If the per capita GDP of U.S. grew by 12.4%, how it happened that all classes of society were worse off in 2014 than in 2000? I don't trust that chart at all.
The growth of economic indexes is meaningless. The gains are going massively onto the people who already own capital. That's the engine of inequality.
Also... You don't "trust" that chart? You can probably calculate it yourself if you want. That chart is data. If you have any reasonable arguments against the accuracy of that data Id love to hear it.
Not trusting a chart because it's numbers seem to contradict other numbers is perfectly valid and reasonable. Your comment about gains going to people who own capital (who, incidentally, are primarily middle class homeowners) is not a refutation of it. In fact, it's completely irrelevant.
A refutation would be explaining why GDP and income don't necessarily correlate, which is more a matter of accounting identities. Specifically, GDP != income, income is merely one component of it.
Because income is still over 60% of GDP, GDP growing while income falls would mean a really dramatic growth of all other components. I can't see how it may be true.
The wage share in the United States has been consistently falling from ~64% to about 57% now. (as a % of GDP)
It's quite easy to see that even if GDP grew 12% as someone else mentioned, the change from 64% to 57% would keep incomes at approximately the same level (and perhaps even slightly lower).
> Income is not just wage. Total personal income is about 80% of GDP
Since personal income includes capital income, that's a useless figure when "wage" is being used as an (admittedly, imperfect) proxy for labor income as opposed to capital income, as the context upthread makes clear it was.
and GDP in current dollars was 18036.6 billion - http://www.bea.gov/national/xls/gdplev.xls, so 87.5% of GDP was income, and that figure has been pretty much constant over last 50 years, at never out of 75-90% range for sure. In fact, it is higher than average in the last 10 years or so - while difference is really small.
Disposable income after all taxes and including all social transfers (excluding non-monetary ones like food stamps and assisted housing) was 69.5% of the GDP, also quite typical figure which shows to tendency to fall over time, more likely to rise.
Surely that includes dividends, rents, and realized capital gains. And yet, it must have been reflected in the chart in question, if only in the top decile - while chart somehow shows incomes of all deciles falling from 2000, which is hard to believe.
No chart is ever data. A chart, like the result of an SQL query, is a projection via analysis. The analysis may be trivial, or it may not. You can hide a lot in non-trivial analysis if you want to. I don't say that the NYT did so here (and I don't say that it didn't), but it's hard to have any kind of productive discussion when something this basic is overlooked.
Numbers of this sort are usually fucking worthless because of the manipulation applied to them in accordance with political goals.
Forget the government figures and look at the market. Sure you might make a buck more an hour but the price of meat has doubled (roughly) in the past five years.
But the curious thing is we live in an era where being poor isn't as fucking horrible as it was in the past. While homeless I was able to have a smartphone, a laptop, and a couple of things of liquid nicotine. That's a sanity keeping pack right there.
I don't care if the rich guy can order custom-made marbelized sculpted horse anuses, my quality of life as a homeless man was increased precisely because rich men were assholes enough to create products general and well-built enough for many environments.
The problem of course is the almost never-ending stream of propoganda which tells people to eat sub-standard food and adopt sub-standard lifestyles. You stuff a population full of terrible diets, little personal physicality, and constant dopaminergic stimulation...
Well I suppose if I were a rich man I'd be chuckling at the peons who are literally segregating themselves physically as a separate species. It'd make breeding and consolidation a bit easier if you could tell a peon visually by their body fat ratio.
Nicotine is a lifesaver for people on the streets. The majority concern is over carcinogenic particulates that occur in certain delivery vehicles of nicotine (cigarettes). Getting cancer in the future is your least concern.
Mitigating the anxiety, fear, and lonliness by using nicotine? That's far far higher up. That's the bigger priority in the timeframe of "being fucking homeless".
except I don't see how the NYTimes can bend these numbers to serve their party of choice.
being poor in a developed country has rarely been bad and its hard for many to realize that is true. as for the price of meat the government intervention in grain pricing with regards to pushing ethanol and similar didn't help that.
the rich can weather a bad storm better than the poor but only if they are properly diversified and not relying on the boom to keep them there
I believe parent's point was that GDP is significantly decoupled from experience of the vitality in a 'main street'perspective. In China they get high GDP growth rates, but if the productive activity was building high rises where no one lives, we may need to reevaluate our notion of 'productive'.
In China high GDP growth rate is mainly translated into moving people from village to city. It is more like: lives of both city and village people is only very slowly improving (while faster than in developed countries), but there are quickly getting more of the former and less of the latter. Only those who move reap the benefits.
This process will be over soon when urbanization hits Western levels (about 10-15 years from now), then the growth rate will moderate.
>>being poor in a developed country has rarely been bad and its hard for many to realize that is true
Have you ever been poor? I understand that absolute poverty in an undeveloped country is worse, but to make a statement like you have shows that you apparently have very little understanding of the reality of poverty in a developed country.
Being merely poor sucks in an environment that is stacked to keep you down by merely ENVIRONMENTAL means. Not even propoganda.
As I said before, if you eat substandard food, don't give your body stress in manageable amounts (exercise), and are constantly bombarded by a level of stimuli unthinkable to someone from 1800...
Being "poor" or even "homeless" doesn't have to suck as bad. From experience, the whole homeless shelter (particularly within Veteran Affairs) system is ripe for disruption. You wouldn't believe how much money is wasted on absolute bullshit (coughAnyoneWithASocialWorkDegreecough) as opposed to simple procedures and steps which actually help a person to not be homeless.
Two things which persisently keep a lot of homeless people down are a lack of employable skills and a lack of supportive social networks that keep a person "in the game" so that they're not bored and smoking crack.
Except you are wrong about them creating the Technology. Most of the tech you mentioned was created in the public sector and then handed over to the private.
Same public sector could have provided you a home. You could have had a smartphone, a laptop, AND a roof.
But those smug rich assholes don't make money off that, so therefore you don't have it. You only have the droppings of gov research after it was privatized.
GDP growth and income growth are not equivalent - for example, corporate profits that aren't distributed would count towards GDP but not towards individual incomes.
GDP is a piss poor way of measuring the prosperity of a nation across all of its people.
It's heavily skewed towards the richest in society, and yet people keep harping on about GDP increases in all of these questionable free-trade agreements we keep hearing about.
Increased GDP should not be a reason for adopting anything.
GDP is a horrible measure of prosperity. If one giant corporation exchanged 2 trillion dollars with of goods with another giant corporation in some way, you'd see an uptick in GDP. Doesn't mean that 99.9999999999999% of people ever saw any change.
That especially looks incredible (if not outright impossible) that since 1990 to 2014, real GDP per capita in the U.S. has increased by 39.8%. And the chart somehow implies that average income remains approximately unchanged.
There must be something distorting that chart, like: it is a chart of household income dynamics, and the average size of household has decreased.
A - The "capitalist system", much like evolution, does not have goals. Capitalism is just people trading with each other. The USA has had a similar system for hundreds of years, where the rich have gotten richer, but the poor have also gotten richer. So blaming capitalism itself is not a good answer. What has changed within capitalism to make the results from 1776 - 1990 different from 1990 - 2014? Either this is just a temporary decrease for the bottom percentiles, or there are other factors that have caused this shift (globalization, technology, government policies, personal choices, etc).
B - Do you really want to own the business you work for? If you work at a chocolate factory, and own the chocolate factory - your entire livelyhood is tied to that chocolate factory. If the company goes under, you lose your job and your savings. Wouldn't you rather own bits and pieces of many other companies, to share in their success?
But regardless, I believe your point is that it sucks not having savings / capital. Obviously true - but how do you propose people get savings / capital? Confiscate capital from the rich to give to the poor?
Capitalism is not just people trading with each other. We invented lots of legal fictions to get where we are today, and they're pretty effective. For instance, if you contribute your capital to a corporation, you'll be rewarded with an agreed upon portion of the corporations dividends. It looks like the company is rewarding you, but it's really society. We create and enforce rules like these—private property, limited liability, etc.—because they make us more prosperous. But they're artificial. They're not laws of nature. They can have flaws.
I think people forget how big a deal this is - people who don't have it (e.g. old fashioned "joint and several liability" partnerships) can be in for a whole world of misery.
I remember hearing a BBC Radio 4 program a few years back on a financial disaster where a bank was both mutual and didn't have limited liability and collapsed, that was a disaster for anyone who had deposits at the bank (no matter how small).
'The "capitalist system", much like evolution, does not have goals'
That's true. Markets are just feedback mechanisms. Like a thermostat. It's politics and public discourse what decide what the temperature in the room should be.
You say that we should try to know what have changed within capitalism but I think that the answer is that nothing have changed.
The times we are living have a lot of similarity to the 20's and 30's and they are the opposite of the age from the end of the Second World War to the 70's when the pendulum swung to the other side.
It's just the old history of capital vs. labour, everyone of them in one side of the rope, the rope being the government.
I suppose that automation of mental work is what could make this time different.
> If you work at a chocolate factory, and own the chocolate factory - your entire livelyhood is tied to that chocolate factory. If the company goes under, you lose your job and your savings.
Not true. Owners risk no personal stake because of incorporation. The company can go bankrupt and their personal wealth will not be touched. Just take a look at Hanjin. The firm can't pay it's employees but their kids are still driving around in MacLarens.
> Owners risk no personal stake because of incorporation.
Owners per definition owns something, and if that something becomes worthless it means that the owner lost something. Thus owners always take personal risks, incorporation just means that they don't risk more than their ownership.
What changed? I believe technology changed.
Instant information exchange. Selling/buying globally with no barriers. I believe technology is changing too quickly for our system to even be able to adapt. Look at the Financial sector, for example. High-frequency trading, "insurable securities", by the time we create new laws and regulations, they've thought of 4 new ways to make money that avoid those regulations. And who is the winner from all that? Certainly not the 99.9%.
Same with the IT sector or BioMed or any other "knowledge economy" sector - we're doing great. Problem is, we need to figure out how to make the wealth really start trickling down, or we're in for rough times.
Trump and the angry pitchfork mobs are real, today, and they're pissed. The Tea Party, the Occupy movement, Brexiters, Trump supports - all feeling left behind and abandoned and betrayed and pretty angry. I sincerely hope we figure something out quick.
A. Capitalism by definition leads to concentration of wealth in hands of a few. That to me is the unwritten goal of the system. Historically wealth always consentrated in capitalistic societies.
B. Yes, if you work at a chocolate factory and at the same time own part of it you will enjoy both its success and its failure. Co-ownership and sharing both outcomes is what we don't have at most work places today.
No, I'm against this socialist/communist extreme where you take money from the rich. I am for creating mechanisms and tools that allow entire society to prosper and better itself.
The way we educate people, the way we run businesses and governments is all messed up today. It simply needs to change.
"In addition to wages, the census includes dividends, rental income and cash benefits (like Temporary Assistance for Needy Families and unemployment benefits). But it excludes noncash benefits like food stamps (which benefit the poor) and capital gains (which tend to benefit the rich)."
This is really a strange way to look at it. It is comparing the 'rich' middle class to the rest of the middle class and ignoring the extremes.
Whenever a great profit is being made, basic theory says that the market should work to push things back to normal. When that doesn't happen it is an indicator that something is off-kilter.
So, what is off-kilter here? What occupations are at the tip of the elephant's trunk? Why aren't the people riding the elephant's back pushing into that part of the market? Is it an education problem? A capital allocation problem? Regulatory capture? This is the question that needs answering.
You're confusing two different things. Theories of markets say that in the long term competition will drive profits in any given industry to a nominal level. They don't say that the people who already have capital won't be able to use that capital to keep riding the wave of large profits in industries before they hit equilibrium.
No theory of markets says that in the long term "profits" in general go to zero. Just profits in competitive industries. E.g. steel used to be very profitable. Not so much now. PCs used to be very profitable. Now profits in the PC industry are nominal. But there are always new industries that haven't hit that equilibrium yet.
Actually it's you who is confused. The return on capital is currently very low in most sectors, and people who have capital have no particular ability to keep profits high.
Income inequality is primarily about two things: earned income and capital gains from housing wealth. The latter is a non-competitive market due mainly to NIMBYs keeping supply artificially low.
Of course, this is irrelevant to a graph of market income. Market income simply reflects how scarce certain skillsets are, income is not profit.
The answer of why people aren't riding the elephants back onto the trunk might simply be because they can't - the implicit costs are too high. For example, suppose I gave you $1M to spend. Could you turn a nurse into a top trader, managing a $50M book? What if I gave you $2M?
One very interesting theory about why this increase is happening now is the headhunter theory: historically, oligopolistic corporations were keeping pay down for the highest productivity employees. Now, as the market has become more competitive, executives/traders/high end developers/etc are better able to capture a larger piece of their true economic value.
Can income be considered a type of profit in this context?
I'm not an expert, but at first blush the term 'implicit costs' seems to be so much handwaving. I'm sure there is something concrete there somewhere but to just say 'Well these top earners naturally far outstrip other people and maintain that position over long periods of time without anyone jumping onto their boat because of implicit costs' seems a bit too magical to be useful.
No, income is not profit. It's just the price of a good.
There is no economic law that the price of gold should fall to the same price as other metals. Rather, economics says that if gold mining is a competitive industry, gold production will increase until the economic profit on producing more drops to the same level as economic profits in all other productive directions.
Concretely, to understand why top earners outstrip others, it's important to figure out who they are. A lot of them are traders. A trader earning $20M/year makes that much because his trading desk produces $200M/year for the hedge fund he works for, and because no one else can.
Now, suppose you want to take a nurse making $40k/year and bring her up to the trader's level. Suppose I give you $500k. Do you think you can do it? Concretely speaking, and without handwaving, what would you spend the money on? A harvard education (using up $240k already) is far from sufficient.
Forget even bringing her into the 0.1%. How much money would you need to spend, and what would you spend it on, for her to reliably become a mid-level developer earning $200k/year?
The implicit costs are hard to pin down. But when you ask how to move a specific person into a specific 1% or even 10% job, it suddenly becomes a lot clearer why this is hard.
>Now, suppose you want to take a nurse making $40k/year and bring her up to the trader's level. Suppose I give you $500k. Do you think you can do it? Concretely speaking, and without handwaving, what would you spend the money on? A harvard education (using up $240k already) is far from sufficient.
First, I'd spend a sizable amount attracting and testing nurses to find one with sufficient mathematical aptitude and motivation. We're not really talking about any random person from a population but whether a particular type of person exists in that group.
If I could catch a person who would become a nurse earlier (assuming some aptitude and motivation in the desired direction) and train them to be a trader or a developer it could be cheaper -- not so much wasted time learning skills that would not be applicable.
You seem to assume that people end up fulfilling their full earning aptitude and, if they are at the 'level' of a nurse, they are obviously not cut out for something more rarefied.
You might be right, but I don't think it is wise to assume the end result, simply because it is the result that occurred, is proof that is the optimal result.
If we assume that $20M/year traders are the ones skewing the data on the right side of the graph, the question is what is keeping others from entering that field and competing?
I really don't think 'raw aptitude' is the ultimate answer. I don't have an answer, and that is my point -- we need to explore why such a deep moat exists and what we can do to drain it. If there are implicit costs that reduce the economic profit so that it is so divorced from accounting profit, what are they and can they be reduced? I don't think we can assume that all is as it should be and move on.
You seem to assume that people end up fulfilling their full earning aptitude and, if they are at the 'level' of a nurse, they are obviously not cut out for something more rarefied.
I'm not assuming this at all. I'm just trying to illustrate that implicit costs are real, you just can't necessarily see what they are without delving into very concrete programs. E.g., running your gigantic screening program, the training program for folks with high aptitude who pass the screening, the ones who flunk out of the training program, etc.
If you recall, tptacek and patio11 recently started a startup (starfighter) trying to do something along those lines. They've now moved on to something else.
Now I don't think every single person with aptitude is already there - Zoho University demonstrates this pretty well. But I think exploiting the high hanging fruit is a lot harder than you think.
If we assume that $20M/year traders are the ones skewing the data on the right side of the graph, the question is what is keeping others from entering that field and competing?
Nothing. Trading is one of the most open, meritocratic and low barrier to entry fields out there. Just google how easy it is to get a Robin Hood or Interactive Brokers account [1]. In terms of barrier to entry, it's far lower than something like building a SAAS app.
The only thing that prevents more people from doing it is the fact that predicting the future is hard.
[1] I have an IB account, it took a couple of weeks to set everything up. I'm good at predicting the future, e.g. here's me publicly talking up my book (currently up 15%): https://twitter.com/stucchio/status/747493530277294082 But I'm not $20M/year good.
>Nothing. Trading is one of the most open, meritocratic and low barrier to entry fields out there. Just google how easy it is to get a Robin Hood or Interactive Brokers account [1]. In terms of barrier to entry, it's far lower than something like building a SAAS app.
That gave me a chuckle (though I suspect you're trying to bait me -- you seem to have a background in finance and would know this all very well). The one obvious barrier to entry is access to capital. It is a lot easier (or at least possible) to play with different strategies with more than less. Even a brilliant trader would have a hard time playing different strategies with, say, $10K. Or even $100K. They'd quickly hit a bad play or a down trade and lose beyond the capacity to absorb with a chance of bouncing back. Game over.
But the capital is out there so that's not really the issue. And that capital is paying traders $20/mil per year. That is what I mean by competing...not competing on trading talent but competing for the jobs. Its not like hedge funds are scanning Robin Hood for diamond in the rough trading talent...if they did, it would be a mistake since they would be nearly guaranteed to find people who do very well up until they point they hire them then they crash back to earth through regression to the mean.
>The only thing that prevents more people from doing it is the fact that predicting the future is hard.
I doubt that is the reason. Predicting the future is hard for everyone, including top-flight traders, as has been shown year after year, study after study. What is easier, and a skill (though, granted, a challenging skill to master and one that is still, even after some level of mastery, subject to more luck than most people are comfortable with), is using all of the tools at one's disposal to win more than you lose. Or rely on luck. That works sometimes, too -- for a while.
I'm just saying -- if there's a great amount of money being reaped year after year, decade after decade, the system surrounding that activity is probably worth a careful look.
The one obvious barrier to entry is access to capital. It is a lot easier (or at least possible) to play with different strategies with more than less. Even a brilliant trader would have a hard time playing different strategies with, say, $10K. Or even $100K. They'd quickly hit a bad play or a down trade and lose beyond the capacity to absorb with a chance of bouncing back. Game over.
This is completely backwards. Every strategy has a capacity and most of them have a very low capacity.
I'm currently just a hobbyist trader. I've got a strategy or two, but I can't even put all of my (software engineer level) savings into it - additional marginal dollars will lose money. My current strategy never does more than pick off the top level of the order book - it can't, and if I try my additional dollars will lose money according to my simulations.
A bigger strategy might need to not just buy from deeper in the order book, but actually make repeated purchases and face market impact. That's way harder. The book "Flash Boys" is all about how market makers try to give you and me a better price than big players trying to do this.
The only strategy I run which has enough capacity for me to really put money in it is my "reason from first principles to figure out when everyone has gone insane" strategy. E.g., that's what made me a bunch of money from Brexit. But that's a pretty risky strategy involving only a few big bets/year. (Next one will be about $50-100k on "stop overreacting, Trump won't be that bad", conditional on him winning the election.)
Trading a big book is vastly harder, not easier, than trading a small one.
Its not like hedge funds are scanning Robin Hood for diamond in the rough trading talent...if they did, it would be a mistake since they would be nearly guaranteed to find people who do very well up until they point they hire them then they crash back to earth through regression to the mean.
I'm confused. I'm arguing that top talent is uncommon and hard to find. Your tone suggests you are disagreeing with me, yet you just agreed. Can you clarify?
Let's take the example analog of poker. There are good poker players. They win more than they lose over relatively large time frames.
That is not talent. That is skill. It is a skill that can be learned. A large part of the skill of poker is calculation. There are people who back into that skill by sheer volume of playing -- they develop an intuition based on facts repeated over and over more or less haphazardly. This important probabilistic intuition can be greatly expedited with some mathematical training. It is possible to learn this skill. It is also possible to learn some rudimentary information and game theory to help with those aspects of poker. All teachable skills.
There are soft skills that are also teachable like controlling one's emotions when dealing with large amounts of money.
If I wanted to go out and find a team of poker players to bankroll, I might go and find people who tend to win (longer time frame observation under similar high stakes conditions would be preferred) but I would add the additional filter of testing their skill in those areas.
This is opposed to observing a handful of low stakes games and picking those that do best and running with that group.
That would be a mistake. I might get some of the same people. But I would also sweep up people who merely got lucky. I'd also miss some people that got unlucky.
Picking stock traders from their performance on their Robin Hood accounts would be a similar mistake.
Unfortunately, at least in the software industry, not everyone can do the work. There is a barrier to entry that may be grounded in innate ability and is exacerbated by educational inequality. As evidence of the former, I would point to all of the first-year engineering students who drop their major because they struggle with the work. These people have same educational opportunities at the collegiate levels as those who don't drop. There may be inequalities with primary and secondary educational opportunities that follow a student into college, but this is not the problem in all cases.
In the terminology of Michael Porter, this is an almost perfect moat: it limits barrier to entry, it's widely accepted by those who must pay higher prices as a result, and it costs little to enforce. Contrast the latter point with medical careers, whose practitioners must pay much in time and money to dig an institutional moat that prevents competitors from entering their employment market.
If software is indeed eating the world, this problem will only get worse.
Some other charts to explore this stuff. But man, economic statistics are hard - a lot of the fine print can really affect the results (household vs individual income, labor force participation, etc):
Can we talk about what a fucking terrible visualization the elephant chart is? We often note how useless "fastest growing" is, because it is easy to get large changes when you have a small denominator. So income can grow worldwide for the bottom by 100% and only add a few dollars to their wealth. Meanwhile the top 1℅ might add 25% to their income at millions of dollars.
This is a chart designed to make us feel good about poor people getting a pittance. Meanwhile the top 100 people in the world have more wealth than the bottom fifty percent. We need growth of tens of thousands of percent at the bottom for decades to move forward.
Marginal utility of money decreases, which means these "pennies" at the hands of literally billions of poor make a whole world of difference to them.
The American Middle Class has the right to be angry about their stagnation, but it's undeniable that the world is better for most people if you compare it to the 90's and early 00's.
However, my point is that those "pennies" could easily have been "dollars" instead at the cost of a fraction of the top of the income distribution, and this graph is celebrating "pennies" for the poor as a victory and masking millions or billions flowing to the wealthiest.
What harm is there in the richest people being richer? If they hoard their money, they're temporarily increasing the value of everyone else's. If they spend it, they're trickling it back down to the poor.
Easy: they appropriate a greater portion of humanity's productivity towards themselves. Wealth is power, the ability to express desire and recruit human effort to its fulfillment. When the rich have all the money, the poor cannot express their own desires and end up just working to satisfy the ends of the rich.
Can you give a concrete example? Something that I can't do now with all these super rich people around that I could have done when they weren't so much richer than me. If I'm competing with them to buy a Picasso, sure, they'll outbid me, but what about things I actually want to do, like buy equipment for my hobbies or go travelling. Are they making that more expensive?
Someone living on $2/day (the generally accepted figure for extreme poverty) is living on about $730 per year. A single year of 10,000% growth would get that person to an annual income of $73,000 which would be well into the global 1%.
Annual growth of 10,000% for even a single decade would give that person an annual income of:
$73,000,000,000,000,000,000,000
That's 73 sextillion dollars. For reference Gross World Product is around 100 trillion.
Yeah, I didn't think that out very carefully, obviously exponential growth at any substantial rate would have that kind of effect. The perils of composing text in the loo. My main point still stands, though...
I don't think it does to be honest. Income growth for the world's poorest has been astonishing over the last several decades. The gains are very real and very meaningful.
In what terms are they "very meaningful"? There are still hundreds of millions of people living in slums in cities around the world; if these people now survive on $2 instead of $1, why is this "very meaningful"?
What are you talking about? The difference between $2 and $1 is extremely meaningful. $1 a day means that you can barely afford enough rice to survive, at $2 you can start diversify your food and maybe save up for better clothes.
I mean, I think it's informative even if percentage results are misleading in some ways. In particular, it's relevant because growth is a good representation of status relative to local prices.
If I remember, a tantalum miner in the DR Congo makes several dollars a day - a bit above the $2/day threshold, but then you have to correct for extortion/pay-to-work. In those Congo mining towns, buying a hot dinner costs around $0.05.
So for those miners, seeing your income double is a hell of a big deal, even if it's only to $4/day. Getting $10/hour wouldn't be a big raise, it would be bizarre hyperinflation.
To be clear, I don't think this means $4/day is a good outcome. Even with low local prices, it's still a pittance and the people getting it are living horribly in global terms. I share your annoyance with "extreme poverty is being eradicated!" stories, because they imply movement to a good position, rather than a less atrocious one.
But for the sake of analysis like this, I think percentage change is still a useful way to go. Raw dollars just means that everything at the bottom is effectively zero, while growth reveals interesting effects like the 5th percentile seeing near-zero gain while the 10th sees real growth.
I find these type of posts on HN to be curious things. Clearly, there's lots of interest in the subject and desire to change things. And, most HN readers are highly educated and many are even high-income (i.e. have position to affect real change). But, I never see posts advertising ways to take real action.
I love you guys, but making your cohorts know that you're aware and sympathetic of the cause only feels good. Let's see some posts that help organize and activate. Let's set some achievable, tangible goals and do something.
I can appreciate the general sentiment, but at least for this post specifically I'm not sure I agree.
The subtle aspects of these two charts are really interesting. Like, the only non-rich group to see income gains in the US is the ~15th percentile group? That's striking, and deserves some consideration. (At a guess, EITC and Clinton's work-for-benefits programs have helped the employed-near-minimum-wage cohort, but not the very poor.) The 2000-2014 numbers are similarly interesting - we see that the ~90th percentile (e.g. surgeons) was insulated from the crash better than the middle class or the very rich, but that the very rich have rebounded completely.
So yes, signaling is different from actual action, but I'm filing this one under 'education'. For me at least, I'm interested more by the subtleties than by the basic restatement of "this is an issue".
I feel like I am educated and fairly high income (will clear $200k this year) but I honestly feel like I have no way to affect change.
Contacting representatives yields nothing but form responses, protesting has had no real effect. Volunteer work and charitable donations are about all I seem to be able to do and that's not on any appreciable scale.
I honestly feel like I have no way to cause anyone to make changes outside of voting. Which, to be honest even when I vote I feel like my voice is not heard.
"In North Dakota, in the heart of shale mining country, it made everyone richer."
Well, mostly on the western side of the state, but that was the poorer side to begin with. It did make for some problems with some folks on fixed incomes.
Income inequality will continue to grow as technology lets us produce tremendous amounts of value with comparably small amounts of employees. Said value is often not accounted for in graphs like these so we can't really know if people are better off today than 20 years ago. I mean, would you rather live today with cheap internet, awesome computer and more free content on the internet than you can ever consume or would you want to live without those things with 10% higher inflation adjusted wage 20 years ago? I know what I would choose, hence I would say that the middle class has gained a lot.
The nice things about those things is that they are wealth agnostic as well. Bill Gates doesn't have better internet than me, nor does he have a better personal computer, better youtube, better facebook, better internet search etc. All of those are extremely valuable and are spread evenly between almost everyone in the west.
Well, the glass half full is that California's drought will soon be fixed by the tears of everyone in SV who's upset that, despite all their, intelligence, big data and economic prodding by the government, the middle class in those "backwards, flyover states" did better.
On a more serious note, the pattern I saw here was coastline = bad.
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[ 3.2 ms ] story [ 157 ms ] threadAlso... You don't "trust" that chart? You can probably calculate it yourself if you want. That chart is data. If you have any reasonable arguments against the accuracy of that data Id love to hear it.
A refutation would be explaining why GDP and income don't necessarily correlate, which is more a matter of accounting identities. Specifically, GDP != income, income is merely one component of it.
It's quite easy to see that even if GDP grew 12% as someone else mentioned, the change from 64% to 57% would keep incomes at approximately the same level (and perhaps even slightly lower).
Since personal income includes capital income, that's a useless figure when "wage" is being used as an (admittedly, imperfect) proxy for labor income as opposed to capital income, as the context upthread makes clear it was.
Wage share is an economically accepted term, with data from BLS behind it.
You literally made up some number and said "it doesn't change much over time".
You're going to need to provide a source for that 80%.
http://www.bea.gov/newsreleases/national/pi/2016/pdf/pi0716....
and GDP in current dollars was 18036.6 billion - http://www.bea.gov/national/xls/gdplev.xls, so 87.5% of GDP was income, and that figure has been pretty much constant over last 50 years, at never out of 75-90% range for sure. In fact, it is higher than average in the last 10 years or so - while difference is really small.
Disposable income after all taxes and including all social transfers (excluding non-monetary ones like food stamps and assisted housing) was 69.5% of the GDP, also quite typical figure which shows to tendency to fall over time, more likely to rise.
Surely that includes dividends, rents, and realized capital gains. And yet, it must have been reflected in the chart in question, if only in the top decile - while chart somehow shows incomes of all deciles falling from 2000, which is hard to believe.
This is a main point in Capital in the 21st Century by Thomas Piketty. He explains the capital/income ratio and its effects on the economy. Decent write up here: http://www.robertdkirkby.com/blog/2015/summary-of-piketty-i/
No chart is ever data. A chart, like the result of an SQL query, is a projection via analysis. The analysis may be trivial, or it may not. You can hide a lot in non-trivial analysis if you want to. I don't say that the NYT did so here (and I don't say that it didn't), but it's hard to have any kind of productive discussion when something this basic is overlooked.
Where did you get that number? No way that's right. Here are the numbers from the Fed: https://fred.stlouisfed.org/series/A191RP1Q027SBEA
Annual per capita GDP growth never exceeded 7% from 2000-2014.
https://fred.stlouisfed.org/series/A939RX0Q048SBEA
Real GDP/capita = $43,935 in Q1 2000, $50,549 in Q4 2014. That's 15% growth.
Your own numbers don't disagree with this if you integrate them and divide by population.
The middle class in America shrank considerably following 2009.
Forget the government figures and look at the market. Sure you might make a buck more an hour but the price of meat has doubled (roughly) in the past five years.
But the curious thing is we live in an era where being poor isn't as fucking horrible as it was in the past. While homeless I was able to have a smartphone, a laptop, and a couple of things of liquid nicotine. That's a sanity keeping pack right there.
I don't care if the rich guy can order custom-made marbelized sculpted horse anuses, my quality of life as a homeless man was increased precisely because rich men were assholes enough to create products general and well-built enough for many environments.
The problem of course is the almost never-ending stream of propoganda which tells people to eat sub-standard food and adopt sub-standard lifestyles. You stuff a population full of terrible diets, little personal physicality, and constant dopaminergic stimulation...
Well I suppose if I were a rich man I'd be chuckling at the peons who are literally segregating themselves physically as a separate species. It'd make breeding and consolidation a bit easier if you could tell a peon visually by their body fat ratio.
Mitigating the anxiety, fear, and lonliness by using nicotine? That's far far higher up. That's the bigger priority in the timeframe of "being fucking homeless".
being poor in a developed country has rarely been bad and its hard for many to realize that is true. as for the price of meat the government intervention in grain pricing with regards to pushing ethanol and similar didn't help that.
the rich can weather a bad storm better than the poor but only if they are properly diversified and not relying on the boom to keep them there
This process will be over soon when urbanization hits Western levels (about 10-15 years from now), then the growth rate will moderate.
Have you ever been poor? I understand that absolute poverty in an undeveloped country is worse, but to make a statement like you have shows that you apparently have very little understanding of the reality of poverty in a developed country.
As I said before, if you eat substandard food, don't give your body stress in manageable amounts (exercise), and are constantly bombarded by a level of stimuli unthinkable to someone from 1800...
Being "poor" or even "homeless" doesn't have to suck as bad. From experience, the whole homeless shelter (particularly within Veteran Affairs) system is ripe for disruption. You wouldn't believe how much money is wasted on absolute bullshit (coughAnyoneWithASocialWorkDegreecough) as opposed to simple procedures and steps which actually help a person to not be homeless.
Two things which persisently keep a lot of homeless people down are a lack of employable skills and a lack of supportive social networks that keep a person "in the game" so that they're not bored and smoking crack.
Same public sector could have provided you a home. You could have had a smartphone, a laptop, AND a roof.
But those smug rich assholes don't make money off that, so therefore you don't have it. You only have the droppings of gov research after it was privatized.
It's heavily skewed towards the richest in society, and yet people keep harping on about GDP increases in all of these questionable free-trade agreements we keep hearing about.
Increased GDP should not be a reason for adopting anything.
There must be something distorting that chart, like: it is a chart of household income dynamics, and the average size of household has decreased.
We can talk all we want but we are all disposable material, unless we own the business we work for.
How many people in this country ( middle class included) are 3-6 months away from being on the street if job suddenly disappeared?
B - Do you really want to own the business you work for? If you work at a chocolate factory, and own the chocolate factory - your entire livelyhood is tied to that chocolate factory. If the company goes under, you lose your job and your savings. Wouldn't you rather own bits and pieces of many other companies, to share in their success?
But regardless, I believe your point is that it sucks not having savings / capital. Obviously true - but how do you propose people get savings / capital? Confiscate capital from the rich to give to the poor?
I think people forget how big a deal this is - people who don't have it (e.g. old fashioned "joint and several liability" partnerships) can be in for a whole world of misery.
I remember hearing a BBC Radio 4 program a few years back on a financial disaster where a bank was both mutual and didn't have limited liability and collapsed, that was a disaster for anyone who had deposits at the bank (no matter how small).
That's true. Markets are just feedback mechanisms. Like a thermostat. It's politics and public discourse what decide what the temperature in the room should be.
You say that we should try to know what have changed within capitalism but I think that the answer is that nothing have changed.
The times we are living have a lot of similarity to the 20's and 30's and they are the opposite of the age from the end of the Second World War to the 70's when the pendulum swung to the other side.
It's just the old history of capital vs. labour, everyone of them in one side of the rope, the rope being the government.
I suppose that automation of mental work is what could make this time different.
Not true. Owners risk no personal stake because of incorporation. The company can go bankrupt and their personal wealth will not be touched. Just take a look at Hanjin. The firm can't pay it's employees but their kids are still driving around in MacLarens.
Owners per definition owns something, and if that something becomes worthless it means that the owner lost something. Thus owners always take personal risks, incorporation just means that they don't risk more than their ownership.
Same with the IT sector or BioMed or any other "knowledge economy" sector - we're doing great. Problem is, we need to figure out how to make the wealth really start trickling down, or we're in for rough times.
Trump and the angry pitchfork mobs are real, today, and they're pissed. The Tea Party, the Occupy movement, Brexiters, Trump supports - all feeling left behind and abandoned and betrayed and pretty angry. I sincerely hope we figure something out quick.
B. Yes, if you work at a chocolate factory and at the same time own part of it you will enjoy both its success and its failure. Co-ownership and sharing both outcomes is what we don't have at most work places today.
No, I'm against this socialist/communist extreme where you take money from the rich. I am for creating mechanisms and tools that allow entire society to prosper and better itself. The way we educate people, the way we run businesses and governments is all messed up today. It simply needs to change.
This is really a strange way to look at it. It is comparing the 'rich' middle class to the rest of the middle class and ignoring the extremes.
Whenever a great profit is being made, basic theory says that the market should work to push things back to normal. When that doesn't happen it is an indicator that something is off-kilter.
So, what is off-kilter here? What occupations are at the tip of the elephant's trunk? Why aren't the people riding the elephant's back pushing into that part of the market? Is it an education problem? A capital allocation problem? Regulatory capture? This is the question that needs answering.
Seems like this has been trending since at least the 80's.
How long does/should the wave of large profits last until we recognize it as a symptom of a problem?
Income inequality is primarily about two things: earned income and capital gains from housing wealth. The latter is a non-competitive market due mainly to NIMBYs keeping supply artificially low.
http://www.investopedia.com/ask/answers/033015/what-differen...
Of course, this is irrelevant to a graph of market income. Market income simply reflects how scarce certain skillsets are, income is not profit.
The answer of why people aren't riding the elephants back onto the trunk might simply be because they can't - the implicit costs are too high. For example, suppose I gave you $1M to spend. Could you turn a nurse into a top trader, managing a $50M book? What if I gave you $2M?
One very interesting theory about why this increase is happening now is the headhunter theory: historically, oligopolistic corporations were keeping pay down for the highest productivity employees. Now, as the market has become more competitive, executives/traders/high end developers/etc are better able to capture a larger piece of their true economic value.
https://editorialexpress.com/cgi-bin/conference/download.cgi...
I'm not an expert, but at first blush the term 'implicit costs' seems to be so much handwaving. I'm sure there is something concrete there somewhere but to just say 'Well these top earners naturally far outstrip other people and maintain that position over long periods of time without anyone jumping onto their boat because of implicit costs' seems a bit too magical to be useful.
There is no economic law that the price of gold should fall to the same price as other metals. Rather, economics says that if gold mining is a competitive industry, gold production will increase until the economic profit on producing more drops to the same level as economic profits in all other productive directions.
Concretely, to understand why top earners outstrip others, it's important to figure out who they are. A lot of them are traders. A trader earning $20M/year makes that much because his trading desk produces $200M/year for the hedge fund he works for, and because no one else can.
Now, suppose you want to take a nurse making $40k/year and bring her up to the trader's level. Suppose I give you $500k. Do you think you can do it? Concretely speaking, and without handwaving, what would you spend the money on? A harvard education (using up $240k already) is far from sufficient.
Forget even bringing her into the 0.1%. How much money would you need to spend, and what would you spend it on, for her to reliably become a mid-level developer earning $200k/year?
The implicit costs are hard to pin down. But when you ask how to move a specific person into a specific 1% or even 10% job, it suddenly becomes a lot clearer why this is hard.
First, I'd spend a sizable amount attracting and testing nurses to find one with sufficient mathematical aptitude and motivation. We're not really talking about any random person from a population but whether a particular type of person exists in that group.
If I could catch a person who would become a nurse earlier (assuming some aptitude and motivation in the desired direction) and train them to be a trader or a developer it could be cheaper -- not so much wasted time learning skills that would not be applicable.
You seem to assume that people end up fulfilling their full earning aptitude and, if they are at the 'level' of a nurse, they are obviously not cut out for something more rarefied.
You might be right, but I don't think it is wise to assume the end result, simply because it is the result that occurred, is proof that is the optimal result.
If we assume that $20M/year traders are the ones skewing the data on the right side of the graph, the question is what is keeping others from entering that field and competing?
I really don't think 'raw aptitude' is the ultimate answer. I don't have an answer, and that is my point -- we need to explore why such a deep moat exists and what we can do to drain it. If there are implicit costs that reduce the economic profit so that it is so divorced from accounting profit, what are they and can they be reduced? I don't think we can assume that all is as it should be and move on.
I'm not assuming this at all. I'm just trying to illustrate that implicit costs are real, you just can't necessarily see what they are without delving into very concrete programs. E.g., running your gigantic screening program, the training program for folks with high aptitude who pass the screening, the ones who flunk out of the training program, etc.
If you recall, tptacek and patio11 recently started a startup (starfighter) trying to do something along those lines. They've now moved on to something else.
Now I don't think every single person with aptitude is already there - Zoho University demonstrates this pretty well. But I think exploiting the high hanging fruit is a lot harder than you think.
If we assume that $20M/year traders are the ones skewing the data on the right side of the graph, the question is what is keeping others from entering that field and competing?
Nothing. Trading is one of the most open, meritocratic and low barrier to entry fields out there. Just google how easy it is to get a Robin Hood or Interactive Brokers account [1]. In terms of barrier to entry, it's far lower than something like building a SAAS app.
The only thing that prevents more people from doing it is the fact that predicting the future is hard.
[1] I have an IB account, it took a couple of weeks to set everything up. I'm good at predicting the future, e.g. here's me publicly talking up my book (currently up 15%): https://twitter.com/stucchio/status/747493530277294082 But I'm not $20M/year good.
That gave me a chuckle (though I suspect you're trying to bait me -- you seem to have a background in finance and would know this all very well). The one obvious barrier to entry is access to capital. It is a lot easier (or at least possible) to play with different strategies with more than less. Even a brilliant trader would have a hard time playing different strategies with, say, $10K. Or even $100K. They'd quickly hit a bad play or a down trade and lose beyond the capacity to absorb with a chance of bouncing back. Game over.
But the capital is out there so that's not really the issue. And that capital is paying traders $20/mil per year. That is what I mean by competing...not competing on trading talent but competing for the jobs. Its not like hedge funds are scanning Robin Hood for diamond in the rough trading talent...if they did, it would be a mistake since they would be nearly guaranteed to find people who do very well up until they point they hire them then they crash back to earth through regression to the mean.
>The only thing that prevents more people from doing it is the fact that predicting the future is hard.
I doubt that is the reason. Predicting the future is hard for everyone, including top-flight traders, as has been shown year after year, study after study. What is easier, and a skill (though, granted, a challenging skill to master and one that is still, even after some level of mastery, subject to more luck than most people are comfortable with), is using all of the tools at one's disposal to win more than you lose. Or rely on luck. That works sometimes, too -- for a while.
I'm just saying -- if there's a great amount of money being reaped year after year, decade after decade, the system surrounding that activity is probably worth a careful look.
This is completely backwards. Every strategy has a capacity and most of them have a very low capacity.
I'm currently just a hobbyist trader. I've got a strategy or two, but I can't even put all of my (software engineer level) savings into it - additional marginal dollars will lose money. My current strategy never does more than pick off the top level of the order book - it can't, and if I try my additional dollars will lose money according to my simulations.
A bigger strategy might need to not just buy from deeper in the order book, but actually make repeated purchases and face market impact. That's way harder. The book "Flash Boys" is all about how market makers try to give you and me a better price than big players trying to do this.
The only strategy I run which has enough capacity for me to really put money in it is my "reason from first principles to figure out when everyone has gone insane" strategy. E.g., that's what made me a bunch of money from Brexit. But that's a pretty risky strategy involving only a few big bets/year. (Next one will be about $50-100k on "stop overreacting, Trump won't be that bad", conditional on him winning the election.)
Trading a big book is vastly harder, not easier, than trading a small one.
Its not like hedge funds are scanning Robin Hood for diamond in the rough trading talent...if they did, it would be a mistake since they would be nearly guaranteed to find people who do very well up until they point they hire them then they crash back to earth through regression to the mean.
I'm confused. I'm arguing that top talent is uncommon and hard to find. Your tone suggests you are disagreeing with me, yet you just agreed. Can you clarify?
That is not talent. That is skill. It is a skill that can be learned. A large part of the skill of poker is calculation. There are people who back into that skill by sheer volume of playing -- they develop an intuition based on facts repeated over and over more or less haphazardly. This important probabilistic intuition can be greatly expedited with some mathematical training. It is possible to learn this skill. It is also possible to learn some rudimentary information and game theory to help with those aspects of poker. All teachable skills.
There are soft skills that are also teachable like controlling one's emotions when dealing with large amounts of money.
If I wanted to go out and find a team of poker players to bankroll, I might go and find people who tend to win (longer time frame observation under similar high stakes conditions would be preferred) but I would add the additional filter of testing their skill in those areas.
This is opposed to observing a handful of low stakes games and picking those that do best and running with that group.
That would be a mistake. I might get some of the same people. But I would also sweep up people who merely got lucky. I'd also miss some people that got unlucky.
Picking stock traders from their performance on their Robin Hood accounts would be a similar mistake.
It is subtle, I know, but critical.
Unfortunately, at least in the software industry, not everyone can do the work. There is a barrier to entry that may be grounded in innate ability and is exacerbated by educational inequality. As evidence of the former, I would point to all of the first-year engineering students who drop their major because they struggle with the work. These people have same educational opportunities at the collegiate levels as those who don't drop. There may be inequalities with primary and secondary educational opportunities that follow a student into college, but this is not the problem in all cases.
In the terminology of Michael Porter, this is an almost perfect moat: it limits barrier to entry, it's widely accepted by those who must pay higher prices as a result, and it costs little to enforce. Contrast the latter point with medical careers, whose practitioners must pay much in time and money to dig an institutional moat that prevents competitors from entering their employment market.
If software is indeed eating the world, this problem will only get worse.
Filter by years to see growth: http://stateofworkingamerica.org/who-gains/#/?start=1995&end...
Job growth by job type: http://www.nytimes.com/interactive/2014/06/05/upshot/how-the...
Income by demographic: http://www.nytimes.com/interactive/2015/01/25/upshot/shrinki...
Percentile income distribution: http://blogs.wsj.com/economics/2016/07/01/the-99-got-a-raise...
This is a chart designed to make us feel good about poor people getting a pittance. Meanwhile the top 100 people in the world have more wealth than the bottom fifty percent. We need growth of tens of thousands of percent at the bottom for decades to move forward.
The American Middle Class has the right to be angry about their stagnation, but it's undeniable that the world is better for most people if you compare it to the 90's and early 00's.
Annual growth of 10,000% for even a single decade would give that person an annual income of:
$73,000,000,000,000,000,000,000
That's 73 sextillion dollars. For reference Gross World Product is around 100 trillion.
I think you're setting the bar a little high!
If I remember, a tantalum miner in the DR Congo makes several dollars a day - a bit above the $2/day threshold, but then you have to correct for extortion/pay-to-work. In those Congo mining towns, buying a hot dinner costs around $0.05.
So for those miners, seeing your income double is a hell of a big deal, even if it's only to $4/day. Getting $10/hour wouldn't be a big raise, it would be bizarre hyperinflation.
To be clear, I don't think this means $4/day is a good outcome. Even with low local prices, it's still a pittance and the people getting it are living horribly in global terms. I share your annoyance with "extreme poverty is being eradicated!" stories, because they imply movement to a good position, rather than a less atrocious one.
But for the sake of analysis like this, I think percentage change is still a useful way to go. Raw dollars just means that everything at the bottom is effectively zero, while growth reveals interesting effects like the 5th percentile seeing near-zero gain while the 10th sees real growth.
I love you guys, but making your cohorts know that you're aware and sympathetic of the cause only feels good. Let's see some posts that help organize and activate. Let's set some achievable, tangible goals and do something.
The subtle aspects of these two charts are really interesting. Like, the only non-rich group to see income gains in the US is the ~15th percentile group? That's striking, and deserves some consideration. (At a guess, EITC and Clinton's work-for-benefits programs have helped the employed-near-minimum-wage cohort, but not the very poor.) The 2000-2014 numbers are similarly interesting - we see that the ~90th percentile (e.g. surgeons) was insulated from the crash better than the middle class or the very rich, but that the very rich have rebounded completely.
So yes, signaling is different from actual action, but I'm filing this one under 'education'. For me at least, I'm interested more by the subtleties than by the basic restatement of "this is an issue".
Contacting representatives yields nothing but form responses, protesting has had no real effect. Volunteer work and charitable donations are about all I seem to be able to do and that's not on any appreciable scale.
I honestly feel like I have no way to cause anyone to make changes outside of voting. Which, to be honest even when I vote I feel like my voice is not heard.
Well, mostly on the western side of the state, but that was the poorer side to begin with. It did make for some problems with some folks on fixed incomes.
The nice things about those things is that they are wealth agnostic as well. Bill Gates doesn't have better internet than me, nor does he have a better personal computer, better youtube, better facebook, better internet search etc. All of those are extremely valuable and are spread evenly between almost everyone in the west.
On a more serious note, the pattern I saw here was coastline = bad.