Mr. Gates did not create Microsoft... someone else built the garage he started in; OR his parents created him and therefore they created Microsoft (or an infinite number of other rationales) 2) The engine malfunctioning did not cause the airplane to crash, gravity caused the plane to crash
- deleted 12y ago
  [deleted]
- jgh 12y ago
  No I don't think that's quite right. He very clearly is saying that the entrepreneur alone is not responsible for the success and growth of a company because they also need customers and employees and etc etc. As for your plane crash analogy, http://en.wikipedia.org/wiki/Chain_of_events_(aeronautics) http://en.wikipedia.org/wiki/Chain_of_events_(aeronautics).
eloff 12y ago
I think here there's some truth to both propositions (why are people so black or white in their thinking when the world is always shades of grey?) Clearly without demand (consumers with money) you can't create jobs in the economy. Just as clearly, without entrepreneurs willing to take the risk and put in the effort, and the investors who fund them, you can't create those jobs either. So the truth of the matter is that economics is complex, and you need plucky entrepreneurs, wealthy investors, and consumers with lots of disposable income to create jobs, among a whole host of motivations, cultural and societal influences, international trade and agreements, infrastructure, even healthcare, and other human factors.
- bryanlarsen 12y ago
  The analogy the original article used was that of entrepreneurs and investors to seeds: a seed is a vital component to the growing of trees, but far from sufficient.
hnnewguy 12y ago
This is all "chicken and egg" stuff; does the demand for goods create jobs, or do the jobs create demand for goods? I think it's both. Regardless, the premise is flawed. Rich people don't create jobs, smart and ambitious people do. There just happens to be some overlap between those groups.
snowwrestler 12y ago
I think it's plenty arguable that rich people create jobs. For example: if rich people don't create jobs, then how can it be their fault that there are not enough jobs? If jobs really come from the middle class, why hasn't the middle class created more of them? It would be in their self-interest to do so. Arguing that wages for middle class jobs should go up raises the question of where that wage money should come from. The answer is capital, i.e. rich people. Societies without rich people are also societies that struggle to create well-paying jobs. The USSR and China attempted to eliminate rich people by adopting a communist economy. What happened is that the people in the government were the only ones who got rich, and the government was the only source of jobs. That is not a coincidence. Since the end of the 20th Century, both Russia and China have relaxed government control of capital, and the result has been an increase in both rich people and well-paying jobs in those countries. Finally, consider technological innovation; a rich source of job creation. It is created by investment, sometimes seemingly far-fetched or speculative investment. Google and the iPhone are two examples of products that were not guaranteed success, and were even dismissed by some industry experts when released. Each has directly created thousands of jobs and indirectly enabled at least tens of thousands more in supporting or related fields. But before there was Google or the iPhone, there were rich people writing checks to the people who envisioned them. BTW this is NOT an argument against a higher minimum wage. In fact I think the questions of "where jobs come from" and "what is the ideal minimum wage" are only very loosely connected. edits: spellings
- clavalle 12y ago
  Holy smokes, where to begin... > if rich people don't create jobs, then how can it be their fault that there are not enough jobs? No one is blaming rich people. They are blaming the system (aspects of it, at least) that we have collectively created. >If jobs really come from the middle class, why hasn't the middle class created more of them? Much like fire needs heat, oxygen, and a fuel a successful business needs entrepreneurs, capital, and demand. If the middle class doesn't have disposable income that limits available capital and demand for creating and sustaining a business by middle class entrepreneurs. >Arguing that wages for middle class jobs should go up raises the question of where that wage money should come from. The answer is capital, i.e. rich people. Creating value creates money. That's how this whole thing works. It doesn't have to come from rich people, it comes, ultimately, from profit. >The USSR and China attempted to eliminate rich people by adopting a communist economy. You are jumping a bit far, there. I don't think anyone is advocating communism. >But before there was Google or the iPhone, there were rich people writing checks to the people who envisioned them. Capital doesn't have to come from rich people. Just as centralization of economic control is inefficient and ultimately harmful in communist systems you cite, it is just as destructive in a capitalist system.
talmand 12y ago
I understand the concept that a business such as Wal-Mart can easily afford a sudden rise in minimum wage as that's almost always the example used. That, or another similarly large and successful company. But what about that mom and pop store on the corner? Am I to understand that they could afford the new employment costs if suddenly it were to be doubled, or close to it? How long does it take for the new economic benefits of the store paying out more money per week to employees to offset the new costs? Can they last that long? Some places are on tough times and on tight margins. Any increase in expenses is potential disaster. Do they raise prices at first because that new positive economic impact doesn't happen immediately, which may actually prevent the positive impact if other local stores have to do the same? Will the customers with more money to spend in their store offset the new higher costs of employing people or will it be a wash? (If anyone has a source of the economic impact on small businesses, and not the large chains, of doubling the minimum wage I would be highly interested in reading it.) Because this isn't just about increasing minimum wage, it would increase wages for a great number of people who are not making minimum wage. Would the manager of a pizza shop be happy that his drivers suddenly make more per hour then he does? Of course not, that would mean all wages at the place would need to be adjusted according to seniority and responsibilities. Many wages are structured based on the current minimum wage level. Plus, it would seem that it would be in the best interest of Wal-Mart to push for doubling the minimum wage. As been shown numerous times, they can afford it. Much of their competition could not. Not that I disagree with the sentiment, something definitely needs to be done because the current mantra clearly doesn't work. But the issue is far more complicated, as the original essay mentioned points out, then just simply raising the minimum wage. I think raising the minimum wage would, in the end, be a good thing; but I believe there would be a wave of negative consequences, and there are many, that would have to be survived. Many people who are against raising the minimum wage point out those negative consequences, but cannot see beyond them. That doesn't mean they should be ignored.
- krisdol 12y ago
  Regarding your mom and pop store example: some businesses should fail. If they cannot afford to keep full time workers out of poverty, they cannot afford to run a business that hires workers.
JackFr 12y ago
Me, I'm a wage slave, but I do have a friend who put up his savings, borrowed money from a bank and built and opened a car wash. He hired a dozen or so young men and women who staff it, while he is an owner/manager. He has been successful -- he judged the demand for a car wash correctly. Probably not a %1'er, but as a local small business owner is able to live a comfortable middle class life. Certainly without customers and without the bank he could not have succeeded, but I think it's ludicrous to say the 'economy' created the jobs. There are some agents within the economy who 1) recognize opportunities for profitable activity and 2) direct resources these opportunities. I think it's reasonable to describe these people as job creators.
- gerbal 12y ago
  This argument isn't about people starting small businesses, but rather about millionaires patting themselves on the back for being wealthy. Many of whom think of themselves as job creators because they have a maid and a gardener while getting richer by being clever on the stock market.
- akmiller 12y ago
  But it's certainly reasonable to assume most of his customers are middle class individuals with enough discretionary income to spend on occasional car washes. The articles point is not that your friend doesn't deserve credit in creating jobs, but the initial creation is only one part. Sustaining those jobs requires sustaining the customers and to do that they must maintain enough discretionary income to spend on car washes. With the income disparity ever increasing it's easy to see the middle class fading and as that happens so shall your friends car wash business.
lnanek2 12y ago
Wow, a business article saying money sitting in a bank account does nothing? Are they that clueless? It is leveraged many times over and invested and used by the bank. Putting a dollar in the bank lets the bank pretend they have forty.
- chrisbennet 12y ago
  We were taught in school that a bank takes deposits and lends them out as loans but that's not how it really works. When a bank makes a house loan for example, the house is added to their balance sheet and it becomes an asset that they can lend again, minus a fraction.
budu3 12y ago
> Had he been born in Africa, Hanauer points out — where the potential customers for his entrepreneurial efforts would have barely enough money to survive — Hanauer would likely be selling fruit by the side of the road Africa in not a country. It's a continent with 50 plus countries, some with a middle class with decent spending power. So there's a high probability that Hanauer would in fact not be likely to be selling fruit by the side of the road growing up in a middle class family (as he did in the US) in an African country.
- wavefunction 12y ago
  What is the probability of growing up in a middle-class family in Africa? There is nothing fallacious or incorrect about what Hanauer points out.
- ritchiea 12y ago
  In the article he wrote "had I been born in Somalia or the Congo," where I don't believe there is much middle class or societal structure at all.
- GioM 12y ago
  Unless it's been revised, the actual article (not the business insider summary) says "Somalia or Congo", not Africa. See page 3 of the link below. http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014.html http://www.politico.com/magazine/story/2014/06/the-pitchfork...
pdx 12y ago
It will be interesting to try to see what happens in Seattle after passing the $15 minimum wage. It will take years to fully implement, which will mask the cause/effect, unfortunately. I do this thought experiment. If I write every person in America a check for one million dollars, who have I actually helped? In my thought experiment, the prices of everything will instantly rise to compensate for the increased wealth, and everybody will be exactly where they are now, just with more zeros on all their bills and paychecks. I suspect that rent prices in Seattle, which are already high, will rise very rapidly, to relieve these workers of their extra income. That the wage increase will take place over a few years time is unfortunate, as this effect will be deniable by those who choose to deny it. But this is what my gut is telling me will happen. So, amusingly, it will be those evil 1% landlords, who will actually win, not the minimum wage workers, who will be exactly where they are now.
- okaram 12y ago
  If you write a check for 1M to every person in America, you help the poorest; if I have $0 I cannot afford anything; you give me 1M now I can get about 1/300M of the total of things. I assume rents (and other things) will rise even more in Seattle, but not to take the whole increase; the 1% will always make lots of money, but hopefully the bottom 10% gets a slightly higher piece of the pie
- Istof 12y ago
  this is called trickle-up economics
- asgard1024 12y ago
  I think you are wrong, because you assume that the ability of people to exert power (to influence prices, for example) is independent on income. But that's probably not true. So for example, in your thought experiment, some of the people could start a business with that million of dollars (invest it), and become more independent. That would be competition (or substitute, depends how you look at it), and it would prevent from rising the real price to the original level. If you suddenly give everyone a big sum of money (which is resources), you actually equalize power.
- 12y ago
nickthemagicman 12y ago
What constrains landlords rent prices? If you increase the minimum wage won't the landlords just subsequently increase rent? So essentially increasing minimum wage is just funneling money to landowners?
- dragonwriter 12y ago
  > What constrains landlords rent prices? Competition. > If you increase the minimum wage won't the landlords just subsequently increase rent? Yes, they will -- as will people selling other goods that are in demand by the people receiving more income. Under any reasonable assumptions about supply and demand elasticity, those receiving more income as a result of the minimum wage increase will still be better off after considering the specific inflation in the price of certain goods and services resulting from the greater income received by them as a group, but not by as much as a pre-increase analysis that ignored the market-specific inflation would suggest. > So essentially increasing minimum wage is just funneling money to landowners? One effect of increasing minimum wage will be funnelling some money to landlords and others selling goods and services to the people receiving increases, while funnelling some money away from those selling goods and services to the people and corporatiosn paying the increases. (Often times, those will be the same people, though different specific goods and services.)
CWuestefeld 12y ago
Unlike Hanauer and other 1%-ers, middle class people spend almost every penny they make, and this spending becomes revenue for companies started and owned by people like Hanauer. The same is true for the rich as well. Much of what they earn is consumed directly. But for anything that's not, it's surely not being hidden under a mattress (they didn't get to be rich by losing out to inflation). Instead, these people are investing it or saving it. If they just save it in a bank account, then the bank is (less the fractional reserve portion) loaning it back out to somebody else, probably providing the means for a non-rich-person to finance a house or a car or a new business. That is, it's being spent by the person taking out the loan. If they invest the money, then it's providing the capital for business, which is even better. That business might spend it (there it is again - spending) to buy new machinery, or they might expand operations and hire more workers, etc. Any way you slice it, other than the part that's held back in fractional reserve, the large incomes of the rich do get spent. Either they spend directly, or they let someone else use it for their own spending.
- asgard1024 12y ago
  Depending on what you mean by "spending". I see spending as an irreversible process, where someone actually decides how to convert resources to products. You could say the more you do that, the bigger the economy. However, rich people don't engage in this sort of spending as much. Lot of their "spending" is in reality just circulation of money through rent extraction. And it's important for them to do that, because that allows them to keep their power. For instance, if they loan it to a person, that person becomes dependent on them. Your idea is based on flawed premise that one has only two rational options what to do with money - invest (in a narrow sense, to make actual decision how to convert one resource to another) or consume. In reality, there is a third option, which is similar to saving, that is investing money in power grabbing and rent extraction. While saving doesn't give you an advantage to other players, the rent extraction may. This was already explained by Marx long time ago, when he described the capitalist as someone who wants to create more money from money he has through profit from investment. And more recently this was explained by Piketty, that you can have a situation in economy where rich people try to "invest" into rent extraction and not producing more goods or services.
nileshtrivedi 12y ago
So if the billionaires are putting their wealth in savings, isn't it because they are getting good returns on it, implying that there is demand for capital in the form of loans? What is to say that this isn't what the economy needs?
pdkl95 12y ago
There seems to be a lot of people equating investment (often by the rich or owners of business) with people returning all/most of their wage income back to the economy (the poor or middle class that spend their paychecks directly). If these activities are the same, I assume you would agree that they should also be taxed the same? If so, we should really get rid of "capital gains" taxes and tax those profits as regular income. Otherwise there would be a severe bias introduced into the economy from the uneven application of taxes. /or, maybe there is something different about investments after all...
joelhaus 12y ago
The academic term for this area of economic study is Marginal Propensity to Consume[1]. It's defined as: "The proportion of an aggregate raise in pay that a consumer spends on the consumption of goods and services, as opposed to saving it." I don't think it's very controversial. [1] http://en.wikipedia.org/wiki/Marginal_propensity_to_consume http://en.wikipedia.org/wiki/Marginal_propensity_to_consume

106 points by Shivetya 12y ago

I wonder how many of these "Job Creators" really believes that the wealthy create jobs, or if they are fully aware it's BS?

wmeredith 12y ago
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” ― Upton Sinclair[1] 1) http://www.goodreads.com/quotes/21810-it-is-difficult-to-get-a-man-to-understand-something http://www.goodreads.com/quotes/21810-it-is-difficult-to-get...
wodenokoto 12y ago
As far as I am to understand, most of the 1%'ers wealth is tied up in investments. And this is why they consider themselves the job creators. They invest in all sorts of companies and markets and without the initial investment to start a company, there wouldn't be anything for the middle-class to purchase with their middle class salary, not to say no one to pay that salary either. If they just bought gold and hid it in a vault, then I expect them not to consider themselves job creators.
- tdaltonc 12y ago
  If that's the idea, then I guess the members of working class should start calling themselves "wealth creators", "return creators", or "investment opertunity creators."
- krisdol 12y ago
  It's precisely why high income taxes on the wealthy should exist. With high income tax, they have an incentive to invest more money than they keep (rather than hand it over to the government). With low taxation, they can take a small hit and hoard whatever amount they feel like they should. Not taxing the "job creators" stops making them "job creators". Furthermore, keeping wages low prevents regular workers from ever becoming "job creators".
  - akmiller 12y ago
    The wealth disparity that is increasing is mostly due to investments and an extremely low capital gains tax. We can't just increase the income tax because the wealthiest 1% probably don't even have much of an income...they have capital gains from investments. Yes, the income tax needs to be increased (or actually more brackets need to be created) but we also need to raise the capital gains tax for higher amounts of capital gains.
  - sp332 12y ago
    I think you have something backwards. A high income tax on the rich would decrease the amount of money they get to invest, and also reduce their returns on that investment.
- pdonis 12y ago
  As far as I am to understand, most of the 1%'ers wealth is tied up in investments. And this is why they consider themselves the job creators. But this is a very inefficient way of creating jobs; that's one of the main points of the article. Most of the 1%'ers wealth is in investments that they do not actively manage. That has to be the case, because a single person just doesn't scale. There's no way any single person can efficiently determine how best to spend billions of dollars. But if you spread the billions of dollars out among thousands (or even millions) of people, they'll find much better ways to spend it--where "better" means "creating more wealth in aggregate".

bkcooper 12y ago

The threshold for the 1% is "centi-millionaire," eh? I'm apparently substantially more baller than I realized.

jameshart 12y ago
I guess you, like me, initially read it as an SI prefix, and were a bit confused about someone with a net worth of $10,000 being touted as a one-percenter... I mentally rewrote it as hecto-millionnaire and it made more sense. But I guess a centipede doesn't have a hundredth of a foot, and it's not like millionnaire/billionnaire follows an SI naming scheme in the first place. Maybe we should introduce a new scale: megalonnaire gigalonnaire ... Successful tech entrepreneurs could rather aspire to becoming binary prefixed mebilonnaires or gibilonnaires.
- eCa 12y ago
  Hecto[1] would have been a better choice for a prefix. [1] http://en.wikipedia.org/wiki/Hecto- http://en.wikipedia.org/wiki/Hecto-
steveklabnik 12y ago
> I'm apparently substantially more baller than I realized. We all are. The poverty threshhold estimate for 2013 is $12,119/year for a single adult under 65.[1] 49 million people in the US are in 'food insecure households',[2], which means '“limited or uncertain availability of nutritionally adequate and safe foods or limited or uncertain ability to acquire acceptable foods in socially acceptable ways.” 16 million of those 49 are children.[3] Furthermore, if you don't just look at poverty, but at 'the middle class', whatever that means, as of 2004, the median income for a _household_ was $44,389[4]. The 2011 WSJ "What Percent Are You" calculator says that for a $120,000 income, (which is anecdotally what you can expect as a Bay Area programmer, at least, according to my anecdata), you are in the top 16% of earners. Glassdoor says that it's $100,000,[6], which puts you in the top 19%. Software development is a very lucrative profession. 1: https://www.census.gov/hhes/www/poverty/data/threshld/ https://www.census.gov/hhes/www/poverty/data/threshld/ 2: http://en.wikipedia.org/wiki/Food_security#Food_Security_in_the_US http://en.wikipedia.org/wiki/Food_security#Food_Security_in_... 3: https://feedingamerica.org/hunger-in-america/hunger-studies/map-the-meal-gap/~/media/Files/research/map-meal-gap/2014-MMG-web-2014.ashx?.pdf https://feedingamerica.org/hunger-in-america/hunger-studies/... 4: http://en.wikipedia.org/wiki/Household_income_in_the_United_States#Median_income http://en.wikipedia.org/wiki/Household_income_in_the_United_... 5: http://blogs.wsj.com/economics/2011/10/19/what-percent-are-you/ http://blogs.wsj.com/economics/2011/10/19/what-percent-are-y... 6: http://www.glassdoor.com/Salaries/san-francisco-software-engineer-salary-SRCH_IL.0,13_IM759_KO14,31.htm http://www.glassdoor.com/Salaries/san-francisco-software-eng...

spindritf 12y ago

What about clickbait sites selling demand-side economy story as some sort of revelation despite being heavily represented in the field of economics and government policy for the last hundred years? Do they create jobs? Or just confusion? While it's true that Americans take less money home, it's not true that compensation has fallen. In fact, "total compensation reflects growth in productivity."[1] BTW What actually allows trees to grow is the CO2 from the air. That's what they're made of. Partial credit for mentioning water. [1] http://www.nber.org/digest/oct08/w13953.html http://www.nber.org/digest/oct08/w13953.html

Jtsummers 12y ago
> BTW What actually allows trees to grow is the CO2 from the air. That's what they're made of. Partial credit for mentioning water. But what actually grows and sustains trees is the combination of the DNA in the seed and the soil, sunshine, water, atmosphere, nutrients, and other factors in the environment that nurture them. Pretty sure they cover CO2 in that list under the broader category of atmosphere.

taeric 12y ago

The source essay for this is equally as good of a read. If not better, honestly.

taeric 12y ago
Oddly, I posted it and it got turned into a dead link. :( I'm not even sure what that means. I'm assuming I messed up the posting.

paulhauggis 12y ago

It's like saying: you didn't earn that PhD, since we all pay tuition that fund the school, we all earned it for you. it seems it's cool these days to never give the "rich" any credit. When hey leave, and take many of the jobs with them, will we still be parroting this nonsense that they don't create jobs?

Jtsummers 12y ago
That's not really analagous to Hanauer's thesis. His point is that believing the rich, on their own, to be the job creators is absurd. That it's the entire economic system that enables job creation, and the wealthy are only one component. And given his attitude in the original essay [1], he doesn't deny them their credit, he just thinks "Job Creators" is a loftier title than they deserve. [1] http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014.html http://www.politico.com/magazine/story/2014/06/the-pitchfork...
paulhauggis 12y ago
it figures: free speech is down voted and circle-jerk propaganda is up voted. 1984 is here. It's just not the government we have to worry about

hansy 12y ago

For anyone interested in learning more about the growing inequality gap in America, I recommend watching the documentary "Inequality For All" (http://imdb.com/title/tt2215151/ http://imdb.com/title/tt2215151/).

ancap 12y ago
I have not seen the movie but it is laughable that almost without fail the voices for "equality" are those who are quite rich themselves. Just look at the cast for that movie.
- ceallen 12y ago
  And if they were poor, they'd just be people jealous of the success of others. Ad-hominems are an easy way to sidestep discussion.
- sp332 12y ago
  Russell Brand: When I was poor and I complained about inequality people said I was bitter, now I'm rich and I complain about inequality they say I'm a hypocrite. I'm beginning to think they just don't want inequality on the agenda http://www.theguardian.com/commentisfree/2013/nov/05/russell-brand-democratic-system-newsnight http://www.theguardian.com/commentisfree/2013/nov/05/russell...

ancap 12y ago

>To anyone reared on the political orthodoxy of the moment... "higher wages cause higher unemployment," This is not political orthodoxy at all this is economic law. Anyone who understands the basic principle of supply and demand knows that higher price lowers demand. http://www.economicpolicyjournal.com/2014/06/asian-community-letter-explains-damage.html http://www.economicpolicyjournal.com/2014/06/asian-community...

jameshart 12y ago
or does lower demand raise prices? And you focus on the fact that demand falls but ignore that supply increases. All economic 'law' says is that price and quantity for supply and demand are correlated - all other things being equal. But when other things change, they move the supply and demand curves and the equilibrium price will move. It's possible to have things change in the marketplace which cause the demand or supply curves to shift in a way which increases both the price of labor AND the quantity of labor exchanged in a market at the same time - meaning that wages would go up and unemployment down. The open question for politicians is whether it's possible for them to enact policies which cause that. And the open question for economists is whether that would actually be a good thing.
- ancap 12y ago
  >or does lower demand raise prices? No. Draw a supply and demand curve. Shift the demand curve to the left (representing lower demand). Clearly the lower demand causes lower prices. >But when other things change, they move the supply and demand curves and the equilibrium price will move. And that is exactly the problem. Raising the minimum wage does not cause "other things [to] change." It is changing a single variable. With just a rudimentary understanding of economics the result is lower demand for labor (unemployment).
  - jre 12y ago
    > And that is exactly the problem. Raising the minimum wage does not cause "other things [to] change." It is changing a single variable. It will increase the income of people paid minimum wage, allowing them to buy more things, therefore increasing demand for some products.

richcollins 12y ago

Nobody creates the jobs, they exist to be discovered. If you adopt the viewpoint that other people create jobs for you then your fate is not in your own hands. People want things. If you can create something that other people want and they can create something that you want, you both have a job.

bryanlarsen 12y ago
You missed a key qualifier: if you can create something that other people want and can afford.
- richcollins 12y ago
  They can afford it if they can create something of value that you're willing to accept in return. If they can't then that is the real problem. You have to ask why they can't create enough wealth to trade for the things they want / need.
  - bryanlarsen 12y ago
    They can't because there are huge factories in China that can produce widgets cheaper than they can, because there are farmers with million dollar combine harvesters that can produce food cheaper than they can, et cetera. We live in an industrial economy. Most people can create more value for the economy by working for somebody else and/or don't have the safety net that allows them to take the risks necessary to start their own business.
    - richcollins 12y ago
      Software developers make $100+ an hour. The jobs are there for people willing to adapt to them. You can't just wait to be handed a job that matches your current abilities.
      - sp332 12y ago
        A few software developers make that kind of money. I certainly don't. There is not an infinite demand for high-paid programmers.

ancap 12y ago

The line of reasoning of this article can be applied to all things and by extrapolating out the logic it becomes evident how absurd the logic really is. Examples: 1) Mr. Gates did not create Microsoft... someone else built the garage he started in; OR his parents created him and therefore they created Microsoft (or an infinite number of other rationales) 2) The engine malfunctioning did not cause the airplane to crash, gravity caused the plane to crash

deleted 12y ago
[deleted]
jgh 12y ago
No I don't think that's quite right. He very clearly is saying that the entrepreneur alone is not responsible for the success and growth of a company because they also need customers and employees and etc etc. As for your plane crash analogy, http://en.wikipedia.org/wiki/Chain_of_events_(aeronautics) http://en.wikipedia.org/wiki/Chain_of_events_(aeronautics).

eloff 12y ago

I think here there's some truth to both propositions (why are people so black or white in their thinking when the world is always shades of grey?) Clearly without demand (consumers with money) you can't create jobs in the economy. Just as clearly, without entrepreneurs willing to take the risk and put in the effort, and the investors who fund them, you can't create those jobs either. So the truth of the matter is that economics is complex, and you need plucky entrepreneurs, wealthy investors, and consumers with lots of disposable income to create jobs, among a whole host of motivations, cultural and societal influences, international trade and agreements, infrastructure, even healthcare, and other human factors.

bryanlarsen 12y ago
The analogy the original article used was that of entrepreneurs and investors to seeds: a seed is a vital component to the growing of trees, but far from sufficient.

hnnewguy 12y ago

This is all "chicken and egg" stuff; does the demand for goods create jobs, or do the jobs create demand for goods? I think it's both. Regardless, the premise is flawed. Rich people don't create jobs, smart and ambitious people do. There just happens to be some overlap between those groups.

snowwrestler 12y ago

I think it's plenty arguable that rich people create jobs. For example: if rich people don't create jobs, then how can it be their fault that there are not enough jobs? If jobs really come from the middle class, why hasn't the middle class created more of them? It would be in their self-interest to do so. Arguing that wages for middle class jobs should go up raises the question of where that wage money should come from. The answer is capital, i.e. rich people. Societies without rich people are also societies that struggle to create well-paying jobs. The USSR and China attempted to eliminate rich people by adopting a communist economy. What happened is that the people in the government were the only ones who got rich, and the government was the only source of jobs. That is not a coincidence. Since the end of the 20th Century, both Russia and China have relaxed government control of capital, and the result has been an increase in both rich people and well-paying jobs in those countries. Finally, consider technological innovation; a rich source of job creation. It is created by investment, sometimes seemingly far-fetched or speculative investment. Google and the iPhone are two examples of products that were not guaranteed success, and were even dismissed by some industry experts when released. Each has directly created thousands of jobs and indirectly enabled at least tens of thousands more in supporting or related fields. But before there was Google or the iPhone, there were rich people writing checks to the people who envisioned them. BTW this is NOT an argument against a higher minimum wage. In fact I think the questions of "where jobs come from" and "what is the ideal minimum wage" are only very loosely connected. edits: spellings

clavalle 12y ago
Holy smokes, where to begin... > if rich people don't create jobs, then how can it be their fault that there are not enough jobs? No one is blaming rich people. They are blaming the system (aspects of it, at least) that we have collectively created. >If jobs really come from the middle class, why hasn't the middle class created more of them? Much like fire needs heat, oxygen, and a fuel a successful business needs entrepreneurs, capital, and demand. If the middle class doesn't have disposable income that limits available capital and demand for creating and sustaining a business by middle class entrepreneurs. >Arguing that wages for middle class jobs should go up raises the question of where that wage money should come from. The answer is capital, i.e. rich people. Creating value creates money. That's how this whole thing works. It doesn't have to come from rich people, it comes, ultimately, from profit. >The USSR and China attempted to eliminate rich people by adopting a communist economy. You are jumping a bit far, there. I don't think anyone is advocating communism. >But before there was Google or the iPhone, there were rich people writing checks to the people who envisioned them. Capital doesn't have to come from rich people. Just as centralization of economic control is inefficient and ultimately harmful in communist systems you cite, it is just as destructive in a capitalist system.

talmand 12y ago

I understand the concept that a business such as Wal-Mart can easily afford a sudden rise in minimum wage as that's almost always the example used. That, or another similarly large and successful company. But what about that mom and pop store on the corner? Am I to understand that they could afford the new employment costs if suddenly it were to be doubled, or close to it? How long does it take for the new economic benefits of the store paying out more money per week to employees to offset the new costs? Can they last that long? Some places are on tough times and on tight margins. Any increase in expenses is potential disaster. Do they raise prices at first because that new positive economic impact doesn't happen immediately, which may actually prevent the positive impact if other local stores have to do the same? Will the customers with more money to spend in their store offset the new higher costs of employing people or will it be a wash? (If anyone has a source of the economic impact on small businesses, and not the large chains, of doubling the minimum wage I would be highly interested in reading it.) Because this isn't just about increasing minimum wage, it would increase wages for a great number of people who are not making minimum wage. Would the manager of a pizza shop be happy that his drivers suddenly make more per hour then he does? Of course not, that would mean all wages at the place would need to be adjusted according to seniority and responsibilities. Many wages are structured based on the current minimum wage level. Plus, it would seem that it would be in the best interest of Wal-Mart to push for doubling the minimum wage. As been shown numerous times, they can afford it. Much of their competition could not. Not that I disagree with the sentiment, something definitely needs to be done because the current mantra clearly doesn't work. But the issue is far more complicated, as the original essay mentioned points out, then just simply raising the minimum wage. I think raising the minimum wage would, in the end, be a good thing; but I believe there would be a wave of negative consequences, and there are many, that would have to be survived. Many people who are against raising the minimum wage point out those negative consequences, but cannot see beyond them. That doesn't mean they should be ignored.

krisdol 12y ago
Regarding your mom and pop store example: some businesses should fail. If they cannot afford to keep full time workers out of poverty, they cannot afford to run a business that hires workers.

JackFr 12y ago

Me, I'm a wage slave, but I do have a friend who put up his savings, borrowed money from a bank and built and opened a car wash. He hired a dozen or so young men and women who staff it, while he is an owner/manager. He has been successful -- he judged the demand for a car wash correctly. Probably not a %1'er, but as a local small business owner is able to live a comfortable middle class life. Certainly without customers and without the bank he could not have succeeded, but I think it's ludicrous to say the 'economy' created the jobs. There are some agents within the economy who 1) recognize opportunities for profitable activity and 2) direct resources these opportunities. I think it's reasonable to describe these people as job creators.

gerbal 12y ago
This argument isn't about people starting small businesses, but rather about millionaires patting themselves on the back for being wealthy. Many of whom think of themselves as job creators because they have a maid and a gardener while getting richer by being clever on the stock market.
akmiller 12y ago
But it's certainly reasonable to assume most of his customers are middle class individuals with enough discretionary income to spend on occasional car washes. The articles point is not that your friend doesn't deserve credit in creating jobs, but the initial creation is only one part. Sustaining those jobs requires sustaining the customers and to do that they must maintain enough discretionary income to spend on car washes. With the income disparity ever increasing it's easy to see the middle class fading and as that happens so shall your friends car wash business.

lnanek2 12y ago

Wow, a business article saying money sitting in a bank account does nothing? Are they that clueless? It is leveraged many times over and invested and used by the bank. Putting a dollar in the bank lets the bank pretend they have forty.

chrisbennet 12y ago
We were taught in school that a bank takes deposits and lends them out as loans but that's not how it really works. When a bank makes a house loan for example, the house is added to their balance sheet and it becomes an asset that they can lend again, minus a fraction.

budu3 12y ago

> Had he been born in Africa, Hanauer points out — where the potential customers for his entrepreneurial efforts would have barely enough money to survive — Hanauer would likely be selling fruit by the side of the road Africa in not a country. It's a continent with 50 plus countries, some with a middle class with decent spending power. So there's a high probability that Hanauer would in fact not be likely to be selling fruit by the side of the road growing up in a middle class family (as he did in the US) in an African country.

wavefunction 12y ago
What is the probability of growing up in a middle-class family in Africa? There is nothing fallacious or incorrect about what Hanauer points out.
ritchiea 12y ago
In the article he wrote "had I been born in Somalia or the Congo," where I don't believe there is much middle class or societal structure at all.
GioM 12y ago
Unless it's been revised, the actual article (not the business insider summary) says "Somalia or Congo", not Africa. See page 3 of the link below. http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014.html http://www.politico.com/magazine/story/2014/06/the-pitchfork...

pdx 12y ago

It will be interesting to try to see what happens in Seattle after passing the $15 minimum wage. It will take years to fully implement, which will mask the cause/effect, unfortunately. I do this thought experiment. If I write every person in America a check for one million dollars, who have I actually helped? In my thought experiment, the prices of everything will instantly rise to compensate for the increased wealth, and everybody will be exactly where they are now, just with more zeros on all their bills and paychecks. I suspect that rent prices in Seattle, which are already high, will rise very rapidly, to relieve these workers of their extra income. That the wage increase will take place over a few years time is unfortunate, as this effect will be deniable by those who choose to deny it. But this is what my gut is telling me will happen. So, amusingly, it will be those evil 1% landlords, who will actually win, not the minimum wage workers, who will be exactly where they are now.

okaram 12y ago
If you write a check for 1M to every person in America, you help the poorest; if I have $0 I cannot afford anything; you give me 1M now I can get about 1/300M of the total of things. I assume rents (and other things) will rise even more in Seattle, but not to take the whole increase; the 1% will always make lots of money, but hopefully the bottom 10% gets a slightly higher piece of the pie
Istof 12y ago
this is called trickle-up economics
asgard1024 12y ago
I think you are wrong, because you assume that the ability of people to exert power (to influence prices, for example) is independent on income. But that's probably not true. So for example, in your thought experiment, some of the people could start a business with that million of dollars (invest it), and become more independent. That would be competition (or substitute, depends how you look at it), and it would prevent from rising the real price to the original level. If you suddenly give everyone a big sum of money (which is resources), you actually equalize power.
12y ago

nickthemagicman 12y ago

What constrains landlords rent prices? If you increase the minimum wage won't the landlords just subsequently increase rent? So essentially increasing minimum wage is just funneling money to landowners?

dragonwriter 12y ago
> What constrains landlords rent prices? Competition. > If you increase the minimum wage won't the landlords just subsequently increase rent? Yes, they will -- as will people selling other goods that are in demand by the people receiving more income. Under any reasonable assumptions about supply and demand elasticity, those receiving more income as a result of the minimum wage increase will still be better off after considering the specific inflation in the price of certain goods and services resulting from the greater income received by them as a group, but not by as much as a pre-increase analysis that ignored the market-specific inflation would suggest. > So essentially increasing minimum wage is just funneling money to landowners? One effect of increasing minimum wage will be funnelling some money to landlords and others selling goods and services to the people receiving increases, while funnelling some money away from those selling goods and services to the people and corporatiosn paying the increases. (Often times, those will be the same people, though different specific goods and services.)

CWuestefeld 12y ago

Unlike Hanauer and other 1%-ers, middle class people spend almost every penny they make, and this spending becomes revenue for companies started and owned by people like Hanauer. The same is true for the rich as well. Much of what they earn is consumed directly. But for anything that's not, it's surely not being hidden under a mattress (they didn't get to be rich by losing out to inflation). Instead, these people are investing it or saving it. If they just save it in a bank account, then the bank is (less the fractional reserve portion) loaning it back out to somebody else, probably providing the means for a non-rich-person to finance a house or a car or a new business. That is, it's being spent by the person taking out the loan. If they invest the money, then it's providing the capital for business, which is even better. That business might spend it (there it is again - spending) to buy new machinery, or they might expand operations and hire more workers, etc. Any way you slice it, other than the part that's held back in fractional reserve, the large incomes of the rich do get spent. Either they spend directly, or they let someone else use it for their own spending.

asgard1024 12y ago
Depending on what you mean by "spending". I see spending as an irreversible process, where someone actually decides how to convert resources to products. You could say the more you do that, the bigger the economy. However, rich people don't engage in this sort of spending as much. Lot of their "spending" is in reality just circulation of money through rent extraction. And it's important for them to do that, because that allows them to keep their power. For instance, if they loan it to a person, that person becomes dependent on them. Your idea is based on flawed premise that one has only two rational options what to do with money - invest (in a narrow sense, to make actual decision how to convert one resource to another) or consume. In reality, there is a third option, which is similar to saving, that is investing money in power grabbing and rent extraction. While saving doesn't give you an advantage to other players, the rent extraction may. This was already explained by Marx long time ago, when he described the capitalist as someone who wants to create more money from money he has through profit from investment. And more recently this was explained by Piketty, that you can have a situation in economy where rich people try to "invest" into rent extraction and not producing more goods or services.

nileshtrivedi 12y ago

So if the billionaires are putting their wealth in savings, isn't it because they are getting good returns on it, implying that there is demand for capital in the form of loans? What is to say that this isn't what the economy needs?

pdkl95 12y ago

There seems to be a lot of people equating investment (often by the rich or owners of business) with people returning all/most of their wage income back to the economy (the poor or middle class that spend their paychecks directly). If these activities are the same, I assume you would agree that they should also be taxed the same? If so, we should really get rid of "capital gains" taxes and tax those profits as regular income. Otherwise there would be a severe bias introduced into the economy from the uneven application of taxes. /or, maybe there is something different about investments after all...

joelhaus 12y ago

The academic term for this area of economic study is Marginal Propensity to Consume[1]. It's defined as: "The proportion of an aggregate raise in pay that a consumer spends on the consumption of goods and services, as opposed to saving it." I don't think it's very controversial. [1] http://en.wikipedia.org/wiki/Marginal_propensity_to_consume http://en.wikipedia.org/wiki/Marginal_propensity_to_consume