8 ms·

Why the super-rich get richer

64 points by techdog 11y ago

hammock 11y ago
> It's not hard to understand what happened, although economists, as a group, seem to be incredibly dense on this point. Computer technology allowed radical increases in productivity. Not sure it's that cut and dry, nor that the rise of computers could be the cause of such a sharp inflection point. Bretton Woods ended around 1971-73...In fact the real wage of nonsupervisory workers peaked in 1973[1] [1]http://www.nytimes.com/2006/09/01/opinion/01krugman.html http://www.nytimes.com/2006/09/01/opinion/01krugman.html
- jayvanguard 11y ago
  That was my thought as well. The dates don't quite line up. Computers weren't widespread until the mid to late 1970s when mini-computers started to show up in smaller businesses. Even then, very small numbers of people were actually working with the computers and the paper office was still in full force. It wasn't until the 1980s that computers were ubiquitous in a way that it clearly affected the vast majority of the population.
  - kevin_thibedeau 11y ago
    I would say it wasn't until the 90's that automation technology was sophisticated enough to start displacing workers. Before then it was used to do new things or amplify worker productivity. A TV remote from the 80's wasn't taking away a job from a house servant who would stand by to change the channel for you. Consider how the development of machine tools in 1800's created more opportunity for work in areas that were previously limited to skilled craftsmen.
- jjoonathan 11y ago
  How is ending the "gold exchange standard" connected to the decline in labor bargaining power? I buy your argument that the rollout of computers doesn't quite line up as it ought to if it were the primary factor behind wage-productivity decoupling, but I'm much less familiar with Bretton Woods so I'd appreciate any dot-connecting you can offer.
  - danuker 11y ago
    Workers' savings become worthless through inflation. Voila! Wage slavery.
    - jjoonathan 11y ago
      But savings != income. I can see the argument that eroding peoples' savings would eventually reduce their bargaining power, but on the graph the effect seems almost instantaneous.
      - LanceH 11y ago
        Savings implies income if inflation doesn't eat it up (and then some).
    - leaveyou 11y ago
      It kind of makes sense: In high inflation the savers subsidize the borrowers. Who tries to save is screwed and who borrows gets an advantage. The workers are usually net savers and the businesses & the investors are borrowers. edit: my mistake; When I said 'investors' I had in mind the people who buy shares with or invest borrowed capital..
      - mtviewdave 11y ago
        >the investors are borrowers The investors are the lenders, not the borrowers. That's what the term "investor" means.
    - gesman 11y ago
      Savings in money, yes. Savings in real estate - highly unlikely.
    - mtviewdave 11y ago
      That's only true for savings in physical cash. Savings in an interest bearing instrument or account (which is where most workers actually keep their money) does not have this problem.
- howeyc 11y ago
  > Not sure it's that cut and dry Maybe not, but seems plausible. https://en.wikipedia.org/wiki/Calculator#1970s_to_mid-1980s https://en.wikipedia.org/wiki/Calculator#1970s_to_mid-1980s
  - crimsonalucard 11y ago
    Giorgio Fischer, a gynecologist from Rome, Italy, invents liposuction in 1975. This allowed fat people to become skinny and therefore more productive. Correlation does not equal causation.
- astazangasta 11y ago
  Ah, the ol' "blame the robots" gambit. They took our money! Except nothing about this story flies: first, the microprocessor did not produce some magically more productive economy. First look here: http://www.intellectualtakeout.org/sites/default/files/imagecache/chart_content/chart-graph/gdp_world_capita.png http://www.intellectualtakeout.org/sites/default/files/image... You can see that world real GDP per capita did not suddenly increase after the 70s, in fact growth actually slowed a bit. The story also doesn't agree with common sense - microprocessors didn't reinvent the economy, they couldn't even deliver the "paperless office" we were promised (something particularly close to their domain). The fact is that productivity has been growing at basically the same boring pace, and microprocessors are just another boring form of automation, not a game-changer. Finally, believing this story requires us to ignore all of the other things we know about - the introduction of fiat currency, the Fed's shift to aggressive inflation-squashing (read: preventing full employment), massive consolidation of corporate ownership, financialization of the economy, enormous tax cuts for the wealthy, trade policies designed to reduce worker bargaining power, etc., etc. Are we to believe that none of these changes had an effect?
  - crimsonalucard 11y ago
    The author of this article is just cocky. He thinks he has the world figured out so well he even referred to economists as "dense." Seriously, economists have actually worked out the reason behind the wealth gap, he didn't even address or critique the prevailing theory. Most likely because he doesn't even know what it is.
- limeyx 11y ago
  Yeah. Reading the "Intel trinity" book it was interesting to note that around this time (maybe a little later) was when the chip companies successfully petitoned the Raegan government to reduce the capital gains tax rate which was at the time higher than regular income. Wonder how much that has to do with this ... (and also how interesting how suddenly keen the "free market" fanatics were to take government money ....
sosuke 11y ago
The article title and the contents don't match up. If you're interested in how technology is and will be replacing most jobs we have now see "Humans Need Not Apply" https://www.youtube.com/watch?v=7Pq-S557XQU https://www.youtube.com/watch?v=7Pq-S557XQU I believe that we will need to make some structure that allows for people to work who want to earn more, and still support a considerable number of people who just aren't employable in the future. There don't have to be just winners and losers like this article posits, it isn't us versus them, and technology shouldn't be vilified.
- ackalker 11y ago
  >I believe that we will need to make some structure that allows for people to work who want to earn more, and still support a considerable number of people who just aren't employable in the future. There don't have to be just winners and losers like this article posits, it isn't us versus them, and technology shouldn't be vilified. I believe what you're hinting at is the idea of "(unconditional) basic income". http://en.wikipedia.org/wiki/Basic_income http://en.wikipedia.org/wiki/Basic_income Interest in this is rising, there are some scientific studies, and several pilot projects have been run around the world, with generally positive outcomes.
dghf 11y ago
> According to Uber, the median wage for an UberX driver working at least 40 hours a week in New York City is $90,766 a year. In San Francisco, the median wage for an UberX driver working at least 40 hours a week is $74,191. Does that sound like a plan for reducing income inequality? Or increasing it? I don't know. What are the median wages of the cab drivers that these UberX drivers are apparently putting out of work? The article doesn't say.
- falsestprophet 11y ago
  Uber is lying of course. Those figures are revenue. Subtract operating expenses of around 50 cents per mile and then you have real earnings or "wages."
  - socialist_coder 11y ago
    Great point. Those jobs will be gone soon anyways. Uber wants nothing more than to replace human drivers with AI.
  - varjag 11y ago
    And "at least 40 hours a week" is another subtle caveat. This obviously includes all the drivers putting whatever time they can into it.
  - cylinder 11y ago
    Of course. And they don't earn "wages," they are contractors.
- polskibus 11y ago
  Is wage calculated without costs like loan repayments on the car, gas, etc.?
- beat 11y ago
  I really dislike that they noted how many cab drivers are being put out of work, without noting how many new jobs were created by Uber. That's a dishonest and misleading journalistic practice.
nsxwolf 11y ago
Compounding interest? Not a very compelling headline.
- crimsonalucard 11y ago
  dude he says computers and efficiency in labor are the cause of wealth inequality. Not the real reason: compounding interest.
dschiptsov 11y ago
Diversification.
leaveyou 11y ago
I agree that productivity & cheap energy played a major role in the devaluation of the traditional worker but I find it highly suspicious that the blogger does not consider at all another remarkable phenomena that started in 1971: "free floating fiat currency" and the tremendous increase in the money supply. This amazing currency is "free" but chooses to float only one direction: devaluation. Maybe the increase in productivity was the perfect cover for the massive increase in the money supply and the masses had no feeling of high inflation while still paying the hidden tax.
- danuker 11y ago
  I agree with you. The graph is too sharp to be just technology: technology was gradually developed over years - from "nearly useless" to "automate everything". What happened is this: https://en.wikipedia.org/wiki/Nixon_Shock https://en.wikipedia.org/wiki/Nixon_Shock
- howeyc 11y ago
  Floating currency only matters when you buy stuff from someone else who deals in a different currency. Although you sort of right in that "globalization" could be a cause. That is, "why hire more workers at high salary when I can hire dirt cheap and ship the product here?" https://en.wikipedia.org/wiki/Containerization#Toward_standards https://en.wikipedia.org/wiki/Containerization#Toward_standa... This leads me to wonder, when wages stagnated around 1970 in USA, did they start lifting in developing world?
  - msandford 11y ago
    > Floating currency only matters when you buy stuff from someone else who deals in a different currency The idea that the currency floats can also mean that the buying power consistently decreases. As the purchasing power decreases if you're in cash you lose wealth, even though on paper you're maybe even growing the number a bit. If you own productive assets this is OK because you can increase the price of your outputs faster than your inputs. Meaning you can give people raises (but more slowly than the currency depreciation) and you'll still make money. If you're an employee instead of an employer, though, you're paying the higher prices before you get the raise to be able to afford them. In this way it's possible for the central bank to perform an effective (though non-obvious) redistribution of wealth.
lmg643 11y ago
Federal Reserve policies to ease interest rates and purchasing securities (via QE) have the effect of inflating asset prices. Wealthy people are often paid with assets (executive stock/option grants), work in asset-managing businesses (hedge funds/PE), and/or hold more assets than the poor (business owners). In my view, the Federal Reserve is mainly responsible for exploding income, not that technology doesn't play some role as well - but, if it wasn't for exploding asset values, VCs would not be as desperate to invest in crazy money-losing ideas to automate XYZ (causing unemployment elsewhere) that they can sell to a bigger fish. (Interested to know if the Fed is a disputed explanation.) It seems strange to me that we have such a simple root cause but complicated ideas for how to stop it, other than curtailing the Federal Reserve.
vinceguidry 11y ago
I've finally come to understand why I care so little about income inequality. Income is not the only measure of wealth, I don't even consider it the most important. I was hanging out at the bar the other day with this software developer from India. He had brought a puppy with him to the bar. While I was playing with the puppy and we were chatting, a girl comes up to us and wants to play with the puppy too. His intentions became nakedly known when he kept saying over and over that "me and the puppy are a package deal." As I was leaving to head to the restroom, he starts going on about how he's "recruiting" for a boat trip in the Caribbean. When I got back she was gone, obviously unimpressed. It got me thinking about the dating market. No woman I know has wealth anywhere on their priority list for men they want to date. That guy could have been telling the complete truth about yachting in the Caribbean and she'd have had the same reaction. Who wants to spend time with a boor even on a luxury yacht? If he'd been legit Mr. Darcy, sure, I'm sure she'd have been eating out of his hand. -------------------------------- If I wanted to, I could fairly easily jack up my yearly salary by anywhere from $25-50K by finding another job. The reason I haven't done that yet is simply that the switching costs vastly dwarf the (slight) standard of living increase that the bump would afford me. When I look to move the needle, salary just doesn't look attractive. Just having one is the big win. I hold that money is cheap right now precisely because capital is worth much less, relative to other kinds of wealth. Who is killing it right now? Apple. Samsung. Global commercial institutions. Finance has accomplished its goal of making everything fungible, now the only things left that are worth anything relative to anything else are precisely the things that finance can't replicate, like an amazing company started by an amazing genius. So, no, capital accumulation is not worrying to me, because it's obvious to me that we live in a much richer world now than we ever have. Doesn't look that way on paper, but that's because we don't have a way of representing, in the numbers, the idea that money itself isn't worth what it used to be. Capital accumulation is exactly what would happen if everyone started subconsciously realizing that cash is no longer king. They'd place their investments elsewhere, leaving some poor sap holding the big bag of worthless paper.
- crimsonalucard 11y ago
  You don't care in terms of looking at your own situation, sure. But as a social problem for people less fortunate then you the problem is compelling. Note that the problem is actually growing. If the gap keeps growing faster then your wage grows, it will be a problem for you too. As for your anecdotal experience about women I have to say you're wrong. No women will ever call herself a gold digger that's why they don't tell you wealth is on their priority list. The truth is, it matters a lot. See below. The content of the link kind of doesn't fit with HN, but the the evidence fits as an anecdotal counterargument to your anecdotal experience with the puppy: https://www.youtube.com/watch?v=XbYNAZxcWh4 https://www.youtube.com/watch?v=XbYNAZxcWh4
crimsonalucard 11y ago
Lots of stuff happened in the 1970s. It's requires a huge leap of logic to say that computers are the cause... after all correlation does not imply causation. You need significantly more evidence to prove that computers are the cause of the growing wage gap. There was a really famous book that was published recently called "Capital in the 21st century" by Thomas Piketty that summarizes the real reason: http://www.economist.com/blogs/economist-explains/2014/05/economist-explains http://www.economist.com/blogs/economist-explains/2014/05/ec... The book is dense, but the logic and evidence is compelling. Basically it says that you need to look at more data, because there was ALWAYS a trend towards inequality that was temporarily reversed from 1930-1975, read below: ""Capital" is built on more than a decade of research by Mr Piketty and a handful of other economists, detailing historical changes in the concentration of income and wealth. This pile of data allows Mr Piketty to sketch out the evolution of inequality since the beginning of the industrial revolution. In the 18th and 19th centuries western European society was highly unequal. Private wealth dwarfed national income and was concentrated in the hands of the rich families who sat atop a relatively rigid class structure. This system persisted even as industrialisation slowly contributed to rising wages for workers. Only the chaos of the first and second world wars and the Depression disrupted this pattern. High taxes, inflation, bankruptcies, and the growth of sprawling welfare states caused wealth to shrink dramatically, and ushered in a period in which both income and wealth were distributed in relatively egalitarian fashion. But the shocks of the early 20th century have faded and wealth is now reasserting itself. On many measures, Mr Piketty reckons, the importance of wealth in modern economies is approaching levels last seen before the first world war." The real reason for economic inequality is not technology, it is actually a feature of capitalism. In simple terms what is happening is that invested wealth grows faster for rich people then it does for poor people and this causes the gap to grow. See the quote below: "From this history, Mr Piketty derives a grand theory of capital and inequality. As a general rule wealth grows faster than economic output, he explains, a concept he captures in the expression r > g (where r is the rate of return to wealth and g is the economic growth rate). Other things being equal, faster economic growth will diminish the importance of wealth in a society, whereas slower growth will increase it (and demographic change that slows global growth will make capital more dominant). But there are no natural forces pushing against the steady concentration of wealth. Only a burst of rapid growth (from technological progress or rising population) or government intervention can be counted on to keep economies from returning to the “patrimonial capitalism” that worried Karl Marx. Mr Piketty closes the book by recommending that governments step in now, by adopting a global tax on wealth, to prevent soaring inequality contributing to economic or political instability down the road." I'm no economist but according to my knowledge this is the prevailing theory in academia today.
cowsandmilk 11y ago
His second figure[1] shows his argument is nonsense. The slope of increases in productivity remains constant on most of the graph, it just is that a certain point, wages stop going up. That is, the computer revolution did not change that slope, at least not until 1995-2005 (possibly from the internet). Until the 70's, increases in worker productivity from technology were given to the worker as pay. After the 70's, it appears they were given to management and shareholders. [1] http://2.bp.blogspot.com/-NEITJXBoBbY/VTY54JJX8gI/AAAAAAAADiI/m_DQ4HrrylU/s1600/productivity.jpg http://2.bp.blogspot.com/-NEITJXBoBbY/VTY54JJX8gI/AAAAAAAADi...
- astazangasta 11y ago
  Political explanations are not unjustified: https://en.wikipedia.org/wiki/Lewis_F._Powell,_Jr.#Powell_Memorandum https://en.wikipedia.org/wiki/Lewis_F._Powell,_Jr.#Powell_Me...
- msandford 11y ago
  Probably because decoupling the dollar from gold meant that it was possible for nominal wages to continue to rise, but more slowly than prices. Until then if you wanted to pay people less money you had to somehow literally cut their pay. You had to make them accept a smaller number on their paycheck. After that, through the miracle of inflation, the numbers on their paychecks could continue to go up, up up! Just as long as those numbers are going up more slowly than inflation, you as a business owner are giving people a pay cut and they're not noticing it. Life is good! Me personally, I think that's the cause of a lot of the inequality.
  - pjc50 11y ago
    http://en.wikipedia.org/wiki/File:US-Inflation-by-year.png http://en.wikipedia.org/wiki/File:US-Inflation-by-year.png Inflation existed before the decoupling, and has been low in the US since the early 80s. Nominal wage rigidity is important but the gold standard does not guarantee price levels or wage levels.
    - msandford 11y ago
cm2187 11y ago
What this article suggests is possible in a world with no competition. I don't think we can say this of most of the markets. And not only there is competition but there is international competition.
FLUX-YOU 11y ago
>Actually, think surgery. Many procedures (try 400,000 a year) are robotic now. This doesn't put anyone out of a job currently and has absolutely zero in common with the ECGs, CTs, and and ultrasounds mentioned before. As far as I know, robotic cases require the same amount of personnel to perform. Typically the people you need for robotic cases have more specialized knowledge and additional training (sold by da Vinci I imagine), not to mention the technical people da Vinci needs to hire for maintenance which wasn't going to be supplied by the hospital anyway. Cab and Uber drivers should be scared of driverless vehicles because there's a proof of concept that exists, but unless something has happened in the past 2-3 years, I really don't think a proof of concept exists for automated surgeries or automated support personnel for surgeries.
deleted 11y ago
[deleted]
ChrisLomont 11y ago
If someone can provide a definition of rich and can show the majority of people meeting that definition of rich stay in that class for very long, I'd be interested in seeing the data supporting it. I have looked for years and always found the opposite whenever a dataset allowed answering the question. For any reasonable definition of rich ( * ) (by total wealth or by total income, for example), and for any dataset from which I can check the claim "the rich get richer," I have found that the majority of those in that definition of rich do not stay in that class. So it seems far more accurate to claim the rich get poorer. It's hard to find such datasets, but some that you can find that demonstrate this are (I don't care to chase them down, and my notes on it are not where I am sitting): 1) the majority born into the top quintile don't end up there (although the most likely quintile to end up in is the top). I think St. Louis Fed has studies on this. 2) the richest Americans, as measured by Forbes 400, demonstrate that the majority are first generation in that class. This you can check yourself quite easily. 3) Various tax studies show that people don't stay at the top for income. Sure, a wealthy person rarely falls to zero, but once you fix a definition of rich and see how long people in that class stay at that definition, the majority simply do not last. (*) if you define rich as the top 90% of people by wealth, which is not a very common way to define it, then the majority stay in it over time.
- socialist_coder 11y ago
  > If someone can provide a definition of rich and can show the majority of people meeting that definition of rich stay in that class for very long, I'd be interested in seeing the data supporting it. Isn't that "Capital in the Twenty-First Century"? It's proved.
  - ChrisLomont 11y ago
    The class as a whole may have increasing wealth, but that does not mean the people in the class at one snapshot in time remain there. Care to cite where in that book they make a definition of rich, and then show that exactly those people in the rich group remain there? I have not seen anyone claim the books shows this. The class of rich people is very fluid, as the above datasets show. In academic circles, there is ample criticism of that book, so much that it's considered wrong on many points by economists of all political persuasions. It's right about some things, provides a lot if good material, but is also wrong in many things, so don't just take all it says as truth without reading ample scholarly work after it's publication. Google is your friend here.
known 11y ago
Globalization is Zero sum;
xname 11y ago
Misleading as I pointed out in a previous comment ( https://news.ycombinator.com/item?id=9418512 https://news.ycombinator.com/item?id=9418512 ) "the super-rich" is different groups of people from year to year.
johnmoore 11y ago
When you have no money you work for money, when you have money it works for you. As time goes on the more it will make for you. So if you have 10,000 in a fund with 10 percent return it makes you 1,000 each year. So Over 47 years you will be a millionaire. This is then past to the second generation which then does the same then passes this to the third generation. Only once this cycle is broken will the poor and rich gap narrow.

64 points by techdog 11y ago

> It's not hard to understand what happened, although economists, as a group, seem to be incredibly dense on this point. Computer technology allowed radical increases in productivity. Not sure it's that cut and dry, nor that the rise of computers could be the cause of such a sharp inflection point. Bretton Woods ended around 1971-73...In fact the real wage of nonsupervisory workers peaked in 1973[1] [1]http://www.nytimes.com/2006/09/01/opinion/01krugman.html http://www.nytimes.com/2006/09/01/opinion/01krugman.html

jayvanguard 11y ago
That was my thought as well. The dates don't quite line up. Computers weren't widespread until the mid to late 1970s when mini-computers started to show up in smaller businesses. Even then, very small numbers of people were actually working with the computers and the paper office was still in full force. It wasn't until the 1980s that computers were ubiquitous in a way that it clearly affected the vast majority of the population.
- kevin_thibedeau 11y ago
  I would say it wasn't until the 90's that automation technology was sophisticated enough to start displacing workers. Before then it was used to do new things or amplify worker productivity. A TV remote from the 80's wasn't taking away a job from a house servant who would stand by to change the channel for you. Consider how the development of machine tools in 1800's created more opportunity for work in areas that were previously limited to skilled craftsmen.
jjoonathan 11y ago
How is ending the "gold exchange standard" connected to the decline in labor bargaining power? I buy your argument that the rollout of computers doesn't quite line up as it ought to if it were the primary factor behind wage-productivity decoupling, but I'm much less familiar with Bretton Woods so I'd appreciate any dot-connecting you can offer.
- danuker 11y ago
  Workers' savings become worthless through inflation. Voila! Wage slavery.
  - jjoonathan 11y ago
    But savings != income. I can see the argument that eroding peoples' savings would eventually reduce their bargaining power, but on the graph the effect seems almost instantaneous.
    - LanceH 11y ago
      Savings implies income if inflation doesn't eat it up (and then some).
  - leaveyou 11y ago
    It kind of makes sense: In high inflation the savers subsidize the borrowers. Who tries to save is screwed and who borrows gets an advantage. The workers are usually net savers and the businesses & the investors are borrowers. edit: my mistake; When I said 'investors' I had in mind the people who buy shares with or invest borrowed capital..
    - mtviewdave 11y ago
      >the investors are borrowers The investors are the lenders, not the borrowers. That's what the term "investor" means.
  - gesman 11y ago
    Savings in money, yes. Savings in real estate - highly unlikely.
  - mtviewdave 11y ago
    That's only true for savings in physical cash. Savings in an interest bearing instrument or account (which is where most workers actually keep their money) does not have this problem.
howeyc 11y ago
> Not sure it's that cut and dry Maybe not, but seems plausible. https://en.wikipedia.org/wiki/Calculator#1970s_to_mid-1980s https://en.wikipedia.org/wiki/Calculator#1970s_to_mid-1980s
- crimsonalucard 11y ago
  Giorgio Fischer, a gynecologist from Rome, Italy, invents liposuction in 1975. This allowed fat people to become skinny and therefore more productive. Correlation does not equal causation.
astazangasta 11y ago
Ah, the ol' "blame the robots" gambit. They took our money! Except nothing about this story flies: first, the microprocessor did not produce some magically more productive economy. First look here: http://www.intellectualtakeout.org/sites/default/files/imagecache/chart_content/chart-graph/gdp_world_capita.png http://www.intellectualtakeout.org/sites/default/files/image... You can see that world real GDP per capita did not suddenly increase after the 70s, in fact growth actually slowed a bit. The story also doesn't agree with common sense - microprocessors didn't reinvent the economy, they couldn't even deliver the "paperless office" we were promised (something particularly close to their domain). The fact is that productivity has been growing at basically the same boring pace, and microprocessors are just another boring form of automation, not a game-changer. Finally, believing this story requires us to ignore all of the other things we know about - the introduction of fiat currency, the Fed's shift to aggressive inflation-squashing (read: preventing full employment), massive consolidation of corporate ownership, financialization of the economy, enormous tax cuts for the wealthy, trade policies designed to reduce worker bargaining power, etc., etc. Are we to believe that none of these changes had an effect?
- crimsonalucard 11y ago
  The author of this article is just cocky. He thinks he has the world figured out so well he even referred to economists as "dense." Seriously, economists have actually worked out the reason behind the wealth gap, he didn't even address or critique the prevailing theory. Most likely because he doesn't even know what it is.
limeyx 11y ago
Yeah. Reading the "Intel trinity" book it was interesting to note that around this time (maybe a little later) was when the chip companies successfully petitoned the Raegan government to reduce the capital gains tax rate which was at the time higher than regular income. Wonder how much that has to do with this ... (and also how interesting how suddenly keen the "free market" fanatics were to take government money ....

sosuke 11y ago

The article title and the contents don't match up. If you're interested in how technology is and will be replacing most jobs we have now see "Humans Need Not Apply" https://www.youtube.com/watch?v=7Pq-S557XQU https://www.youtube.com/watch?v=7Pq-S557XQU I believe that we will need to make some structure that allows for people to work who want to earn more, and still support a considerable number of people who just aren't employable in the future. There don't have to be just winners and losers like this article posits, it isn't us versus them, and technology shouldn't be vilified.

ackalker 11y ago
>I believe that we will need to make some structure that allows for people to work who want to earn more, and still support a considerable number of people who just aren't employable in the future. There don't have to be just winners and losers like this article posits, it isn't us versus them, and technology shouldn't be vilified. I believe what you're hinting at is the idea of "(unconditional) basic income". http://en.wikipedia.org/wiki/Basic_income http://en.wikipedia.org/wiki/Basic_income Interest in this is rising, there are some scientific studies, and several pilot projects have been run around the world, with generally positive outcomes.

dghf 11y ago

> According to Uber, the median wage for an UberX driver working at least 40 hours a week in New York City is $90,766 a year. In San Francisco, the median wage for an UberX driver working at least 40 hours a week is $74,191. Does that sound like a plan for reducing income inequality? Or increasing it? I don't know. What are the median wages of the cab drivers that these UberX drivers are apparently putting out of work? The article doesn't say.

falsestprophet 11y ago
Uber is lying of course. Those figures are revenue. Subtract operating expenses of around 50 cents per mile and then you have real earnings or "wages."
- socialist_coder 11y ago
  Great point. Those jobs will be gone soon anyways. Uber wants nothing more than to replace human drivers with AI.
- varjag 11y ago
  And "at least 40 hours a week" is another subtle caveat. This obviously includes all the drivers putting whatever time they can into it.
- cylinder 11y ago
  Of course. And they don't earn "wages," they are contractors.
polskibus 11y ago
Is wage calculated without costs like loan repayments on the car, gas, etc.?
beat 11y ago
I really dislike that they noted how many cab drivers are being put out of work, without noting how many new jobs were created by Uber. That's a dishonest and misleading journalistic practice.

nsxwolf 11y ago

Compounding interest? Not a very compelling headline.

crimsonalucard 11y ago
dude he says computers and efficiency in labor are the cause of wealth inequality. Not the real reason: compounding interest.

dschiptsov 11y ago

Diversification.

leaveyou 11y ago

I agree that productivity & cheap energy played a major role in the devaluation of the traditional worker but I find it highly suspicious that the blogger does not consider at all another remarkable phenomena that started in 1971: "free floating fiat currency" and the tremendous increase in the money supply. This amazing currency is "free" but chooses to float only one direction: devaluation. Maybe the increase in productivity was the perfect cover for the massive increase in the money supply and the masses had no feeling of high inflation while still paying the hidden tax.

danuker 11y ago
I agree with you. The graph is too sharp to be just technology: technology was gradually developed over years - from "nearly useless" to "automate everything". What happened is this: https://en.wikipedia.org/wiki/Nixon_Shock https://en.wikipedia.org/wiki/Nixon_Shock
howeyc 11y ago
Floating currency only matters when you buy stuff from someone else who deals in a different currency. Although you sort of right in that "globalization" could be a cause. That is, "why hire more workers at high salary when I can hire dirt cheap and ship the product here?" https://en.wikipedia.org/wiki/Containerization#Toward_standards https://en.wikipedia.org/wiki/Containerization#Toward_standa... This leads me to wonder, when wages stagnated around 1970 in USA, did they start lifting in developing world?
- msandford 11y ago
  > Floating currency only matters when you buy stuff from someone else who deals in a different currency The idea that the currency floats can also mean that the buying power consistently decreases. As the purchasing power decreases if you're in cash you lose wealth, even though on paper you're maybe even growing the number a bit. If you own productive assets this is OK because you can increase the price of your outputs faster than your inputs. Meaning you can give people raises (but more slowly than the currency depreciation) and you'll still make money. If you're an employee instead of an employer, though, you're paying the higher prices before you get the raise to be able to afford them. In this way it's possible for the central bank to perform an effective (though non-obvious) redistribution of wealth.

lmg643 11y ago

Federal Reserve policies to ease interest rates and purchasing securities (via QE) have the effect of inflating asset prices. Wealthy people are often paid with assets (executive stock/option grants), work in asset-managing businesses (hedge funds/PE), and/or hold more assets than the poor (business owners). In my view, the Federal Reserve is mainly responsible for exploding income, not that technology doesn't play some role as well - but, if it wasn't for exploding asset values, VCs would not be as desperate to invest in crazy money-losing ideas to automate XYZ (causing unemployment elsewhere) that they can sell to a bigger fish. (Interested to know if the Fed is a disputed explanation.) It seems strange to me that we have such a simple root cause but complicated ideas for how to stop it, other than curtailing the Federal Reserve.

vinceguidry 11y ago

I've finally come to understand why I care so little about income inequality. Income is not the only measure of wealth, I don't even consider it the most important. I was hanging out at the bar the other day with this software developer from India. He had brought a puppy with him to the bar. While I was playing with the puppy and we were chatting, a girl comes up to us and wants to play with the puppy too. His intentions became nakedly known when he kept saying over and over that "me and the puppy are a package deal." As I was leaving to head to the restroom, he starts going on about how he's "recruiting" for a boat trip in the Caribbean. When I got back she was gone, obviously unimpressed. It got me thinking about the dating market. No woman I know has wealth anywhere on their priority list for men they want to date. That guy could have been telling the complete truth about yachting in the Caribbean and she'd have had the same reaction. Who wants to spend time with a boor even on a luxury yacht? If he'd been legit Mr. Darcy, sure, I'm sure she'd have been eating out of his hand. -------------------------------- If I wanted to, I could fairly easily jack up my yearly salary by anywhere from $25-50K by finding another job. The reason I haven't done that yet is simply that the switching costs vastly dwarf the (slight) standard of living increase that the bump would afford me. When I look to move the needle, salary just doesn't look attractive. Just having one is the big win. I hold that money is cheap right now precisely because capital is worth much less, relative to other kinds of wealth. Who is killing it right now? Apple. Samsung. Global commercial institutions. Finance has accomplished its goal of making everything fungible, now the only things left that are worth anything relative to anything else are precisely the things that finance can't replicate, like an amazing company started by an amazing genius. So, no, capital accumulation is not worrying to me, because it's obvious to me that we live in a much richer world now than we ever have. Doesn't look that way on paper, but that's because we don't have a way of representing, in the numbers, the idea that money itself isn't worth what it used to be. Capital accumulation is exactly what would happen if everyone started subconsciously realizing that cash is no longer king. They'd place their investments elsewhere, leaving some poor sap holding the big bag of worthless paper.

crimsonalucard 11y ago
You don't care in terms of looking at your own situation, sure. But as a social problem for people less fortunate then you the problem is compelling. Note that the problem is actually growing. If the gap keeps growing faster then your wage grows, it will be a problem for you too. As for your anecdotal experience about women I have to say you're wrong. No women will ever call herself a gold digger that's why they don't tell you wealth is on their priority list. The truth is, it matters a lot. See below. The content of the link kind of doesn't fit with HN, but the the evidence fits as an anecdotal counterargument to your anecdotal experience with the puppy: https://www.youtube.com/watch?v=XbYNAZxcWh4 https://www.youtube.com/watch?v=XbYNAZxcWh4

crimsonalucard 11y ago

Lots of stuff happened in the 1970s. It's requires a huge leap of logic to say that computers are the cause... after all correlation does not imply causation. You need significantly more evidence to prove that computers are the cause of the growing wage gap. There was a really famous book that was published recently called "Capital in the 21st century" by Thomas Piketty that summarizes the real reason: http://www.economist.com/blogs/economist-explains/2014/05/economist-explains http://www.economist.com/blogs/economist-explains/2014/05/ec... The book is dense, but the logic and evidence is compelling. Basically it says that you need to look at more data, because there was ALWAYS a trend towards inequality that was temporarily reversed from 1930-1975, read below: ""Capital" is built on more than a decade of research by Mr Piketty and a handful of other economists, detailing historical changes in the concentration of income and wealth. This pile of data allows Mr Piketty to sketch out the evolution of inequality since the beginning of the industrial revolution. In the 18th and 19th centuries western European society was highly unequal. Private wealth dwarfed national income and was concentrated in the hands of the rich families who sat atop a relatively rigid class structure. This system persisted even as industrialisation slowly contributed to rising wages for workers. Only the chaos of the first and second world wars and the Depression disrupted this pattern. High taxes, inflation, bankruptcies, and the growth of sprawling welfare states caused wealth to shrink dramatically, and ushered in a period in which both income and wealth were distributed in relatively egalitarian fashion. But the shocks of the early 20th century have faded and wealth is now reasserting itself. On many measures, Mr Piketty reckons, the importance of wealth in modern economies is approaching levels last seen before the first world war." The real reason for economic inequality is not technology, it is actually a feature of capitalism. In simple terms what is happening is that invested wealth grows faster for rich people then it does for poor people and this causes the gap to grow. See the quote below: "From this history, Mr Piketty derives a grand theory of capital and inequality. As a general rule wealth grows faster than economic output, he explains, a concept he captures in the expression r > g (where r is the rate of return to wealth and g is the economic growth rate). Other things being equal, faster economic growth will diminish the importance of wealth in a society, whereas slower growth will increase it (and demographic change that slows global growth will make capital more dominant). But there are no natural forces pushing against the steady concentration of wealth. Only a burst of rapid growth (from technological progress or rising population) or government intervention can be counted on to keep economies from returning to the “patrimonial capitalism” that worried Karl Marx. Mr Piketty closes the book by recommending that governments step in now, by adopting a global tax on wealth, to prevent soaring inequality contributing to economic or political instability down the road." I'm no economist but according to my knowledge this is the prevailing theory in academia today.

cowsandmilk 11y ago

His second figure[1] shows his argument is nonsense. The slope of increases in productivity remains constant on most of the graph, it just is that a certain point, wages stop going up. That is, the computer revolution did not change that slope, at least not until 1995-2005 (possibly from the internet). Until the 70's, increases in worker productivity from technology were given to the worker as pay. After the 70's, it appears they were given to management and shareholders. [1] http://2.bp.blogspot.com/-NEITJXBoBbY/VTY54JJX8gI/AAAAAAAADiI/m_DQ4HrrylU/s1600/productivity.jpg http://2.bp.blogspot.com/-NEITJXBoBbY/VTY54JJX8gI/AAAAAAAADi...

astazangasta 11y ago
Political explanations are not unjustified: https://en.wikipedia.org/wiki/Lewis_F._Powell,_Jr.#Powell_Memorandum https://en.wikipedia.org/wiki/Lewis_F._Powell,_Jr.#Powell_Me...
msandford 11y ago
Probably because decoupling the dollar from gold meant that it was possible for nominal wages to continue to rise, but more slowly than prices. Until then if you wanted to pay people less money you had to somehow literally cut their pay. You had to make them accept a smaller number on their paycheck. After that, through the miracle of inflation, the numbers on their paychecks could continue to go up, up up! Just as long as those numbers are going up more slowly than inflation, you as a business owner are giving people a pay cut and they're not noticing it. Life is good! Me personally, I think that's the cause of a lot of the inequality.
- pjc50 11y ago
  http://en.wikipedia.org/wiki/File:US-Inflation-by-year.png http://en.wikipedia.org/wiki/File:US-Inflation-by-year.png Inflation existed before the decoupling, and has been low in the US since the early 80s. Nominal wage rigidity is important but the gold standard does not guarantee price levels or wage levels.
  - msandford 11y ago

cm2187 11y ago

What this article suggests is possible in a world with no competition. I don't think we can say this of most of the markets. And not only there is competition but there is international competition.

FLUX-YOU 11y ago

>Actually, think surgery. Many procedures (try 400,000 a year) are robotic now. This doesn't put anyone out of a job currently and has absolutely zero in common with the ECGs, CTs, and and ultrasounds mentioned before. As far as I know, robotic cases require the same amount of personnel to perform. Typically the people you need for robotic cases have more specialized knowledge and additional training (sold by da Vinci I imagine), not to mention the technical people da Vinci needs to hire for maintenance which wasn't going to be supplied by the hospital anyway. Cab and Uber drivers should be scared of driverless vehicles because there's a proof of concept that exists, but unless something has happened in the past 2-3 years, I really don't think a proof of concept exists for automated surgeries or automated support personnel for surgeries.

deleted 11y ago

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ChrisLomont 11y ago

If someone can provide a definition of rich and can show the majority of people meeting that definition of rich stay in that class for very long, I'd be interested in seeing the data supporting it. I have looked for years and always found the opposite whenever a dataset allowed answering the question. For any reasonable definition of rich ( * ) (by total wealth or by total income, for example), and for any dataset from which I can check the claim "the rich get richer," I have found that the majority of those in that definition of rich do not stay in that class. So it seems far more accurate to claim the rich get poorer. It's hard to find such datasets, but some that you can find that demonstrate this are (I don't care to chase them down, and my notes on it are not where I am sitting): 1) the majority born into the top quintile don't end up there (although the most likely quintile to end up in is the top). I think St. Louis Fed has studies on this. 2) the richest Americans, as measured by Forbes 400, demonstrate that the majority are first generation in that class. This you can check yourself quite easily. 3) Various tax studies show that people don't stay at the top for income. Sure, a wealthy person rarely falls to zero, but once you fix a definition of rich and see how long people in that class stay at that definition, the majority simply do not last. (*) if you define rich as the top 90% of people by wealth, which is not a very common way to define it, then the majority stay in it over time.

socialist_coder 11y ago
> If someone can provide a definition of rich and can show the majority of people meeting that definition of rich stay in that class for very long, I'd be interested in seeing the data supporting it. Isn't that "Capital in the Twenty-First Century"? It's proved.
- ChrisLomont 11y ago
  The class as a whole may have increasing wealth, but that does not mean the people in the class at one snapshot in time remain there. Care to cite where in that book they make a definition of rich, and then show that exactly those people in the rich group remain there? I have not seen anyone claim the books shows this. The class of rich people is very fluid, as the above datasets show. In academic circles, there is ample criticism of that book, so much that it's considered wrong on many points by economists of all political persuasions. It's right about some things, provides a lot if good material, but is also wrong in many things, so don't just take all it says as truth without reading ample scholarly work after it's publication. Google is your friend here.

known 11y ago

Globalization is Zero sum;

xname 11y ago

Misleading as I pointed out in a previous comment ( https://news.ycombinator.com/item?id=9418512 https://news.ycombinator.com/item?id=9418512 ) "the super-rich" is different groups of people from year to year.

johnmoore 11y ago

When you have no money you work for money, when you have money it works for you. As time goes on the more it will make for you. So if you have 10,000 in a fund with 10 percent return it makes you 1,000 each year. So Over 47 years you will be a millionaire. This is then past to the second generation which then does the same then passes this to the third generation. Only once this cycle is broken will the poor and rich gap narrow.