When was the last time wealth accumulated so greatly in so few hands, the dark ages? It would be really interesting to know what history can tell us about what this potentially means for our future.
Probably best to wait a decade or two before commenting with such confidence about what you think the outcome of today's events and circumstances will be.
Maybe it is the opposite of what you're implying. ex: The creation of value is so high that the discrepancies increase, but everyone is reaping the benefits, just in different proportions.
Doesn't matter. If you could choose when to be born, but not know your race, sex, gender, sexual preference, general health, or family income.... There is no doubt it's better to be born in 2019 than 1919.
The difference across a decade is somewhat negligible. But just in the last few years we've gotten gay marriage, marijuana is getting legalized, crime reform, HIV treatment is becoming widely available... Humans have a tendency to focus on the one or two things that might be worse for them, but over all life is better in almost every way you can think of. Every year is better than the last.
It is a good thing that we treat minorities and the poor better than we did in the past. However, that doesn't mean that the middle class are not worse off than they were at that time.
If you got to choose between being a middle class white man in 1919 or 2019, 2019 is obviously the better choice. Even ignoring impending ww2 and the dust bowl for the 1919 case.
Let's be really clear about scales here. Not just "better" but "the best it's ever been in the history of the world." The world we live in is an absolute miracle. For most of human history it was amazing if our children managed to survive the winter. My grandparents faced the very real prospect of dying from food scarcity. I can push a few buttons on my phone and a hot cooked meal will arrive at my doorstep in under an hour. Most of the diseases that were the cause of human death and misery aren't even on our radar, because we've cured them. I can go flip a switch on my wall and the room will be illuminated because literally tens of thousands of people have all worked together in relative harmony to make it possible.
Our closest biological relatives, chimps, brutally rip apart their own infants and eat their brains as a matter of course. That's biological reality. That's your starting point. Everything past that is a gift. If we just want to say that we can imagine an even better life than the one we have today and we should work towards that.. I'm right there with you. But how can you look around you and say life isn't good? Not "good" compared to what situation that has ever existed in all of history?
It's difficult to tell exactly due to changes in technology and culture, but I'm not sure the evidence points to that. My understanding is that both the rates of home ownership and the number of middle class families where only one person works are down.
It seems like a college degree is more necessary in order to get a middle class job. So if we equated college with apprenticeship I think college might result in more debt for a similar result. However, I'm not super informed about how apprenticeship worked so I could very well be mistaken.
Let's work with some simple numbers and think about what's happened in history.
Imagine median worker income in the 1970s was $100. For a lot of women, they weren't allowed to be workers. Let's increase the population of "workers" by 20% (adding those women), but only pay those women $70 (because patriarchy). What's the median income now? $95.
Let's increase the number of "workers" by another 20% by bringing in 30 million immigrants and their descendants. Those immigrants were making $5 in their old country, but they aren't represented in that original $100 median worker salary. But now they're making $60. Better than they were, but worse than white men because racism. What's the median income now? $89.
This is the real story behind all the drama about median wage stagnation, median household income, etc. We added a bunch of lower wage people into the calculation. Those people are better off than they were before, but they drag down the one stat we look at with tunnel vision. That doesn't mean I deny any of the real concerns people have about racism/sexism/etc. But everything can literally be better for everyone, and as I demonstrated above we can still decrease the median household income.
When you say something like "median household income has barely budged in the last twenty years" that's a very shallow assessment. What's happened to the labor market? What's happened to the housing market? Are there more single people as a percentage of the population? Should we expect single households to have the same income as married households? What has been the historical household income for single moms? Are there more single moms today than 20 years ago? How does that impact median household income?
Average household size hasn’t changed much in the past 20 years. It’s down by about 4% in that time, so that doesn’t explain it. The percentage of the workforce that consists of women is also pretty much flat over that period, and in any case if we’re talking about households and household size hasn’t changed significantly then more women working would increase, not decrease, the median even if they’re underpaid.
That should, on average, cut the household income of those houses in half compared to if two of those singles were married and/or living together. I don't know what the data is for just the last 20 years, but taking a small fraction of the households and splitting them up into two households each making half as much puts a big dent in median once you run the math.
Sure, let's make some assumptions to show how the math works out. Let's assume a total population of 10k, every household is a married couple. Each parent is a worker making $50, resulting in every household (two workers) income being our same $100 median.
For a household size of 2.6, we wind up with 3,846 households. If there's 3,846 households with a median income of $100, that makes our total economy $384,600.
Now let's assume enough of those families divorce such that there are now only 2.5 people per household. We wind up with 4,000 households. We still have the same total economy of $384,600 but split across more households (4000) that results in a median household income of $96. That's a 4% drop in median income.
Now of course in real life the change in household size isn't just people getting divorced (or never marrying). It's also reduce birth rate. But I hope you can see how a small change in single people makes a relatively big change in median income.
A 4% drop in average household size produces a 4% drop in median household income? That’s not a relatively big change, that’s a small change and exactly what I’d expect.
Real per capita GDP rose by around 25% over this period. What accounts for the other 21%?
The only point I'm making is that the median worker's wage has gone up, in spite of the charts showing the median worker's wage looks flat. We know it's gone up because we've discussed how it if all else were equal it SHOULD be down measurably due to things like there being more single families in the median household chart, adding a lot of lower wage workers through women's rights and immigration on the median worker wage chart.
I'm not making any claims that the gains have been perfectly proportional across all segments of the population. Only that the average worker is really better off today than they were before, and that the median wage charts don't give us very helpful information to gauge how much better/worse off they are.
These new additions to the labor pool don't just add another worker/job at the lower end affecting the median chart, they provide downward pressure on everyone's wages because they compete for those jobs. These workers are productive, so GDP goes up, but there is downward pressure on all wages. That is a big part of the story of the increasing wage/wealth disparity between the rich and everyone else. It's not the only factor, but it's a significant one.
I said it has "barely budged". A few percent in two decades fits that description.
I don't understand why you bring up women entering the workforce again. As I mentioned, that's wrong twice: the proportion of women in the workforce is flat over this timeframe, and additional women in the workforce would push median household income up, not down.
So we're left with immigrants. Thus my original question way up there: is it all down to underpaid immigrants, then?
I'm not sure I can help you. My point is that you seem to be trying to make a political statement based on a single variable in an extremely complex system that is multivariate. As I demonstrated, it's trivially easy for everyone in the system to make more money but for the median household income and/or median wage to go down. But all of my numbers are completely fake. I don't know what the real numbers are or their impacts. And those are just the kinds of things I thought of off the top of my head. I can neither prove or disprove the thing you seem to be alluding to. I'm inclined to agree with what I'm assuming is your intent, but the data available doesn't actually tell that story. Nor does it disprove that story.
And yet when we considered the variables you mentioned, the conclusion didn’t change.
What is the point of mentioning that decreasing household size could make the number misleading, when household size didn’t decrease by a significant amount? What is the point of repeatedly bringing up workforce participation by women?
It’s fine to say that a measure might be misleading because of other factors. But when those factors don’t actually make it misleading for the example being discussed, I don’t really get the point.
It’s also weird that you focus entirely on the possibility that everyone is better off. Isn’t it also possible that everyone is worse off while the median household income remains flat? Smells of ideological bias.
I thought this has been the course of history for a long time. Elites take more and more for themselves until they push things too far and they get overthrown. Then the cycle starts again with a different elite.
I'm not sure the word "overthrown" is good - nobody is going to do that today. "Until things fall apart" is more general and entirely possible today. See Venezuela for example. Still no overthrow, but it has fallen apart and the leadership would probably prefer that hadn't happened - though I could be wrong about that.
With overthrown I guess I also meant things like antitrust regulation in the early 1900s or the union movement which was reduced power of the robber barons. This doesn’t always have to be violent.
Not sure what better word could be used instead of overthrown.
Now I don't like the terminology "elites" as it lends itself to populism, but in this framework it's useful.
Soon enough, the elites will not be overthrowable. The advantage that the many have over the few is the retraction of their consent; without housekeepers, farmers, maintenance workers, the rich have historically been forced to capitulate because they couldn't maintain their standard of living without the workers. With the rising tide of automation, I can see a very near future where the workers are simply obsolete, and the division between classes will become so wide as to be completely un-transversable. Those in control of the farmland and the machines that tend it will have no use for the lower classes any more. That's why we need to work on decentralized production, with households owning a production factor of their own which will keep them producing value. Think decentralized factories.
The most interesting bit is that out of that 10 percentage points growth (60% to 70%) for the 10% wealthiest, 9 percentage points are attributed to the top 1% (23% to 32%)!
So, the rest of the top 10% have remained basically at the same level of (relative) wealth (37% to 38%), and the wealth from the poorest has moved to the top 1%!
So, looking at the top 10% here paints a less bleak picture of where the wealth is being accumulated/moved.
IOW, it's not even the rich getting richer, it's just the super rich!
Perhaps you misread what I said: looking at the top 10% rather than top 1% implies that more people are getting proportionally wealthier, when it's only the 1% that is getting wealthier. The former implication is "less bleak" than the latter reality.
Because it's not that the top 10% have roughly comparable amounts of wealth: instead it's that the 1.1%-10% have roughly the same amount while the top 1% has concentrated their power even further. I think "less bleak" is a bit tongue in cheek, but at least it could appear to be less concentrated if just just looking at the top 10%.
The post war consensus, or the long boom as I think it was called in the US.
A period of sustained growth that saw full employment, adult vocational education - in the US in part from the GI Bill, healthy and rising welfare, rising wages, good pension provision and an unprecedented growth of the middle classes.
High income taxes, sometimes extremely high, from both sides of politics saw greater opportunities for infrastructure and redistribution.
It started to fall apart with the 73 oil crisis, that in good part marched us into neo-liberalism and Thatcherism/Reaganism.
The real estate bubble popping. To a first approximation the bottom 9.9% of the top 10% in wealth are older upper-middle class folks who have their mortgage paid off and some retirement savings.
(Wealth and income distributions have significant differences)
Is this elaborated on anywhere to break down by age/etc? Because "9.9% of that 10% of households are actually just your parents/grandparents who've made good choices over the course of their life rather than a bunch of bankers" doesn't trigger people as much.
yes, big disruptive events like war can redistribute & destroy wealth.
See picketty's book "capital in the 21st century" if are interested in light bedtime reading of statistical evidence for changes in wealth over the last century or two
I'm telling you - and I mean this completely without hyperbole, lower your conspicuous consumption. Get rid of your luxury car, don't project your wealth.
To be honest, if you live anywhere on the peninsula (looking at you Atherton) and even areas of San Francisco - a reckoning is coming. Neighborhoods will burn.
"There's a storm coming, Mr. Wayne. You and your friends better batten down the hatches, because when it hits, you're all gonna wonder how you ever thought you could live so large and leave so little for the rest of us."
The article points out that record low interest rates have pushed easy money into the hands of the already-wealthy, exacerbating wealth inequality.
I see that as only half the story. While 0% loans were filling the coffers of Bank of America and Sallie Mae and Chase and Wells Fargo, those same banks were turning around and loaning the money out for consumption at 25% or for assets that rapidly depreciate like cars and TVs at 5-25%, or purchases of questionable value like college tuition at more variable rates.
r > g is still something of an open question in my mind, but the economic weaponization of debt and the inability of consumers to shield themselves from its adverse effects seems to be the reason for the wealth gap and why the increase in capital returns has payed better than overall economic growth, effectively transfering the future wealth of the poor to the present assets of the rich.
It could probably be solved in a generation with stricter regulations on consumer lending and the conversion of social security into a mandatory 401k, similar to Australia's "Super" program.
The fix for capitalism is to force everyone to be capitalists.
The wealthy are growing wealthier due to demographics. Collective IQ is declining right now, due to the relative demographics of the developed vs. developing worlds.
There is nothing you can do to stop unintelligent people from giving their money to the intelligent. We are just going to have to wait it out, which will probably take 200+ years.
Top 10%? That would include a lot of HN folks reading this article.
And I'm sure the housing crash of 2008 didn't help. Real estate is often a key financial investment for the middle class. Housing has recovered (and more!), but a lot of middle class lost/sold their homes and didn't benefit from the appreciation.
What would annual income requirements be? I remember a few years ago when I looked it up, the 1% of top income earners was somewhere around $350~$400k/year minimum (depending on which stat you used). Think about that. Less than 1% of Americans ear over $350k/yr ... and most of them earn far far more than than (several million).
I assume the average senior developer here in a mid-range city probably makes around $120k ~ $160k. Where does that fall into national averages on just income (and yes, I realize this article is talking about overall wealth and not necessarily income).
I think housing prices going up is the problem. Real estate has been growing at at least 10 years of growth for every real year since 1996. The financial crisis was a speed bump and we are far beyond those highs
I can't possibly imagine housing not being treated this way as long as the population is growing.
And it's not really even housing that's driving the issue, it's LAND. In some form or another, basically everything of value that's not IP (and arguably even IP) requires land use.
I'm not sure if sarcasm or not, but do you believe that what would be "fair" would be for the bottom 90% to pay for 90% of the budget in taxes?
Maybe in an ideal world that could be true, but it would also require for the bottom 90% to get 90% of the total income received in an given year. As we can see, that's nowhere near the case.
So of course the single digit percentage of the population that makes the lion's share of total income also has to pay the lion's share in taxes.
The bottom 90% should contribute 90% of the value to the world, instead they're only contributing 30%; while the 10% most successful contributors generate 70% of the value.
That means 90% of people are not contributing as much as they could to society.
The interesting thing about today is that the rich don’t have access to better technology than anyone else due to massive scale. Also, they have no leisure time...
Probably some, but the point is just that there's a difference between the working rich and the idle rich. Obviously it's not a black and white thing, but someone who becomes a millionaire after working their butt off for years as an entrepreneur and selling their company is having a very different experience of life from someone who inherits everything and whose only experience of business is as a figurehead— there are lots of examples of this, but current populist premier of Ontario Doug Ford is a good one. Jared and Ivanka are probably in this bucket too, though perhaps to lesser degrees.
Okay everyone agrees that absolute position matters -> less deprivation is better. But I'm interested in HN's perspective on relative position. It seems that there are people for who relative position shouldn't matter at all and people for whom relative position matters quite a bit, why?
Looks like in 2018, "total assets" is $110 trillion, and an overall net worth of just under $98 trillion.
This puts 70% of net worth/total wealth at $68.5 trillion, owned by the top 10%. I'm sure someone can find the "number of households" but I don't have it handy, so I'm going to just go with 120 million, and see what the average wealth of the top 10% (12 million households) is:
$5.7 million
Of course, the 9.999% above the bottom person could own way more, and that final 0.001% that qualifies might have much less than $5.7 million. So how do you figure out that piece?
This of course is a big side effect of quantitative easing aka printing money. Those who held on to securities and other advanced financial instruments saw prices being pulled upward due to the massive flood of hot off the press money.
Guess what people don’t own large number of those types of assets?
So before everyone does the typical “we should get government involved” rabble rousing, be aware that it is because the government got involved that this is happening.
I am not from US, but I remember loud complaints about how Federal Reserve was bailing out banks and the rich vs the non-wealthy folks. My memory of govt reasoning was that they need to help the economy survive to avoid unfamiliar consequences (if they bankrupted the banks for giving bad loans and let home buyers keep their not fully paid homes, the argument was that crediting would stop in the future, which would be a bigger detriment to the not-wealthy).
IOW, government got involved on behalf of the rich claiming to also benefit non-wealthy in the long run.
This is all a bit simplified, and coming from someone only affected transitively (so without full focus on the developments).
This is basically the Pareto principle in action, and isn't surprising.
Most of the top tier wealth is driven by investments and in the wake of globalization (and "easy" money from CBs,) stocks and other asset classes have risen drastically. Given that the lower rungs in the world all have little to no investments compared to the "upper class" it's just basic math than people with investments will out perform those with none.
There will undoubtedly be a mean reversion on asset prices at some point in the future, which will lower the wealth gap as prices fall...but that might not be a good thing. What we really need, if we want to bridge the gap, imo, is teaching people to invest their money...and I mean in more than just a 401K and a house. If you look at actual living standards, even the middle and lower classes are in much better shape than they were in every previous decade. So we're making strides there. So we need to improve our education system (specifically for the lower class) and teach everyone to invest in the economy as a whole.
The thing about poor people is, they don't have money to invest. Teaching the poor to invest is like teaching the starving to cook.
Moreover, you are simply not correct to say that living standards are improving for everyone. Life expectancy in the United States has gone down for the third year running (the first time that's happened since WWI) due in large part to crises that disproportionately affect poor people.
Life expectancy has gone down because of the Opioid crisis and suicides. That certainly does effect poor people, but it is not -because- they are poor.
And poor people usually do have money to invest, I grew up very poor. My grand mother had no plumbing, no A/C or central heating (and this is the US,) so I know what true poverty is. You will not find that virtually anywhere in the US now.
> Life expectancy has gone down because of the Opioid crisis and suicides. That certainly does effect poor people, but it is not -because- they are poor.
I beg to differ. The area where I grew up, in rural southeastern Ohio, has been ravaged by the opioid crisis. IMHO, it goes hand-in-hand with the loss of industry and jobs and the rise of poverty and hopelessness that's been left in the wake of that loss of economic prosperity.
Not directed at you, but I find it amazing that now that drugs are hitting “rural America” it is seen as caused by the lack of opportunity, jobs, and social mobility but when it was happening in the “inner city” it was all about “pulling yourself up by your bootstraps”, “the government doesn’t owe you anything” and because of a “culture of dependency”.
It is true that if you redefine poverty so that no Americans are poor, and quality of life so that dying young of opioid overdose doesn't count against it, then the entire country is rich and happy.
Because, that's exactly what I said, that there are no poor Americans...right. You can acknowledge, at the very least, that living standards are much higher now than in the 80s, 90s or 00s...and every decade before.
They're not. Wages in the US have been flat for thirty years, social mobility is down, student debt load is up, this generation of young adults will have a far harder time finding housing than their parents did, life expectancy is down. Most places in the world are better off than in the 1990's, but the United States is not one of them.
So, you're saying that technology has not positively effected people's lives? Are you saying that the number of people with access to the internet, computers, tech in general...better clothing and food is...not better than it was in the 90s? Did you even live in the 90s? Things that were once reserved for only the richest of the rich are now in the hands of the poorest of the poor. There has been enormous deflation in several realms that have absolutely improved people's lives or at the least improved their living standards. Almost all of your complaints have simple explanations behind them as well, and some of them aren't actually that bad.
The majority of student debt is held by a very very small percentage of overall students, and many of them came from wealthy families or are going into very rich fields.
I never said your grandfather (though I did use my grand parents as an anecdote to point how far society has come)...I said, literally 10 years ago, even 20 years ago. Life is better now; and once again, most students only carry around ~$5K in student debt, the vast majority of student debt is carried by 10% of students. There is no way you can convince me that your living standards are now lower than they were in the 90s or 10 years ago; everyone is living in nostalgia for the past...people have been saying "the good ole days" forever, and yet lives continue to be improved and poor people are lifted from poverty despite this longing for the "good ole days."
For a good look at what modern poverty in America looks like, see Stephanie Land's amazing book Maid. The overall picture is of someone doing extremely demeaning, physically demanding manual labour, and spending months at a time barely able to afford food for herself and her daughter, in that precarious position where even a trivial unexpected expense could easily send her back to homelessness.
You not only have to have money to invest, you have to have the further means to be able to leave it there for the long term.
I'm middle class and about 18 months ago finally moved some modest savings (5 figure amt) into a robo-advisor controlled account. It's basically been flat the entire time, and is now up 1.4%, not even beating inflation over the same time period. Now, I get it, patience is everything. But it's definitely pretty detached from reality to blame poor people for their bad financial literacy in not having tens of thousands to drop into "investments" when this kind of thing is the reality even for those of us that do.
It did. If you invest $1 Million but someone else invested $1 Billion, and you both made a 25% return, the wealth gap between you still widened fairly drastically. And it gets much worse when people have no investments at all.
Ok, let me rephrase: top 1% had 23% of wealth in 1989 to invest. The next 9% had 37%. If, say, all of them were equally "smart" investors (just different starting positions), for every 1 billion of investment from the top 1%, you get roughly 1.7 billion investment from the next 9%, and their returns are proportional as well. The fact that this 1.7 billion is distributed across 9x more people should not matter in the big picture.
The proportional wealth gap of these groups (not individuals in each of the groups) should stay the same, and even the absolute gap should decrease (on 25% return, one group earns 0.25 billion and the other earns 0.42 billion, thus decreasing the gap by 0.17 billion).
I could understand the argument that the top 1% are smarter investors (though my butt-feel disagrees :), or that the next 9% have less non-tied funds available for investment, but you haven't brought those arguments: you even mention the same returns on their proportionally smaller investments.
So how did the top 1 to next 9 go from 23:37 to 32:38? It does not flow from your initial or subsequent argument, or am I missing something?
And age is strongly correlated with wealth, with people nearing or in retirement often having the highest level of wealth. When the value of equities goes up, they benefit the most.
40% of the US would have a hard time covering a $400 expense [0]. How in God's name do you think they have any kind of stability to think about investing? 2 out of 5 Americans are essentially living paycheck to paycheck.
I keep seeing people make the push to have people invest; but what I never see is any clarification in in what or how; which leads me to assume the pusher is really saying, put your cash in money manager's hands and let them make those decisions for you, and enjoy the interest.
Here's the thing though: I'm not really sure that even with a fiduciary responsibility that the mere incentive of "getting a percent of interest earned on the behalf of clients" really does the market any good.
A 10000 dollar investment in the right place at the right time can make the difference for a small business, which won't even appear on the radar for an investment fund.
These types of money management schemes basically bias the system in favor of a smaller population of larger beneficiaries.
I don't know about anyone else, but I think if people held onto their cash, and managed it to improve what they can locally, I think that we'd see more bang for the capital buck expenditure.
I have seen much more get done with a bit of money in the right place at the right time rather than just throwing absurdly large amounts around and just banking on getting a couple percent back.
The interesting part is the historical contingency of the distribution, that is based not just on rational economic principles but purposeful policy.
For example, you would need to explain why up from post-war until the mid-70s you see increases in income for most people basically matching increases in productivity, and why today there is a disjunction between the two.
There's so much talk about the growing inequality that I tried to find out what would happen if the rich were mobbed and all the money redistributed.
According to [0] there were 73,110 ultra wealthy US citizens in 2017, i.e. individuals with more than $30m in net worth. The same article says that the average net worth in this group is $120m.
In aggregate this group thus controls 120m * 77 110 = 9.3 trillion dollars.
Since there are around 330m people living in the US this would amount to only a little over 28k per person when redistributed.
Or roughly $72,000-73,000 per household, assuming 127 million households and working with the numbers in your comment.
If we stole all the money from every 10%er household, who control 70% of aggregate household wealth, we'd have 70% of $93 trillion (2016 value) or $65.1T. Spreading that across 90% of 127M households nets about $564,500 per.
Some one quoted a number that you need about $1mm in income to be in the top 1%. You know what's perverse? "Qualified investor" mark is at $1mm net worth. The best way to make money is to invest what you have, and this blocks people out.
From what I understand, it might be possible to set up a partnership which does investments, and pool money from about 50 partners. That would allow a decent angel investment group with a few-thousand-dollar buy in. Why don't more people do this? It's very doable to learn about how to read a business plan, read financials, etc. Though it's a risk, it might be helpful to allow the middle class to make informed investments to grow wealth.
In the grand scheme of things, not that I think it would make that much of a difference, but how would the wealth of the middle class that are close to retirement be different if you counted the present value of annuities such as pension plans and even maybe social security?
I know my parents could afford to have a lot less “wealth” and be comfortable thanks to my mom’s pension as a public school employee.
On the other hand, how much worse off is the middle class now that private pensions are rapidly disappearing?
120 comments
[ 4.4 ms ] story [ 196 ms ] threadhttp://content.csbs.utah.edu/~ehrbar/cap1.pdf
Our closest biological relatives, chimps, brutally rip apart their own infants and eat their brains as a matter of course. That's biological reality. That's your starting point. Everything past that is a gift. If we just want to say that we can imagine an even better life than the one we have today and we should work towards that.. I'm right there with you. But how can you look around you and say life isn't good? Not "good" compared to what situation that has ever existed in all of history?
It seems like a college degree is more necessary in order to get a middle class job. So if we equated college with apprenticeship I think college might result in more debt for a similar result. However, I'm not super informed about how apprenticeship worked so I could very well be mistaken.
Imagine median worker income in the 1970s was $100. For a lot of women, they weren't allowed to be workers. Let's increase the population of "workers" by 20% (adding those women), but only pay those women $70 (because patriarchy). What's the median income now? $95.
Let's increase the number of "workers" by another 20% by bringing in 30 million immigrants and their descendants. Those immigrants were making $5 in their old country, but they aren't represented in that original $100 median worker salary. But now they're making $60. Better than they were, but worse than white men because racism. What's the median income now? $89.
This is the real story behind all the drama about median wage stagnation, median household income, etc. We added a bunch of lower wage people into the calculation. Those people are better off than they were before, but they drag down the one stat we look at with tunnel vision. That doesn't mean I deny any of the real concerns people have about racism/sexism/etc. But everything can literally be better for everyone, and as I demonstrated above we can still decrease the median household income.
When you say something like "median household income has barely budged in the last twenty years" that's a very shallow assessment. What's happened to the labor market? What's happened to the housing market? Are there more single people as a percentage of the population? Should we expect single households to have the same income as married households? What has been the historical household income for single moms? Are there more single moms today than 20 years ago? How does that impact median household income?
Is it all down to underpaid immigrants, then?
https://articles.ezlandlordforms.com/landlord-and-real-estat...
That should, on average, cut the household income of those houses in half compared to if two of those singles were married and/or living together. I don't know what the data is for just the last 20 years, but taking a small fraction of the households and splitting them up into two households each making half as much puts a big dent in median once you run the math.
For a household size of 2.6, we wind up with 3,846 households. If there's 3,846 households with a median income of $100, that makes our total economy $384,600.
Now let's assume enough of those families divorce such that there are now only 2.5 people per household. We wind up with 4,000 households. We still have the same total economy of $384,600 but split across more households (4000) that results in a median household income of $96. That's a 4% drop in median income.
Now of course in real life the change in household size isn't just people getting divorced (or never marrying). It's also reduce birth rate. But I hope you can see how a small change in single people makes a relatively big change in median income.
Real per capita GDP rose by around 25% over this period. What accounts for the other 21%?
I'm not making any claims that the gains have been perfectly proportional across all segments of the population. Only that the average worker is really better off today than they were before, and that the median wage charts don't give us very helpful information to gauge how much better/worse off they are.
These new additions to the labor pool don't just add another worker/job at the lower end affecting the median chart, they provide downward pressure on everyone's wages because they compete for those jobs. These workers are productive, so GDP goes up, but there is downward pressure on all wages. That is a big part of the story of the increasing wage/wealth disparity between the rich and everyone else. It's not the only factor, but it's a significant one.
I don't understand why you bring up women entering the workforce again. As I mentioned, that's wrong twice: the proportion of women in the workforce is flat over this timeframe, and additional women in the workforce would push median household income up, not down.
So we're left with immigrants. Thus my original question way up there: is it all down to underpaid immigrants, then?
What is the point of mentioning that decreasing household size could make the number misleading, when household size didn’t decrease by a significant amount? What is the point of repeatedly bringing up workforce participation by women?
It’s fine to say that a measure might be misleading because of other factors. But when those factors don’t actually make it misleading for the example being discussed, I don’t really get the point.
It’s also weird that you focus entirely on the possibility that everyone is better off. Isn’t it also possible that everyone is worse off while the median household income remains flat? Smells of ideological bias.
Not sure what better word could be used instead of overthrown.
Soon enough, the elites will not be overthrowable. The advantage that the many have over the few is the retraction of their consent; without housekeepers, farmers, maintenance workers, the rich have historically been forced to capitulate because they couldn't maintain their standard of living without the workers. With the rising tide of automation, I can see a very near future where the workers are simply obsolete, and the division between classes will become so wide as to be completely un-transversable. Those in control of the farmland and the machines that tend it will have no use for the lower classes any more. That's why we need to work on decentralized production, with households owning a production factor of their own which will keep them producing value. Think decentralized factories.
So, the rest of the top 10% have remained basically at the same level of (relative) wealth (37% to 38%), and the wealth from the poorest has moved to the top 1%!
So, looking at the top 10% here paints a less bleak picture of where the wealth is being accumulated/moved.
IOW, it's not even the rich getting richer, it's just the super rich!
In the past what has driven this trend downward?
A period of sustained growth that saw full employment, adult vocational education - in the US in part from the GI Bill, healthy and rising welfare, rising wages, good pension provision and an unprecedented growth of the middle classes.
High income taxes, sometimes extremely high, from both sides of politics saw greater opportunities for infrastructure and redistribution.
It started to fall apart with the 73 oil crisis, that in good part marched us into neo-liberalism and Thatcherism/Reaganism.
(Wealth and income distributions have significant differences)
See picketty's book "capital in the 21st century" if are interested in light bedtime reading of statistical evidence for changes in wealth over the last century or two
To be honest, if you live anywhere on the peninsula (looking at you Atherton) and even areas of San Francisco - a reckoning is coming. Neighborhoods will burn.
"There's a storm coming, Mr. Wayne. You and your friends better batten down the hatches, because when it hits, you're all gonna wonder how you ever thought you could live so large and leave so little for the rest of us."
I see that as only half the story. While 0% loans were filling the coffers of Bank of America and Sallie Mae and Chase and Wells Fargo, those same banks were turning around and loaning the money out for consumption at 25% or for assets that rapidly depreciate like cars and TVs at 5-25%, or purchases of questionable value like college tuition at more variable rates.
r > g is still something of an open question in my mind, but the economic weaponization of debt and the inability of consumers to shield themselves from its adverse effects seems to be the reason for the wealth gap and why the increase in capital returns has payed better than overall economic growth, effectively transfering the future wealth of the poor to the present assets of the rich.
It could probably be solved in a generation with stricter regulations on consumer lending and the conversion of social security into a mandatory 401k, similar to Australia's "Super" program.
The fix for capitalism is to force everyone to be capitalists.
The wealthy are growing wealthier due to demographics. Collective IQ is declining right now, due to the relative demographics of the developed vs. developing worlds.
There is nothing you can do to stop unintelligent people from giving their money to the intelligent. We are just going to have to wait it out, which will probably take 200+ years.
And I'm sure the housing crash of 2008 didn't help. Real estate is often a key financial investment for the middle class. Housing has recovered (and more!), but a lot of middle class lost/sold their homes and didn't benefit from the appreciation.
https://dqydj.com/net-worth-brackets-wealth-brackets-one-per...
I assume the average senior developer here in a mid-range city probably makes around $120k ~ $160k. Where does that fall into national averages on just income (and yes, I realize this article is talking about overall wealth and not necessarily income).
$118,400
https://dqydj.com/household-income-percentile-calculator/
I wonder what mid range looks like.
Why? And after that, how?
I can't possibly imagine housing not being treated this way as long as the population is growing.
And it's not really even housing that's driving the issue, it's LAND. In some form or another, basically everything of value that's not IP (and arguably even IP) requires land use.
Maybe in an ideal world that could be true, but it would also require for the bottom 90% to get 90% of the total income received in an given year. As we can see, that's nowhere near the case.
So of course the single digit percentage of the population that makes the lion's share of total income also has to pay the lion's share in taxes.
That means 90% of people are not contributing as much as they could to society.
https://www.cnbc.com/2018/07/27/how-much-you-have-to-earn-to...
> To be among the top 1 percent of U.S. earners, a family needs an income of $421,926
For top 10%, you have $178,793.00 per
https://dqydj.com/household-income-percentile-calculator/
> Just to put some numbers on it 2017 you'd need a net worth of about 1.1 million dollars to be in the top 10%.
> https://dqydj.com/net-worth-brackets-wealth-brackets-one-per....
Top 1% - more than $434k/year household income.
Top 10% - more than $179k/year.
50% is $61k/year.
Source: https://dqydj.com/united-states-household-income-brackets-pe...
This puts 70% of net worth/total wealth at $68.5 trillion, owned by the top 10%. I'm sure someone can find the "number of households" but I don't have it handy, so I'm going to just go with 120 million, and see what the average wealth of the top 10% (12 million households) is:
$5.7 million
Of course, the 9.999% above the bottom person could own way more, and that final 0.001% that qualifies might have much less than $5.7 million. So how do you figure out that piece?
Oh - someone else provided a link: https://news.ycombinator.com/item?id=20051782
Looks like in 2017 $1.1 million qualified you for 10%, while a little over $10 million qualifies you for 1%. (That's almost too neat...)
Guess what people don’t own large number of those types of assets?
So before everyone does the typical “we should get government involved” rabble rousing, be aware that it is because the government got involved that this is happening.
IOW, government got involved on behalf of the rich claiming to also benefit non-wealthy in the long run.
This is all a bit simplified, and coming from someone only affected transitively (so without full focus on the developments).
Most of the top tier wealth is driven by investments and in the wake of globalization (and "easy" money from CBs,) stocks and other asset classes have risen drastically. Given that the lower rungs in the world all have little to no investments compared to the "upper class" it's just basic math than people with investments will out perform those with none.
There will undoubtedly be a mean reversion on asset prices at some point in the future, which will lower the wealth gap as prices fall...but that might not be a good thing. What we really need, if we want to bridge the gap, imo, is teaching people to invest their money...and I mean in more than just a 401K and a house. If you look at actual living standards, even the middle and lower classes are in much better shape than they were in every previous decade. So we're making strides there. So we need to improve our education system (specifically for the lower class) and teach everyone to invest in the economy as a whole.
Moreover, you are simply not correct to say that living standards are improving for everyone. Life expectancy in the United States has gone down for the third year running (the first time that's happened since WWI) due in large part to crises that disproportionately affect poor people.
And poor people usually do have money to invest, I grew up very poor. My grand mother had no plumbing, no A/C or central heating (and this is the US,) so I know what true poverty is. You will not find that virtually anywhere in the US now.
I beg to differ. The area where I grew up, in rural southeastern Ohio, has been ravaged by the opioid crisis. IMHO, it goes hand-in-hand with the loss of industry and jobs and the rise of poverty and hopelessness that's been left in the wake of that loss of economic prosperity.
The majority of student debt is held by a very very small percentage of overall students, and many of them came from wealthy families or are going into very rich fields.
Professional students obviously will have substantially more. But most professional school loans are private and not federal as there is a cap.
Also I believe your argument along the lines of you don't have it as bad as your grandfather did therefore you aren't poor is a fallacy.
I'm middle class and about 18 months ago finally moved some modest savings (5 figure amt) into a robo-advisor controlled account. It's basically been flat the entire time, and is now up 1.4%, not even beating inflation over the same time period. Now, I get it, patience is everything. But it's definitely pretty detached from reality to blame poor people for their bad financial literacy in not having tens of thousands to drop into "investments" when this kind of thing is the reality even for those of us that do.
The proportional wealth gap of these groups (not individuals in each of the groups) should stay the same, and even the absolute gap should decrease (on 25% return, one group earns 0.25 billion and the other earns 0.42 billion, thus decreasing the gap by 0.17 billion).
I could understand the argument that the top 1% are smarter investors (though my butt-feel disagrees :), or that the next 9% have less non-tied funds available for investment, but you haven't brought those arguments: you even mention the same returns on their proportionally smaller investments.
So how did the top 1 to next 9 go from 23:37 to 32:38? It does not flow from your initial or subsequent argument, or am I missing something?
[0] https://money.cnn.com/2018/05/22/pf/emergency-expenses-house...
Source?
As of 2015, U.S. 15 year olds do about average on international tests of financial litteracy, as compared to other OECD countries[0]
The issue is not that 2/5ths of people are bad at managing their money, it's that they don't have any money to manage.
[0] http://www.oecd.org/education/pisa-2015-results-volume-iv-97...
http://www.aei.org/publication/some-amazing-findings-on-inco...
Here's the thing though: I'm not really sure that even with a fiduciary responsibility that the mere incentive of "getting a percent of interest earned on the behalf of clients" really does the market any good.
A 10000 dollar investment in the right place at the right time can make the difference for a small business, which won't even appear on the radar for an investment fund.
These types of money management schemes basically bias the system in favor of a smaller population of larger beneficiaries.
I don't know about anyone else, but I think if people held onto their cash, and managed it to improve what they can locally, I think that we'd see more bang for the capital buck expenditure.
I have seen much more get done with a bit of money in the right place at the right time rather than just throwing absurdly large amounts around and just banking on getting a couple percent back.
My layman's point-of-view at least.
For example, you would need to explain why up from post-war until the mid-70s you see increases in income for most people basically matching increases in productivity, and why today there is a disjunction between the two.
It isn't merely a principle at work.
According to [0] there were 73,110 ultra wealthy US citizens in 2017, i.e. individuals with more than $30m in net worth. The same article says that the average net worth in this group is $120m.
In aggregate this group thus controls 120m * 77 110 = 9.3 trillion dollars.
Since there are around 330m people living in the US this would amount to only a little over 28k per person when redistributed.
[0] http://money.com/money/4833875/ultra-wealthy-americans-milli...
That's... that's a lot. And that's only from the top 0.02%.
If we stole all the money from every 10%er household, who control 70% of aggregate household wealth, we'd have 70% of $93 trillion (2016 value) or $65.1T. Spreading that across 90% of 127M households nets about $564,500 per.
From what I understand, it might be possible to set up a partnership which does investments, and pool money from about 50 partners. That would allow a decent angel investment group with a few-thousand-dollar buy in. Why don't more people do this? It's very doable to learn about how to read a business plan, read financials, etc. Though it's a risk, it might be helpful to allow the middle class to make informed investments to grow wealth.
I know my parents could afford to have a lot less “wealth” and be comfortable thanks to my mom’s pension as a public school employee.
On the other hand, how much worse off is the middle class now that private pensions are rapidly disappearing?
It's why 'The rich get richer, the poor get poorer' is an old expression, I guess.
https://www.celebritynetworth.com/articles/billionaire-news/...