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Economic Inequality: It’s Far Worse Than You Think

160 points by Cynddl 12y ago

ryandrake 12y ago
And, it's only going to get worse while [1] 39% of Americans either believe they are already among the top 1% or believe that they one day will be. If your mentality is one of "Don't tax the top because that's me (or will be)", you're going to constantly vote against your own economic self-interest, and continue to support policies that help the real rich get ultra-rich. 1. http://www.nytimes.com/2003/01/12/opinion/the-triumph-of-hope-over-self-interest.html http://www.nytimes.com/2003/01/12/opinion/the-triumph-of-hop...
- blfr 12y ago
  39% of Americans either believe they are already among the top 1% or believe that they one day will be And how many people will actually be in the top 1% of earners at least once? EDIT: 12% http://www.nytimes.com/2014/04/20/opinion/sunday/from-rags-to-riches-to-rags.html http://www.nytimes.com/2014/04/20/opinion/sunday/from-rags-t... What’s more, 39 percent of Americans will spend a year in the top 5 percent of the income distribution Not that far off.
  - ghouse 12y ago
    There is about a 10x difference between the top 5% and top 1%. So, that's sorta far off. And then again a 20x difference between the top 1% and top 0.1%
    - blfr 12y ago
      Yeah but few people when asked think like that. It's just a type of "rich".
      - sp332 12y ago
        To consider yourself in the top 1%, you just have to be richer than 99 other people you know. Humans are not good at avoiding sampling bias.
        Taek 12y ago
        That's not true. Most of my friends and aquaintences are software engineers or masters+ in some other STEM field. (Or are students of a similar caliber). The people you know aren't a good random sample. The top 1% tend to have more friends who are also top 1%.
  - Retric 12y ago
    Lots of things can temporarily boost your income by consolidating several years’ income into one big payment. Sell a flower shop you built up over 40 years for 150k and you are clearly not doing that well. Gamboling can be a net loss over someone’s lifetime and give them one very good year. Even just swapping jobs and seeing getting a few months of saved vacation in one big chunk. The point is for the 88% of Americans never see the top 1% even after their biggest windfall that's a vast gap. And nothing says 1% is defined by their annual tax returns lifetime earnings adjusted for age are a much better link to someones finances than what they made last year. PS: Sure, in theory Bill Gates was not in the top 1% while at Harvard, but his nominal income had little to do with his status. Don't forget his Mother was friends with the CEO of IBM that's serious connections.
    - warfangle 12y ago
      Wait, where can you save vacation and receive that time as paid as one big chunk?
      - gkop 12y ago
        California state law.
        toomuchtodo 12y ago
        Illinois state law as well.
        whybroke 12y ago
        And non-competition clauses are unenforceable in California. Yet other states wonder why no mater how many tax incentive they give business, silicon valley remains stubbornly in CA.
        warfangle 12y ago
        Huh. That's pretty awesome.
  - netrus 12y ago
    The only way I can explain myself these numbers is heritage: Many people will at some point in their life have a heritage above typical yearly salaries. That information doesn't help much. We should find a mid-way between income, wealth and earning potential. Maybe "currently-expected-lifetime-earnings"?
  - ryandrake 12y ago
    Those figures include people who had a lucky year. I'd like to see data showing what percentage of people who start out in the bottom 99%, and end up at any point in their lives spending at least 10 consecutive years (or until their death) in the top 1%. When we talk about "the 1%" we are not talking about that one hit wonder salesman or small business owner who cashes out and technically has >$1M income in one particular year. We are talking about year-after-year sustained income. EDIT: There's no question that there are problems with the phrase "among the top 1% of earners". It's not well defined. I think, though, it's safe to say that when the Average American talks about "the 1%" as a class, he's not talking about the person who had a single good year and went on to have a normal income for the rest of his life. He's talking about the class of people whose income is high and sustained. When the average person says, "I'll be among the top 1% of earners" he's imagining himself as attaining continuing membership in an economic class, not predicting a single-year windfall.
- brador 12y ago
  You honestly believe that people think "Don't tax the top because that's me (or will be)"? I suggest people believe their jobs and technological innovations we all enjoy are on the line if the rich are taxed more. If that is true or not is a separate conversation, but I don't think it's 39% of Americans think they will reach the 1%. That's absurd and the kind of thing you hear in mass media sound bites.
  - kjjw 12y ago
    I'm quite sure it is completely true. In aggregate it is an absurd view for so many people to hold, but that doesn't mean it isn't held. Look at where we are! Hacker News - 10,000s of people talking around start ups! Pretty much none of us will "make it." Yet here we are.
    - venomsnake 12y ago
      Not sure why you are downvoted. Even pg admitted that their ROI are absurd, so they must (and can afford to) fund thousands of startups to have success at the current winner takes all digital economy.
    - icebraining 12y ago
      Hacker News is far from just talking about startups and/or for people who expect to start one. I'm here to talk about tech. Startups are cool and all, but I wouldn't come here just for them.
      - kjjw 12y ago
        To be fair, an arse and utterly pedantic, I didn't say it was just talking /about/ startups.
  - sp332 12y ago
    The most telling polling result from the 2000 election was from a Time magazine survey that asked people if they are in the top 1 percent of earners. Nineteen percent of Americans say they are in the richest 1 percent and a further 20 percent expect to be someday.
- nap 12y ago
  There is an equality in possibilities, not in results. You can't blame anyone because you are bad in investments or can't do business. If you tax people who reach success, why not tax those who was failed? Let's redistribute bankruptcy, depression and suicides.
  - cgearhart 12y ago
    That's the problem though -- there is not equality is possibilities. Analysis [1] of a study from the Pew Research Center on economic mobility [2] found that you are 10x more likely to be in the top 20% if you're born there than if you're born in the bottom 20%. Someone born in the top 20% who doesn't go to college is still 2.5x more likely to have an income in the top 20% as an adult than someone from the bottom 20% who does go to college. Moreover, it's worsened because life is more expensive in subtle ways as you move down the income bracket. [3] Even municipal fines -- as emphasized by John Oliver recently -- contribute to the problem. [1] http://mattbruenig.com/2013/06/13/whats-more-important-a-college-degree-or-being-born-rich/ http://mattbruenig.com/2013/06/13/whats-more-important-a-col... [2] http://www.pewtrusts.org/en/research-and-analysis/reports/0001/01/01/moving-on-up http://www.pewtrusts.org/en/research-and-analysis/reports/00... [3] http://www.slate.com/articles/life/family/2014/12/linda_tirado_on_the_realities_of_living_in_bootstrap_america_daily_annoyances.html http://www.slate.com/articles/life/family/2014/12/linda_tira... [4] https://www.youtube.com/watch?v=0UjpmT5noto https://www.youtube.com/watch?v=0UjpmT5noto
    - walod 12y ago
      Doesn't anybody else find the "equality of opportunity" and other phrases way too abstract for analysis? There are many facets to how an economy functions and how individuals navigate it, and I think a proper analysis of the action on the ground is needed. For example how individuals learn skills and what prerequisites are needed in terms of access to information, ability to focus and think abstractly, and how one trains those abilities. This affects competition in the market, who gets rich, who gets an opportunity and so forth, and yet all the articles I see talk in these distant abstract terms, like they're appealing to someone in the government to fix it or something. Another aspect is consumer responsibility and the way we tend to buy what we want but not think of the large scale consequences. People use gmail and facebook out of habit. They buy groceries in a big store out of habit. We use products dependent on petroleum yet expect someone else to fix global warming. Being interconnected and living in a rather fragile world where systems affect each other is not a responsibility us as individuals are ready for, and I haven't even touched on civic responsibility and the need for everyone to almost be lawyers and critical thinkers for law to function. There are so many complex interconnected parts and we always fall victim to the movements of the herd
- mason240 12y ago
  This is a total strawman that advocates of higher taxes tell each other. It's a pretty effective one because it allows those people handwave off anyone who disagrees with them.
  - kbenson 12y ago
    > It's a pretty effective one because it allows those people handwave off anyone who disagrees with them. Sort of like accusing someone of a strawman argument with nothing to back it?
- theorique 12y ago
  Well, if we all work hard enough, we can all become members of the 1%...
- was8309 12y ago
  an admittedly cynical view is that we can be sycophants and cowards, and so we want to feel that we belong in the most powerful group. I think this is why some of us bash welfare, even though there isn't much evidence of fraud. if a little steals my one dollar bill and runs one way and a big guy steals my hundred bill and just stands there laughing, I turn and run after the little buy screaming 'Thief'! we know we've been robbed, but we're too afraid to confront the big guy
dandare 12y ago
The fact that someone is rich does not mean he took anything from you, no matter how poor you are. Statements like "If poor people knew how rich rich people are, there would be riots in the streets" are not only stupid but also dangerous.
- maxxxxx 12y ago
  You could argue that they took something from other people by claiming a larger share of economic output for themselves. Something seems wrong when the largest share of economic growth goes to the top as we have seen over the last decades. And I believe this is not because of some economic law but because the top 1% have made the rules to their favor.
  - dandare 12y ago
    a) you have democracy, the top 1% are heavily influencing it but that is far from making the rules. 60% of Americans don't vote. b) "Something seems wrong with..." -> http://en.wikipedia.org/wiki/Argument_from_ignorance http://en.wikipedia.org/wiki/Argument_from_ignorance
- ghouse 12y ago
  Well, but it also does not mean that he didn't take anything from me. Generally, the US tax code is designed in such a way that capital begets capital. Put differently, if you make money passively from the money you already have, you pay a lower tax rate then if you haul brick on your back, or teach children. Is this taking? No, not directly, but indirectly, sure.
  - thecopy 12y ago
    I would argue that the state is taking, not the rich (which are not the only people with money invested in the market).
    - toomuchtodo 12y ago
      Feel free to head to Somalia then. I hear they have a wonderful libertarian system setup. EDIT: Seriously folks, taxes pay for civilization. If you don't like it, don't work (so you don't have to pay) or leave. Roads, schools, fire, police, infrastructure aren't built with unicorn dust.
kokey 12y ago
I always feel a number of important metrics are left out, either by accident or on purpose, when people talk about inequality. Most importantly when it comes to wealth itself, by most measures there is a very, very long tail of people with no wealth. 'No wealth' ranges from the most poor, to those living from paycheck to paycheck all the way to those who have as much debt as their assets. Many of these people are fine because, for example, their earnings potential over the next 40 years is good. They are wealthy in things like skills, social connections, etc. and they are certainly not comparable to someone with few skills, bad health and no money. The other issue is the longer term earning potential of top earners. Apart from the fact that companies are bigger and more global and that 'hits' can be bigger (like Kesha selling more records than The Beatles), the average tenure of a CEO has also gotten shorter and is around 5-7 years which usually can be described as the prime of their career, while the average worker can be anywhere in their career including eventually being a CEO one day.
- johnchristopher 12y ago
  > Most importantly when it comes to wealth itself, by most measures there is a very, very long tail of people with no wealth. 'No wealth' ranges from the most poor, to those living from paycheck to paycheck all the way to those who have as much debt as their assets. Many of these people are fine because, for example, their earnings potential over the next 40 years is good. They are wealthy in things like skills, social connections, etc. and they are certainly not comparable to someone with few skills, bad health and no money. No, they won't get rich later.
- whybroke 12y ago
  >while the average worker can be anywhere in their career including eventually being a CEO one day From the article: > our indifference lies in a distinctly American cultural optimism. At the core of the American Dream is the belief that anyone who works hard can move up economically regardless of his or her social circumstances. Aside from the factual error in the notion that there's more social mobility in the US than other countries, there is a difference between "anyone can become CEO" and "everyone will become CEO". If antebellum southern plantations had been structured such that one of the slaves might occasionally become the owner, it would not make it acceptable.
JackFr 12y ago
Wow. Scientific American has really gone off the rails.
- JackFr 12y ago
  I suppose I could have been clearer. This is a well-intentioned advocacy piece. It would be at home on the Op-Ed page of the New York Times, the Washington Post or even the Wall Street Journal. It seems much of the reporting in SA has gone the way of editorializing the flavor of the month rather than reporting on well, science. I miss that.
fullwedgewhale 12y ago
The point of the article is that the meritocratic system in this country is broken. In part this is because we have systematically transferred wealth out of the bottom to the top. For example, focusing on tax cuts that benefit high income individuals while cutting support for public colleges. These two things are usually done at different times with tax cuts usually to stimulate the economy and spending cuts coming to reign in budget imbalances. The result is that you could work your way through college in the 1960's by working about 20 hours a week. Now you'd have to work 40+ hours a week to pay tuition at a public university. The difference income throughout someone's working life between a college degree and no college degree is about 1,000,000 dollars. So the middle and lower middle income people don't see the benefits of tax cuts but they bear the burden of college tuition increases. And their long term earning potential suffers. And the country as a whole suffers because we have a less well educated work force. You can repeat this pattern with a whole host of other programs and issues. For example, the minimum wage is still behind where it needs to be if it were adjusted for inflation. We're becoming a casino culture where people keep playing the game because they believe they're going to be the ones that turn out okay. For the most part, your ability to leave your social class is pretty close to zero, with the rich staying rich because their wealth can insulate them against bad decisions. The only real mobility for most people has been down.
- Shivetya 12y ago
  Wealth transfer because of the tax code occurs all the time, every day. Yet some here I can guarantee would scream bloody murder if they lost their piece of that wealth transfer. Two of which are easy, the ACA and EV tax credits, both transfer wealth but in different ways. The first from the young and healthy who usually are at the beginning of their income generating years and hopefully their lowest pay in their career to those at career and life end where they might have the homes paid for, retirement incomes, and more. Then the EV tax credit gives to people making purchases of cars beyond the reach of average workers. What is the point? The tax code created this imbalance and continues to do so as it is the number one means by which politicians separate us. They play us off each other and the tax code allows the to reward or punish. Simplify the tax code so that anyone with a high school education can see the money and that will lead to people clamoring for a change.
spuz 12y ago
Is it just me, or does the article contradict its own conclusion? > They asked about 55,000 people from 40 countries to estimate how much corporate CEOs and unskilled workers earned ... the patterns were the same for all subgroups, regardless of age, education, political affiliation, or opinion on inequality and pay > One likely reason for this is identified by a third study, ... that suggests that our indifference lies in a distinctly American cultural optimism If 55,000 people from 40 countries make the same poor estimate of the reality of inequality then surely the affect of American cultural optimism is insignificant?
- jplahn 12y ago
  I think the keyword is "indifference." While everybody miscalculates the CEO - unskilled pay ratio, the article is implying the indifference caused by "American cultural optimism" is what prevents us from changing it.
  - spuz 12y ago
    That may well be true but there is a difference between 'ignorance' and 'indifference'. The former is relatively easy to measure but the second is not. In fact the study on social mobility that supposedly demonstrates this indifference doesn't mention the word. It simply shows ignorance of American's understanding of social mobility but does not compare these findings with populations from other countries. Let's say that American's perception of social mobility was found to be significantly skewed relative to that of other populations'. Would that show more or less indifference? You could argue that the 'American Dream' cultural thinking leads more Americans to believe that the poor can become rich and at the same time more passionate about ensuring that that is indeed the case. The fact that it blinds them to the reality does not imply that they don't care.
- spuz 12y ago
  To answer my own question: The 2014 research of 40 countries actually shows that Americans estimate a relatively high inequality of CEO to unskilled worker pay (a ratio of 29.6 compared to an average estimate of 10.0). However, the actual pay ratio for American CEOs is much much higher than in any other country's (354 - as mentioned in the article. The next highest actual pay ratio is in Switzerland at 150 times while most countries have a ratio below 100). The research states: "American respondents (n = 1,581) in our data estimated the ratio of estimated incomes of CEOs to unskilled workers to be 29.6, demonstrating that Americans drastically underestimated the gap in actual incomes between CEOs and unskilled workers." So, yes there is a significance in the figures for America both in terms of estimated inequality and actual inequality that shows that American CEO pay is significantly less egalitarian than other countries and Americans in general significantly less aware of this than other countries.
greggyb 12y ago
Or it's far better than you think. What if the cause of the misconception of the true distribution is that standard of living is far closer than ever before, so the relative distance of wealth is less visible.
- drabiega 12y ago
  Seems more likely that it's the increased geographical wealth/income segregation.
snarfy 12y ago
The estate tax should be near 100%. We do not need dynasties. I don't mind people making the wealth, but they can't take it with them. It shouldn't just transfer to their children.
- Thriptic 12y ago
  What is the incentive to continue working once you hit a threshold to comfortably retire with a good quality of life then? Might a 100% inheritance tax remove significant capital from the markets which would affect growth? In this scenario, what is stopping people from transferring all of their money to their children before they die at a much lower tax rate? How would assets like real estate be handled?
  - whybroke 12y ago
    You assume that such wealth was earned in the first place which is rarely the case and is less so every year. The meritocracy is broken and will be so exactly to the degree that there is inheritance, the two are directly connected. Inheritance is the exact definition of anti-meritocracy.
    - Thriptic 12y ago
      > You assume that such wealth was earned in the first place which is rarely the case and is less so every year. Fair point. It's true that my statements only applied to individuals who earned the money themselves, and I failed to consider people who had themselves inherited money.
- totalrobe 12y ago
  You haven't quite thought this out. Young parents die too, and children need to be provided for.
  - RodericDay 12y ago
    If you believe in equality of opportunity, parents should not be the main source of provision for children. Every time someone mentions "who will provide for your children if you don't leave an inheritance behind?" I immediately have to ask, "what about all the children whose parents are not able to leave them an inheritance (ie: most of them)?" It seems that it is you who have not really thought it out. Here's Adam Smith on the topic btw: > "A power to dispose of estates for ever is manifestly absurd. The earth and the fulness of it belongs to every generation, and the preceding one can have no right to bind it up from posterity. Such extension of property is quite unnatural." Smith said: "There is no point more difficult to account for than the right we conceive men to have to dispose of their goods after death." http://budiansky.blogspot.ca/2010/10/adam-smith-thomas-jefferson-and-other.html http://budiansky.blogspot.ca/2010/10/adam-smith-thomas-jeffe...
proveanegative 12y ago
I think the popular conceptualization of economic inequality (effectively, "inequality is suffering") is misleading because it doesn't take marginal utility into account. What I mean is, take the pizza-dividing example and suppose we have doubled the pizza. The inequality (expressed as the ratio of pizza owned to the available total) would stay the same but those with the smallest part of the divide would be noticeably less hungry than before. In a world of plenty inequality would not mean suffering. More realistically, inequality would not mean (nearly as much) suffering in a world where a minimum slice of pizza was the birthright of a citizen. Edit: This line of thinking is seriously flawed when applied to the real world. See drabiega's comment for why. metaphorm mentions some examples of where competitive costs may apply.
- deleted 12y ago
  [deleted]
- adamc 12y ago
  "...in a world where a minimum slice of pizza was a birthright of a citizen." We do not remotely live in such a world, or even such a country. (I'm referring to the U.S.)
  - proveanegative 12y ago
    Whether a basic income or even a basic job program is plausible under the current conditions in the US is very debatable (you can find yummyfajitas' criticism here on HN). What I had in mind with my final remark is more about the future, i.e., "how to handle things when the machines take over".
- metaphorm 12y ago
  this is a distraction. first off, why should we suppose we have "doubled the pizza"? I see no point in discussing abstract hypotheticals. We ought to stick to real world examples of the real world economy or else we're not really talking about anything meaningful.
  - 12y ago
enoch_r 12y ago
Every time someone says "X people have a higher net worth than Y% of people COMBINED" I get very, very skeptical. Some net worths are negative. Some net worths are significantly negative. A homeless man has a much higher net worth than 8,000 people who just graduated from medical school with some debt combined. Relevant article.[1] [1] http://blogs.reuters.com/felix-salmon/2014/04/04/stop-adding-up-the-wealth-of-the-poor/ http://blogs.reuters.com/felix-salmon/2014/04/04/stop-adding...
dwaltrip 12y ago
I would love to see these types of metrics for other domains. I think any technical question about some distribution across the american population will produce results that contrast with reality, simply because people don't know how to reason about mathematical distributions or large numbers very well. This isn't to say that America does not have an issue with economic inequality, of course.
strommen 12y ago
Wow, the "ideal" wealth distribution based on what people want is simply nuts. If top quintile owns 35% and bottom two own 25% (perhaps 15% and 10%, respectively)...that means the richest would own 3.5x more than the poorest, on average. (If you think this makes any sense at all, consider the median American has a net worth of about $45K. Having 3.5x that amount wouldn't allow you to retire, or even own a 3BR house in Minneapolis.) A person's wealth should (hopefully) increase as they grow older and save more money. It's clear that the responders to this survey didn't account for that at all.
- cadlin 12y ago
  Yes, but the average net worth is 301k. It doesn't make any sense to look at median numbers when talking about uneven wealth distribution. Of course the median is going to be very low, that's the whole point!
- crusso 12y ago
  That's the problem I had with the article as well. You might as well ask the average person what his ideal LDL to HDL cholesterol ratio would be. I'm not prepared to accept the importance of the intuition of the average person in society on wealth distribution any more than I am to accept it on belief in god or taste in music.
joeclark77 12y ago
Nothing in the article explains why "economic inequality" is a bad thing. Which seems to be a logical pre-requisite to declaring it to be "worse than you think".
- ryandrake 12y ago
  It's not necessary. Economic inequality is widely considered a social ill.
  - sokoloff 12y ago
    The Earth was once widely considered to be flat.
  - joeclark77 12y ago
    That's assuming the thing you want to prove. (I'm sure there's a Latin term for that, but I don't remember it.) It's a logical error that Margaret Thatcher blew apart beautifully probably before you were even born. (Bing the video.)
- sgift 12y ago
  "Nothing in the article explains why it is a bad thing that x. Which seems to be a logical pre-requisite to declaring it to be 'worse than you think'" It's quite simple: Some things you have to accept as a given, it's a shared social norm. No one will bother to write a paragraph why rape is bad each time an article about rape is written, no one will bother to write a paragraph why police brutality is bad each time an article about police brutality is written and no one will bother to explain why "economic inequality" (i.e. some people starve while others live in luxury) is bad. It would be cumbersome and tiring for most readers for the sake of a tiny minority to write articles in the style you seem to prefer.
  - joeclark77 12y ago
    If you have twice as much as I do, and both of us see our real wealth doubled, we would undeniably both be richer and happier. However, the entirely abstract, purely-on-paper metric "economic inequality" would also double. That, in a nutshell, is why the premise is dubious. If you would argue for sacrificing real-life prosperity in order to prioritize a purely abstract "KPI", you have to prove it. Margaret Thatcher had the last word on this: https://youtu.be/rv5t6rC6yvg https://youtu.be/rv5t6rC6yvg Worth a watch.
knowaveragejoe 12y ago
"Work hard enough" doesn't mean the same thing it did in the middle of the 20th century. The amount of resources available to the everyman today is orders of magnitude larger, be it tips on frugality or ways to supplement income. They don't really expand upon it in this piece, but it feels like they're using it in the "older" sense, i.e. simply working your job dutifully and being conservative with your money.
streptomycin 12y ago
Alternative title: Humans are bad at estimating things on logarithmic scales, and probably don't adequately factor in things like student loans and mortgage debt when estimating the wealth of the "poor" My title is much less catchy.
mrcactu5 12y ago
The youtube infographic video doesn't work: https://www.youtube.com/watch?v=QPKKQnijnsM https://www.youtube.com/watch?v=QPKKQnijnsM
PythonicAlpha 12y ago
The wealth of the US at times shortly after the second world war came from the broad middle class. Today the wealth of the US is lying in the hands of the top 1% of the society. Something must have been happening in between. In the European Union there is also a similar trend. There exist studies that today it is much more difficult for somebody coming from lower income (and society) levels to become rich than it was 40 or 50 years ago. There is nearly no exchange anymore happening, because today's rich can rely on the fact that their money will beget more additional money nearly automatically. Also times are over, where many people build their riches from scratch. Most rich people today are rich in the second, third or fourth generation today. Low taxes on wealth and inheritance are doing their job. But also the fact that earning money by just having (enough) money costs less tax than hard working for money in Europe (in Germany, you will pay for your worked-for money (if you earn enough) up to ~40% on taxes and additionally you have to pay social security fees that can eat up an additional 20% (estimated) of your earnings. For money you got threw having money, you will today come away with 25% flat rate tax. With such tax laws in action, you could come to the view, that letting work your money for you is more difficult than working in a factory and must be promoted by the state.
happyscrappy 12y ago
Europe is unequal, not quite as much as the US, and yet they are implementing austerity. Why? Because capital needs to flow to where it is most useful. If it does not your economy suffers and everyone loses.
vasilipupkin 12y ago
At least some inequality is the result of our choices. Meaning, Google's new CFO is going to make 70 mln. But, how many people would like to be CFOs? CFOs work crazy hours and have insane amount of responsibility - many people wouldn't want that tradeoff. So, should we somehow normalize inequality numbers for this phenomenon ?
- JustSomeNobody 12y ago
  RNs work crazy hours and have an insane amount of responsibility. Should they make $70 Million?
  - vasilipupkin 12y ago
    no, because many more people want to be RNs and enjoy being RNs than CFOs.
pluma 12y ago
The problem isn't wealth. The problem is poverty. There isn't much of a practical difference between 1MM and 10MM or 10MM and 100MM. Or even 10K and 100K. It's not that there isn't any difference, it's just that (ignoring extreme scenarios like having to pay medical bills in the US) the difference is mostly a luxury. But below a certain threshold, it's not a matter of luxury. It's a matter of being able to afford the bare necessities. I don't make 100K/month. Right now I don't even make 10K/month. To be honest, I'd probably be able to cope (as I have had to in the past) with as little as 1K/month or less. But I don't mind if some investment banker or Fortune 500 CEO makes several orders of magnitude than me. The problem isn't just that someone who works two full-time jobs can barely afford the absolute minimum of necessities. The problem is that making money is a requirement to have access to these essentials. We don't need more jobs, we need better social care. We don't need to cut rich people's wages, we need to eliminate poor people's reliance on wages to keep them housed, fed, warm, healthy and content (or "maintained" if that sounds less socialist and more business-y). Minimum wage is a red herring. Minimum wages are (and should be) dictated by economical concerns alone. It's impossible to regulate them. You can dictate numbers, but that doesn't solve the problem they're meant to address. Minimum wage jobs are not only useless because they can't pay for a living. They're also useless because they generally don't offer any opportunity for personal advancement. If you mop floors at McDonald's for a living, you're likely not going to turn that into a career. If anything, it's a stop-gap, but any effect it will have on your future occupations will likely have nothing to do with the actual tasks you performed (except maybe for a marketing sob-story if you make it big). So separate the two concerns: give people what they need whether they have a job or not, and pay them whatever is economically sensible for any job they take. Basic income and/or strong social services are a better solution than always trying to regulate businesses into supplying sufficient wages against market demands. If anything, the latter just encourages businesses to eliminate those minimum wage jobs entirely to reduce unnecessary costs. You can't compete with technological progress. If you artificially inflate wages, that just makes the humans even less appealing.
- sokoloff 12y ago
  I'd argue that there's a massive difference between 1MM and 10MM USD. The former is not enough to comfortably retire on at age 30 and heading up a household of 4. The latter is. That's a massive qualitative difference, IMO.
Taek 12y ago
You want the economy to be top heavy. You want the best people managing the most money, and you want them to have the strongest incentive for managing it correctly. When you have 10 billion dollars in capital and you are trying to figure out what to do with it, you want the people managing that money to be top-notch, 0.1% or better. And you want to make sure they have an appropriate amount of personal stake in the game. It's not necessarily fair to the 99% that they aren't given similar opportunities to manage that much wealth, but it's what's healthiest for the economy. It's also healthy to heavily emphasize education, and make sure every kid is brought to their full potential. It's downright unhealthy to have an intelligent human being caught in a poverty spiral. My point is that the emphasis should not be on the fact that we are a top-heavy economy. A healthy economy is going to be top heavy, potentially extremely top heavy. The emphasis should be on the bottom, where people are getting completely bottlenecked by their own poverty. The question shouldn't be 'how can we redistribute wealth?'. The question should be 'how can we give every person a proper education' and 'how can we make sure poverty does not get in the way of a person's creativity and potential?'
xaetium 12y ago
On this topic, I almost always concur with these people: http://www.adamsmith.org/blog/tag/inequality/ http://www.adamsmith.org/blog/tag/inequality/
Futurebot 12y ago
Three things define American culture when it comes to economic values, decisions, and status: 1) The Lottery Effect "...the other main reason Americans seem so unperturbed by the widening chasm between the rich and everyone else is what I like to call the lottery effect. Buying lottery tickets is clearly an irrational act -- the odds are hugely stacked against us. But many millions of us do, because we see the powerful evidence that an ordinary person, someone just like us whose only qualifying act was to buy a ticket, wins our favorite lottery every week. For many Americans, the nation’s rowdy form of capitalism is a lottery that has similarly bestowed fabulous rewards on the Everyman." - http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealth-inequality-should-we-care/the-lottery-mentality http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealt... 2) Last Place Aversion "that poor Americans’ antipathy toward redistribution might be due not to their desire to one day be at the top of the income distribution, but to their fear of falling to the bottom. We show that humans have a deep psychological aversion to being in “last place” -- recall the shame of being picked last in gym class -- such that individuals near the bottom of the income distribution may be wary of redistribution because it could help those just below them leapfrog above them." - http://www.nytimes.com/roomfordebate/2011/09/19/do-taxes-narrow-the-wealth-gap/tax-policy-and-americans-last-place-aversion http://www.nytimes.com/roomfordebate/2011/09/19/do-taxes-nar... 3) The Just World Fallacy "The just-world hypothesis (also called the just-world theory, just-world fallacy, just-world effect, or just-world phenomenon) refers to the tendency for people to want to believe that the world is fundamentally just. As a result, when they witness an otherwise inexplicable injustice they rationalize it by searching for things that the victim might have done to deserve it. This deflects their anxiety, and lets them continue to believe the world is a just place, but often at the expense of blaming victims for things that were not, objectively, their fault." - http://en.wikipedia.org/wiki/Just-world_hypothesis http://en.wikipedia.org/wiki/Just-world_hypothesis Hopefully articles like this will get more people to understand these things.
wooyi 12y ago
It isn't a zero sum game. The top 20% doesn't take away 84% of the wealth pie and leave the rest to us. They also create a lot of it. If fact, if the top 20% can create enough wealth for the whole country to live a good quality of life, that is not a bad thing.
kzhahou 12y ago
We have an inequality problem in our own backyard: the disparity in equity between CEOs, SVPs/upper management, and rank-and-file employees. I remember all the stories of how google made 1000 millionaires at IPO. Wonderful! They built a powerhouse and were rewarded. But Larry and Sergey had BILLIONs between them. Possibly more than all the rest combined. Two people (plus throw in Eric Schmidt and whoever else). We all just accept this huge inequality and take it for granted, spouting some rationale about risk, etc. I do believe the founders and earlier people should have higher reward, but not at such extremes. Every time an engineer joins a startup as employee #5 and accepts .5% of the company, they are promoting this huge discrepancy.

160 points by Cynddl 12y ago

And, it's only going to get worse while [1] 39% of Americans either believe they are already among the top 1% or believe that they one day will be. If your mentality is one of "Don't tax the top because that's me (or will be)", you're going to constantly vote against your own economic self-interest, and continue to support policies that help the real rich get ultra-rich. 1. http://www.nytimes.com/2003/01/12/opinion/the-triumph-of-hope-over-self-interest.html http://www.nytimes.com/2003/01/12/opinion/the-triumph-of-hop...

blfr 12y ago
39% of Americans either believe they are already among the top 1% or believe that they one day will be And how many people will actually be in the top 1% of earners at least once? EDIT: 12% http://www.nytimes.com/2014/04/20/opinion/sunday/from-rags-to-riches-to-rags.html http://www.nytimes.com/2014/04/20/opinion/sunday/from-rags-t... What’s more, 39 percent of Americans will spend a year in the top 5 percent of the income distribution Not that far off.
- ghouse 12y ago
  There is about a 10x difference between the top 5% and top 1%. So, that's sorta far off. And then again a 20x difference between the top 1% and top 0.1%
  - blfr 12y ago
    Yeah but few people when asked think like that. It's just a type of "rich".
    - sp332 12y ago
      To consider yourself in the top 1%, you just have to be richer than 99 other people you know. Humans are not good at avoiding sampling bias.
      - Taek 12y ago
        That's not true. Most of my friends and aquaintences are software engineers or masters+ in some other STEM field. (Or are students of a similar caliber). The people you know aren't a good random sample. The top 1% tend to have more friends who are also top 1%.
- Retric 12y ago
  Lots of things can temporarily boost your income by consolidating several years’ income into one big payment. Sell a flower shop you built up over 40 years for 150k and you are clearly not doing that well. Gamboling can be a net loss over someone’s lifetime and give them one very good year. Even just swapping jobs and seeing getting a few months of saved vacation in one big chunk. The point is for the 88% of Americans never see the top 1% even after their biggest windfall that's a vast gap. And nothing says 1% is defined by their annual tax returns lifetime earnings adjusted for age are a much better link to someones finances than what they made last year. PS: Sure, in theory Bill Gates was not in the top 1% while at Harvard, but his nominal income had little to do with his status. Don't forget his Mother was friends with the CEO of IBM that's serious connections.
  - warfangle 12y ago
    Wait, where can you save vacation and receive that time as paid as one big chunk?
    - gkop 12y ago
      California state law.
      - toomuchtodo 12y ago
        Illinois state law as well.
      - whybroke 12y ago
        And non-competition clauses are unenforceable in California. Yet other states wonder why no mater how many tax incentive they give business, silicon valley remains stubbornly in CA.
      - warfangle 12y ago
        Huh. That's pretty awesome.
- netrus 12y ago
  The only way I can explain myself these numbers is heritage: Many people will at some point in their life have a heritage above typical yearly salaries. That information doesn't help much. We should find a mid-way between income, wealth and earning potential. Maybe "currently-expected-lifetime-earnings"?
- ryandrake 12y ago
  Those figures include people who had a lucky year. I'd like to see data showing what percentage of people who start out in the bottom 99%, and end up at any point in their lives spending at least 10 consecutive years (or until their death) in the top 1%. When we talk about "the 1%" we are not talking about that one hit wonder salesman or small business owner who cashes out and technically has >$1M income in one particular year. We are talking about year-after-year sustained income. EDIT: There's no question that there are problems with the phrase "among the top 1% of earners". It's not well defined. I think, though, it's safe to say that when the Average American talks about "the 1%" as a class, he's not talking about the person who had a single good year and went on to have a normal income for the rest of his life. He's talking about the class of people whose income is high and sustained. When the average person says, "I'll be among the top 1% of earners" he's imagining himself as attaining continuing membership in an economic class, not predicting a single-year windfall.
brador 12y ago
You honestly believe that people think "Don't tax the top because that's me (or will be)"? I suggest people believe their jobs and technological innovations we all enjoy are on the line if the rich are taxed more. If that is true or not is a separate conversation, but I don't think it's 39% of Americans think they will reach the 1%. That's absurd and the kind of thing you hear in mass media sound bites.
- kjjw 12y ago
  I'm quite sure it is completely true. In aggregate it is an absurd view for so many people to hold, but that doesn't mean it isn't held. Look at where we are! Hacker News - 10,000s of people talking around start ups! Pretty much none of us will "make it." Yet here we are.
  - venomsnake 12y ago
    Not sure why you are downvoted. Even pg admitted that their ROI are absurd, so they must (and can afford to) fund thousands of startups to have success at the current winner takes all digital economy.
  - icebraining 12y ago
    Hacker News is far from just talking about startups and/or for people who expect to start one. I'm here to talk about tech. Startups are cool and all, but I wouldn't come here just for them.
    - kjjw 12y ago
      To be fair, an arse and utterly pedantic, I didn't say it was just talking /about/ startups.
- sp332 12y ago
  The most telling polling result from the 2000 election was from a Time magazine survey that asked people if they are in the top 1 percent of earners. Nineteen percent of Americans say they are in the richest 1 percent and a further 20 percent expect to be someday.
nap 12y ago
There is an equality in possibilities, not in results. You can't blame anyone because you are bad in investments or can't do business. If you tax people who reach success, why not tax those who was failed? Let's redistribute bankruptcy, depression and suicides.
- cgearhart 12y ago
  That's the problem though -- there is not equality is possibilities. Analysis [1] of a study from the Pew Research Center on economic mobility [2] found that you are 10x more likely to be in the top 20% if you're born there than if you're born in the bottom 20%. Someone born in the top 20% who doesn't go to college is still 2.5x more likely to have an income in the top 20% as an adult than someone from the bottom 20% who does go to college. Moreover, it's worsened because life is more expensive in subtle ways as you move down the income bracket. [3] Even municipal fines -- as emphasized by John Oliver recently -- contribute to the problem. [1] http://mattbruenig.com/2013/06/13/whats-more-important-a-college-degree-or-being-born-rich/ http://mattbruenig.com/2013/06/13/whats-more-important-a-col... [2] http://www.pewtrusts.org/en/research-and-analysis/reports/0001/01/01/moving-on-up http://www.pewtrusts.org/en/research-and-analysis/reports/00... [3] http://www.slate.com/articles/life/family/2014/12/linda_tirado_on_the_realities_of_living_in_bootstrap_america_daily_annoyances.html http://www.slate.com/articles/life/family/2014/12/linda_tira... [4] https://www.youtube.com/watch?v=0UjpmT5noto https://www.youtube.com/watch?v=0UjpmT5noto
  - walod 12y ago
    Doesn't anybody else find the "equality of opportunity" and other phrases way too abstract for analysis? There are many facets to how an economy functions and how individuals navigate it, and I think a proper analysis of the action on the ground is needed. For example how individuals learn skills and what prerequisites are needed in terms of access to information, ability to focus and think abstractly, and how one trains those abilities. This affects competition in the market, who gets rich, who gets an opportunity and so forth, and yet all the articles I see talk in these distant abstract terms, like they're appealing to someone in the government to fix it or something. Another aspect is consumer responsibility and the way we tend to buy what we want but not think of the large scale consequences. People use gmail and facebook out of habit. They buy groceries in a big store out of habit. We use products dependent on petroleum yet expect someone else to fix global warming. Being interconnected and living in a rather fragile world where systems affect each other is not a responsibility us as individuals are ready for, and I haven't even touched on civic responsibility and the need for everyone to almost be lawyers and critical thinkers for law to function. There are so many complex interconnected parts and we always fall victim to the movements of the herd
mason240 12y ago
This is a total strawman that advocates of higher taxes tell each other. It's a pretty effective one because it allows those people handwave off anyone who disagrees with them.
- kbenson 12y ago
  > It's a pretty effective one because it allows those people handwave off anyone who disagrees with them. Sort of like accusing someone of a strawman argument with nothing to back it?
theorique 12y ago
Well, if we all work hard enough, we can all become members of the 1%...
was8309 12y ago
an admittedly cynical view is that we can be sycophants and cowards, and so we want to feel that we belong in the most powerful group. I think this is why some of us bash welfare, even though there isn't much evidence of fraud. if a little steals my one dollar bill and runs one way and a big guy steals my hundred bill and just stands there laughing, I turn and run after the little buy screaming 'Thief'! we know we've been robbed, but we're too afraid to confront the big guy

dandare 12y ago

The fact that someone is rich does not mean he took anything from you, no matter how poor you are. Statements like "If poor people knew how rich rich people are, there would be riots in the streets" are not only stupid but also dangerous.

maxxxxx 12y ago
You could argue that they took something from other people by claiming a larger share of economic output for themselves. Something seems wrong when the largest share of economic growth goes to the top as we have seen over the last decades. And I believe this is not because of some economic law but because the top 1% have made the rules to their favor.
- dandare 12y ago
  a) you have democracy, the top 1% are heavily influencing it but that is far from making the rules. 60% of Americans don't vote. b) "Something seems wrong with..." -> http://en.wikipedia.org/wiki/Argument_from_ignorance http://en.wikipedia.org/wiki/Argument_from_ignorance
ghouse 12y ago
Well, but it also does not mean that he didn't take anything from me. Generally, the US tax code is designed in such a way that capital begets capital. Put differently, if you make money passively from the money you already have, you pay a lower tax rate then if you haul brick on your back, or teach children. Is this taking? No, not directly, but indirectly, sure.
- thecopy 12y ago
  I would argue that the state is taking, not the rich (which are not the only people with money invested in the market).
  - toomuchtodo 12y ago
    Feel free to head to Somalia then. I hear they have a wonderful libertarian system setup. EDIT: Seriously folks, taxes pay for civilization. If you don't like it, don't work (so you don't have to pay) or leave. Roads, schools, fire, police, infrastructure aren't built with unicorn dust.

kokey 12y ago

I always feel a number of important metrics are left out, either by accident or on purpose, when people talk about inequality. Most importantly when it comes to wealth itself, by most measures there is a very, very long tail of people with no wealth. 'No wealth' ranges from the most poor, to those living from paycheck to paycheck all the way to those who have as much debt as their assets. Many of these people are fine because, for example, their earnings potential over the next 40 years is good. They are wealthy in things like skills, social connections, etc. and they are certainly not comparable to someone with few skills, bad health and no money. The other issue is the longer term earning potential of top earners. Apart from the fact that companies are bigger and more global and that 'hits' can be bigger (like Kesha selling more records than The Beatles), the average tenure of a CEO has also gotten shorter and is around 5-7 years which usually can be described as the prime of their career, while the average worker can be anywhere in their career including eventually being a CEO one day.

johnchristopher 12y ago
> Most importantly when it comes to wealth itself, by most measures there is a very, very long tail of people with no wealth. 'No wealth' ranges from the most poor, to those living from paycheck to paycheck all the way to those who have as much debt as their assets. Many of these people are fine because, for example, their earnings potential over the next 40 years is good. They are wealthy in things like skills, social connections, etc. and they are certainly not comparable to someone with few skills, bad health and no money. No, they won't get rich later.
whybroke 12y ago
>while the average worker can be anywhere in their career including eventually being a CEO one day From the article: > our indifference lies in a distinctly American cultural optimism. At the core of the American Dream is the belief that anyone who works hard can move up economically regardless of his or her social circumstances. Aside from the factual error in the notion that there's more social mobility in the US than other countries, there is a difference between "anyone can become CEO" and "everyone will become CEO". If antebellum southern plantations had been structured such that one of the slaves might occasionally become the owner, it would not make it acceptable.

JackFr 12y ago

Wow. Scientific American has really gone off the rails.

JackFr 12y ago
I suppose I could have been clearer. This is a well-intentioned advocacy piece. It would be at home on the Op-Ed page of the New York Times, the Washington Post or even the Wall Street Journal. It seems much of the reporting in SA has gone the way of editorializing the flavor of the month rather than reporting on well, science. I miss that.

fullwedgewhale 12y ago

The point of the article is that the meritocratic system in this country is broken. In part this is because we have systematically transferred wealth out of the bottom to the top. For example, focusing on tax cuts that benefit high income individuals while cutting support for public colleges. These two things are usually done at different times with tax cuts usually to stimulate the economy and spending cuts coming to reign in budget imbalances. The result is that you could work your way through college in the 1960's by working about 20 hours a week. Now you'd have to work 40+ hours a week to pay tuition at a public university. The difference income throughout someone's working life between a college degree and no college degree is about 1,000,000 dollars. So the middle and lower middle income people don't see the benefits of tax cuts but they bear the burden of college tuition increases. And their long term earning potential suffers. And the country as a whole suffers because we have a less well educated work force. You can repeat this pattern with a whole host of other programs and issues. For example, the minimum wage is still behind where it needs to be if it were adjusted for inflation. We're becoming a casino culture where people keep playing the game because they believe they're going to be the ones that turn out okay. For the most part, your ability to leave your social class is pretty close to zero, with the rich staying rich because their wealth can insulate them against bad decisions. The only real mobility for most people has been down.

Shivetya 12y ago
Wealth transfer because of the tax code occurs all the time, every day. Yet some here I can guarantee would scream bloody murder if they lost their piece of that wealth transfer. Two of which are easy, the ACA and EV tax credits, both transfer wealth but in different ways. The first from the young and healthy who usually are at the beginning of their income generating years and hopefully their lowest pay in their career to those at career and life end where they might have the homes paid for, retirement incomes, and more. Then the EV tax credit gives to people making purchases of cars beyond the reach of average workers. What is the point? The tax code created this imbalance and continues to do so as it is the number one means by which politicians separate us. They play us off each other and the tax code allows the to reward or punish. Simplify the tax code so that anyone with a high school education can see the money and that will lead to people clamoring for a change.

spuz 12y ago

Is it just me, or does the article contradict its own conclusion? > They asked about 55,000 people from 40 countries to estimate how much corporate CEOs and unskilled workers earned ... the patterns were the same for all subgroups, regardless of age, education, political affiliation, or opinion on inequality and pay > One likely reason for this is identified by a third study, ... that suggests that our indifference lies in a distinctly American cultural optimism If 55,000 people from 40 countries make the same poor estimate of the reality of inequality then surely the affect of American cultural optimism is insignificant?

jplahn 12y ago
I think the keyword is "indifference." While everybody miscalculates the CEO - unskilled pay ratio, the article is implying the indifference caused by "American cultural optimism" is what prevents us from changing it.
- spuz 12y ago
  That may well be true but there is a difference between 'ignorance' and 'indifference'. The former is relatively easy to measure but the second is not. In fact the study on social mobility that supposedly demonstrates this indifference doesn't mention the word. It simply shows ignorance of American's understanding of social mobility but does not compare these findings with populations from other countries. Let's say that American's perception of social mobility was found to be significantly skewed relative to that of other populations'. Would that show more or less indifference? You could argue that the 'American Dream' cultural thinking leads more Americans to believe that the poor can become rich and at the same time more passionate about ensuring that that is indeed the case. The fact that it blinds them to the reality does not imply that they don't care.
spuz 12y ago
To answer my own question: The 2014 research of 40 countries actually shows that Americans estimate a relatively high inequality of CEO to unskilled worker pay (a ratio of 29.6 compared to an average estimate of 10.0). However, the actual pay ratio for American CEOs is much much higher than in any other country's (354 - as mentioned in the article. The next highest actual pay ratio is in Switzerland at 150 times while most countries have a ratio below 100). The research states: "American respondents (n = 1,581) in our data estimated the ratio of estimated incomes of CEOs to unskilled workers to be 29.6, demonstrating that Americans drastically underestimated the gap in actual incomes between CEOs and unskilled workers." So, yes there is a significance in the figures for America both in terms of estimated inequality and actual inequality that shows that American CEO pay is significantly less egalitarian than other countries and Americans in general significantly less aware of this than other countries.

greggyb 12y ago

Or it's far better than you think. What if the cause of the misconception of the true distribution is that standard of living is far closer than ever before, so the relative distance of wealth is less visible.

drabiega 12y ago
Seems more likely that it's the increased geographical wealth/income segregation.

snarfy 12y ago

The estate tax should be near 100%. We do not need dynasties. I don't mind people making the wealth, but they can't take it with them. It shouldn't just transfer to their children.

Thriptic 12y ago
What is the incentive to continue working once you hit a threshold to comfortably retire with a good quality of life then? Might a 100% inheritance tax remove significant capital from the markets which would affect growth? In this scenario, what is stopping people from transferring all of their money to their children before they die at a much lower tax rate? How would assets like real estate be handled?
- whybroke 12y ago
  You assume that such wealth was earned in the first place which is rarely the case and is less so every year. The meritocracy is broken and will be so exactly to the degree that there is inheritance, the two are directly connected. Inheritance is the exact definition of anti-meritocracy.
  - Thriptic 12y ago
    > You assume that such wealth was earned in the first place which is rarely the case and is less so every year. Fair point. It's true that my statements only applied to individuals who earned the money themselves, and I failed to consider people who had themselves inherited money.
totalrobe 12y ago
You haven't quite thought this out. Young parents die too, and children need to be provided for.
- RodericDay 12y ago
  If you believe in equality of opportunity, parents should not be the main source of provision for children. Every time someone mentions "who will provide for your children if you don't leave an inheritance behind?" I immediately have to ask, "what about all the children whose parents are not able to leave them an inheritance (ie: most of them)?" It seems that it is you who have not really thought it out. Here's Adam Smith on the topic btw: > "A power to dispose of estates for ever is manifestly absurd. The earth and the fulness of it belongs to every generation, and the preceding one can have no right to bind it up from posterity. Such extension of property is quite unnatural." Smith said: "There is no point more difficult to account for than the right we conceive men to have to dispose of their goods after death." http://budiansky.blogspot.ca/2010/10/adam-smith-thomas-jefferson-and-other.html http://budiansky.blogspot.ca/2010/10/adam-smith-thomas-jeffe...

proveanegative 12y ago

I think the popular conceptualization of economic inequality (effectively, "inequality is suffering") is misleading because it doesn't take marginal utility into account. What I mean is, take the pizza-dividing example and suppose we have doubled the pizza. The inequality (expressed as the ratio of pizza owned to the available total) would stay the same but those with the smallest part of the divide would be noticeably less hungry than before. In a world of plenty inequality would not mean suffering. More realistically, inequality would not mean (nearly as much) suffering in a world where a minimum slice of pizza was the birthright of a citizen. Edit: This line of thinking is seriously flawed when applied to the real world. See drabiega's comment for why. metaphorm mentions some examples of where competitive costs may apply.

deleted 12y ago
[deleted]
adamc 12y ago
"...in a world where a minimum slice of pizza was a birthright of a citizen." We do not remotely live in such a world, or even such a country. (I'm referring to the U.S.)
- proveanegative 12y ago
  Whether a basic income or even a basic job program is plausible under the current conditions in the US is very debatable (you can find yummyfajitas' criticism here on HN). What I had in mind with my final remark is more about the future, i.e., "how to handle things when the machines take over".
metaphorm 12y ago
this is a distraction. first off, why should we suppose we have "doubled the pizza"? I see no point in discussing abstract hypotheticals. We ought to stick to real world examples of the real world economy or else we're not really talking about anything meaningful.
- 12y ago

enoch_r 12y ago

Every time someone says "X people have a higher net worth than Y% of people COMBINED" I get very, very skeptical. Some net worths are negative. Some net worths are significantly negative. A homeless man has a much higher net worth than 8,000 people who just graduated from medical school with some debt combined. Relevant article.[1] [1] http://blogs.reuters.com/felix-salmon/2014/04/04/stop-adding-up-the-wealth-of-the-poor/ http://blogs.reuters.com/felix-salmon/2014/04/04/stop-adding...

dwaltrip 12y ago

I would love to see these types of metrics for other domains. I think any technical question about some distribution across the american population will produce results that contrast with reality, simply because people don't know how to reason about mathematical distributions or large numbers very well. This isn't to say that America does not have an issue with economic inequality, of course.

strommen 12y ago

Wow, the "ideal" wealth distribution based on what people want is simply nuts. If top quintile owns 35% and bottom two own 25% (perhaps 15% and 10%, respectively)...that means the richest would own 3.5x more than the poorest, on average. (If you think this makes any sense at all, consider the median American has a net worth of about $45K. Having 3.5x that amount wouldn't allow you to retire, or even own a 3BR house in Minneapolis.) A person's wealth should (hopefully) increase as they grow older and save more money. It's clear that the responders to this survey didn't account for that at all.

cadlin 12y ago
Yes, but the average net worth is 301k. It doesn't make any sense to look at median numbers when talking about uneven wealth distribution. Of course the median is going to be very low, that's the whole point!
crusso 12y ago
That's the problem I had with the article as well. You might as well ask the average person what his ideal LDL to HDL cholesterol ratio would be. I'm not prepared to accept the importance of the intuition of the average person in society on wealth distribution any more than I am to accept it on belief in god or taste in music.

joeclark77 12y ago

Nothing in the article explains why "economic inequality" is a bad thing. Which seems to be a logical pre-requisite to declaring it to be "worse than you think".

ryandrake 12y ago
It's not necessary. Economic inequality is widely considered a social ill.
- sokoloff 12y ago
  The Earth was once widely considered to be flat.
- joeclark77 12y ago
  That's assuming the thing you want to prove. (I'm sure there's a Latin term for that, but I don't remember it.) It's a logical error that Margaret Thatcher blew apart beautifully probably before you were even born. (Bing the video.)
sgift 12y ago
"Nothing in the article explains why it is a bad thing that x. Which seems to be a logical pre-requisite to declaring it to be 'worse than you think'" It's quite simple: Some things you have to accept as a given, it's a shared social norm. No one will bother to write a paragraph why rape is bad each time an article about rape is written, no one will bother to write a paragraph why police brutality is bad each time an article about police brutality is written and no one will bother to explain why "economic inequality" (i.e. some people starve while others live in luxury) is bad. It would be cumbersome and tiring for most readers for the sake of a tiny minority to write articles in the style you seem to prefer.
- joeclark77 12y ago
  If you have twice as much as I do, and both of us see our real wealth doubled, we would undeniably both be richer and happier. However, the entirely abstract, purely-on-paper metric "economic inequality" would also double. That, in a nutshell, is why the premise is dubious. If you would argue for sacrificing real-life prosperity in order to prioritize a purely abstract "KPI", you have to prove it. Margaret Thatcher had the last word on this: https://youtu.be/rv5t6rC6yvg https://youtu.be/rv5t6rC6yvg Worth a watch.

knowaveragejoe 12y ago

"Work hard enough" doesn't mean the same thing it did in the middle of the 20th century. The amount of resources available to the everyman today is orders of magnitude larger, be it tips on frugality or ways to supplement income. They don't really expand upon it in this piece, but it feels like they're using it in the "older" sense, i.e. simply working your job dutifully and being conservative with your money.

streptomycin 12y ago

Alternative title: Humans are bad at estimating things on logarithmic scales, and probably don't adequately factor in things like student loans and mortgage debt when estimating the wealth of the "poor" My title is much less catchy.

mrcactu5 12y ago

The youtube infographic video doesn't work: https://www.youtube.com/watch?v=QPKKQnijnsM https://www.youtube.com/watch?v=QPKKQnijnsM

PythonicAlpha 12y ago

The wealth of the US at times shortly after the second world war came from the broad middle class. Today the wealth of the US is lying in the hands of the top 1% of the society. Something must have been happening in between. In the European Union there is also a similar trend. There exist studies that today it is much more difficult for somebody coming from lower income (and society) levels to become rich than it was 40 or 50 years ago. There is nearly no exchange anymore happening, because today's rich can rely on the fact that their money will beget more additional money nearly automatically. Also times are over, where many people build their riches from scratch. Most rich people today are rich in the second, third or fourth generation today. Low taxes on wealth and inheritance are doing their job. But also the fact that earning money by just having (enough) money costs less tax than hard working for money in Europe (in Germany, you will pay for your worked-for money (if you earn enough) up to ~40% on taxes and additionally you have to pay social security fees that can eat up an additional 20% (estimated) of your earnings. For money you got threw having money, you will today come away with 25% flat rate tax. With such tax laws in action, you could come to the view, that letting work your money for you is more difficult than working in a factory and must be promoted by the state.

happyscrappy 12y ago

Europe is unequal, not quite as much as the US, and yet they are implementing austerity. Why? Because capital needs to flow to where it is most useful. If it does not your economy suffers and everyone loses.

vasilipupkin 12y ago

At least some inequality is the result of our choices. Meaning, Google's new CFO is going to make 70 mln. But, how many people would like to be CFOs? CFOs work crazy hours and have insane amount of responsibility - many people wouldn't want that tradeoff. So, should we somehow normalize inequality numbers for this phenomenon ?

JustSomeNobody 12y ago
RNs work crazy hours and have an insane amount of responsibility. Should they make $70 Million?
- vasilipupkin 12y ago
  no, because many more people want to be RNs and enjoy being RNs than CFOs.

pluma 12y ago

The problem isn't wealth. The problem is poverty. There isn't much of a practical difference between 1MM and 10MM or 10MM and 100MM. Or even 10K and 100K. It's not that there isn't any difference, it's just that (ignoring extreme scenarios like having to pay medical bills in the US) the difference is mostly a luxury. But below a certain threshold, it's not a matter of luxury. It's a matter of being able to afford the bare necessities. I don't make 100K/month. Right now I don't even make 10K/month. To be honest, I'd probably be able to cope (as I have had to in the past) with as little as 1K/month or less. But I don't mind if some investment banker or Fortune 500 CEO makes several orders of magnitude than me. The problem isn't just that someone who works two full-time jobs can barely afford the absolute minimum of necessities. The problem is that making money is a requirement to have access to these essentials. We don't need more jobs, we need better social care. We don't need to cut rich people's wages, we need to eliminate poor people's reliance on wages to keep them housed, fed, warm, healthy and content (or "maintained" if that sounds less socialist and more business-y). Minimum wage is a red herring. Minimum wages are (and should be) dictated by economical concerns alone. It's impossible to regulate them. You can dictate numbers, but that doesn't solve the problem they're meant to address. Minimum wage jobs are not only useless because they can't pay for a living. They're also useless because they generally don't offer any opportunity for personal advancement. If you mop floors at McDonald's for a living, you're likely not going to turn that into a career. If anything, it's a stop-gap, but any effect it will have on your future occupations will likely have nothing to do with the actual tasks you performed (except maybe for a marketing sob-story if you make it big). So separate the two concerns: give people what they need whether they have a job or not, and pay them whatever is economically sensible for any job they take. Basic income and/or strong social services are a better solution than always trying to regulate businesses into supplying sufficient wages against market demands. If anything, the latter just encourages businesses to eliminate those minimum wage jobs entirely to reduce unnecessary costs. You can't compete with technological progress. If you artificially inflate wages, that just makes the humans even less appealing.

sokoloff 12y ago
I'd argue that there's a massive difference between 1MM and 10MM USD. The former is not enough to comfortably retire on at age 30 and heading up a household of 4. The latter is. That's a massive qualitative difference, IMO.

Taek 12y ago

You want the economy to be top heavy. You want the best people managing the most money, and you want them to have the strongest incentive for managing it correctly. When you have 10 billion dollars in capital and you are trying to figure out what to do with it, you want the people managing that money to be top-notch, 0.1% or better. And you want to make sure they have an appropriate amount of personal stake in the game. It's not necessarily fair to the 99% that they aren't given similar opportunities to manage that much wealth, but it's what's healthiest for the economy. It's also healthy to heavily emphasize education, and make sure every kid is brought to their full potential. It's downright unhealthy to have an intelligent human being caught in a poverty spiral. My point is that the emphasis should not be on the fact that we are a top-heavy economy. A healthy economy is going to be top heavy, potentially extremely top heavy. The emphasis should be on the bottom, where people are getting completely bottlenecked by their own poverty. The question shouldn't be 'how can we redistribute wealth?'. The question should be 'how can we give every person a proper education' and 'how can we make sure poverty does not get in the way of a person's creativity and potential?'

xaetium 12y ago

On this topic, I almost always concur with these people: http://www.adamsmith.org/blog/tag/inequality/ http://www.adamsmith.org/blog/tag/inequality/

Futurebot 12y ago

Three things define American culture when it comes to economic values, decisions, and status: 1) The Lottery Effect "...the other main reason Americans seem so unperturbed by the widening chasm between the rich and everyone else is what I like to call the lottery effect. Buying lottery tickets is clearly an irrational act -- the odds are hugely stacked against us. But many millions of us do, because we see the powerful evidence that an ordinary person, someone just like us whose only qualifying act was to buy a ticket, wins our favorite lottery every week. For many Americans, the nation’s rowdy form of capitalism is a lottery that has similarly bestowed fabulous rewards on the Everyman." - http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealth-inequality-should-we-care/the-lottery-mentality http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealt... 2) Last Place Aversion "that poor Americans’ antipathy toward redistribution might be due not to their desire to one day be at the top of the income distribution, but to their fear of falling to the bottom. We show that humans have a deep psychological aversion to being in “last place” -- recall the shame of being picked last in gym class -- such that individuals near the bottom of the income distribution may be wary of redistribution because it could help those just below them leapfrog above them." - http://www.nytimes.com/roomfordebate/2011/09/19/do-taxes-narrow-the-wealth-gap/tax-policy-and-americans-last-place-aversion http://www.nytimes.com/roomfordebate/2011/09/19/do-taxes-nar... 3) The Just World Fallacy "The just-world hypothesis (also called the just-world theory, just-world fallacy, just-world effect, or just-world phenomenon) refers to the tendency for people to want to believe that the world is fundamentally just. As a result, when they witness an otherwise inexplicable injustice they rationalize it by searching for things that the victim might have done to deserve it. This deflects their anxiety, and lets them continue to believe the world is a just place, but often at the expense of blaming victims for things that were not, objectively, their fault." - http://en.wikipedia.org/wiki/Just-world_hypothesis http://en.wikipedia.org/wiki/Just-world_hypothesis Hopefully articles like this will get more people to understand these things.

wooyi 12y ago

It isn't a zero sum game. The top 20% doesn't take away 84% of the wealth pie and leave the rest to us. They also create a lot of it. If fact, if the top 20% can create enough wealth for the whole country to live a good quality of life, that is not a bad thing.

kzhahou 12y ago

We have an inequality problem in our own backyard: the disparity in equity between CEOs, SVPs/upper management, and rank-and-file employees. I remember all the stories of how google made 1000 millionaires at IPO. Wonderful! They built a powerhouse and were rewarded. But Larry and Sergey had BILLIONs between them. Possibly more than all the rest combined. Two people (plus throw in Eric Schmidt and whoever else). We all just accept this huge inequality and take it for granted, spouting some rationale about risk, etc. I do believe the founders and earlier people should have higher reward, but not at such extremes. Every time an engineer joins a startup as employee #5 and accepts .5% of the company, they are promoting this huge discrepancy.