Other than "We’ve also had a combination of tax and regulatory policy that has encouraged capital formation and increasing returns to capital, so labor’s share of returns has decreased. The last round of tax policy out of Washington made this worse." it seems they have nothing concrete to say. I definitely agree that capital should be taxed at the same rates as labor. Maybe there was a time when it made sense to tax capital lower but right now we don't seem to lack investment money but we lack demand.
Globalization. And it will get worse. As long as neoliberal technocats continue to foist globalization on us, polarization will continue.
Techies have been spared because round one pitted the US against India, but in reality Indian firms were happy to capture low-hanging fruit and never bothered trying to go head-to-head with US firms. China will be different. They don't want to do our menial work, they want to own markets.
You are not ready to compete with China, unless you are going to do "996" for $50k a year.
“But the last 50 years have been terrible for people with lower skills. Adjusted for inflation, the average earnings of a man who didn’t go to college is lower now than it was 50 years ago. That’s unheard of.”
How much of this effect is the vastly higher percentage of people who now go to college? If you line up 100 people by vague estimation of their likely earning potential in 1970 and do the same today, but now 2.5 times as many people attend college, the population remaining with "no college" in 2020 isn't really the same population as it was in 1970.
Also, how much of this effect is basically the rest of the world playing catch up in terms of economic production?
China and the rest of Asia are magnitudes more competitive compared to 50 years ago. And prior to that US industry was unmatched thanks to the massive effects world war 2 had on the other, western industrialized nations.
> Also, how much of this effect is basically the rest of the world playing catch up in terms of economic production?
If the rest of the world becoming more productive results in US workers being worse off, then something is severely wrong with US trade policy. For one, it contradicts the dogma that more trade is strictly beneficial.
I think that dogma though was meant to address the situation in a global context. ie - More trade is strictly beneficial for the global population in aggregate.
But yeah, it's still trade, so there will be lows and highs, and ebbs and flows.
> For one, it contradicts the dogma that more trade is strictly beneficial.
Ricardo's original idea was applicable with a narrow set of assumptions/conditions and didn't have much to say about who'd end up with the greater net wealth. I'm not sure how/why it was turned into a magical improve-any-economy law of nature.
Ricardo's mistake is not thinking about development; comparative advantage is optimal now, but a society that just makes coffee beans is going to lose in the end to the one that makes microchips because of the difference in how the economy and society develop over time.
This may have been a mistake by Ricardo, but not one that points towards less trade as optimal. Indeed, export-led development (implying more trade openness) is the one reliable way we know about of going from the "coffee beans" to the "microchips" stage of development.
False, I recommend Ha-Joon Chang's writing on this subject. The US did not develop in a climate of trade openness, it used tariffs to protect its development. In fact no developed economy developed this way, all of them protected their industry until it was mature and ready to compete, had their governments invest in research and infrastructure and so on. If you have an example of a country that successfully developed through export led development and trade openness I would love to hear it.
>For one, it contradicts the dogma that more trade is strictly beneficial.
It is strictly beneficial, in aggregate. But in any situation, there are winners and there are losers. There are no decisions you can make where everybody wins. If you live in a first world country and your skill set is worse than somebody in the developing world, you’re going to have a bad time.
again, only in the aggregate/ entity of measurement level.
I would argue anyone who says otherwise is either being disingenuous or doesn't actually understand economics.
That is not to say that is not trotted out frequently.
Also, to be fair, during my economics education they had this whole focus on modeling policies and finding optimizations where no one is worse off.
Of course, in the real world, that practically never happens... and there is an argument that the focus on efficient/competitive markets/ equilibria/rational agents is also a bit "wouldn't it be nice if the world was actually like this...", whereas in the real world only the most trivial goods/markets can vaguely be described as such...
>If you live in a first world country and your skill set is worse than somebody in the developing world, you’re going to have a bad time.
Even if your skill set is greater, your cost of living is higher. So you'd have to be more than marginally better.
Also, the logical conclusion of where this seems to be headed is that if you're a low-skill person living in a first-world county, voting for protectionist, isolationist policies/politicians is a rational choice.
It's really not - crab mentality refers to pulling others down for no reason other than envy. But in this case, the reason is the lower classes don't want to be pushed even lower. Are they supposed to selflessly sacrifice themselves so that the rich can get even richer?
They want the economy to suffer to preserve their legacy careers doing pointless things like mining coal or forging steel, things that somebody in a developing nation can do just as well for 1/10 the cost. Why are blue collar jobs so sacrosanct? When the careers of secretaries and travel agents essentially vanished, there was no weeping and moaning, no irrational protectionism, no economic suicide. People moved on to do something more productive with their time, and so should the coal miners.
So, yes, they are crabs at the bottom of the pot seeing other crabs moving up, and they cannot abide by that.
I mean, you’ve shown that you don’t even understand the concept of comparative advantage at the individual vs. aggregate level. How am I supposed to explain to you that protectionist policies benefit a small minority of workers at the expense of almost everybody else?
Instead, I’ll just suggest that you find a good Freshman-level Economics textbook and read carefully. You may find it illuminating to understand the concepts behind complex policy decisions.
> How am I supposed to explain to you that protectionist policies benefit a small minority of workers at the expense of almost everybody else?
Given that none of the most successful economies developed without protectionism [1,2], you'll have a difficult time explaining that indeed. That pesky reality, always getting in the way of "good Freshman-level Economics textbooks".
I forget, are we talking about workers in first world countries or workers in developing countries? I’m not quite sure why you are gloating like you just made a strong counterargument, but it’s not a good look.
Except protectionism makes everyone poorer in the medium term and actually causes international conflict. Who do you think gets drafted to fight war when trade wars turn to real wars?
Perhaps if society used the increased wealth to benefit everyone the value of global interconnected trade could be felt by everyone. This is an easy fix, return to the post World War Two tax policy that built the middle class. Return to a well respected government that drives large scale work like highways, scientific research, the space program. Think about how much technology is a direct result of military research (GPS, the Internet, rocketry, etc) imagine if we mobilized on the same scale for exploring space, basic research and innovation and entrepreneurial activity.
That doesn't explain why inequality within the US keeps growing. As a whole the country is doing well but somehow the benefits go a small number of people while everybody else is stagnating.
Sure it does. US consumer demand rises after WWII because of GI bill & repurposing of capital -> competition drives prices down -> Securities & Exchanges Act essentially mandates firms optimize for returns to capital as a fiduciary duty to shareholders -> producers look to countries where standards of living demand lower wages to maintain market positions -> US jobs decline but shareholder value grows -> wealth concentrates in the hands of those who have the opportunity to be a shareholders
We’ve also had a combination of tax and regulatory policy that has encouraged capital formation and increasing returns to capital, so labor’s share of returns has decreased.
To add to that, capital is exponentially more portable than labor. With globalization, capital in the form of investments can move wherever it needs to to grow, it's borderless. Labor however, in order to grow wealth has to physically move. Remote jobs for basic labor doesn't exist - that's almost exclusively knowledge work.
So if you're a coal miner, your ability to create wealth is extremely limited to certain physical places. If you're a remote Java dev, you can code from anywhere and grow wealth much easier, but there is a serious time cost to switching work. If you're an investor and just need to drop money into an account, not only can you do it from anywhere, you can move things around more or less immediately with little (relative) cost.
It's about portability of the thing that is growing the wealth. Labor = slow, Capital = fast.
Use your educated populace to design robots to dig ditches.
It's not "math" that humans have to engage in undesirable labor, under brutal conditions. We have thousands of years of developing tools that are contrary to that statement.
It is a collective social decision to say that an hour of someone's time is worth less than building a robot. That's the only reason why cashiers still exist.
If you go that route, then the people who build and program the robots will necessarily be paid less. Today that is likely a top 10% job. (More likely a top 5% job if we're being honest.) In a world where everyone has a college degree and there are 30 times the number of people who can program those things because the tools have gotten just that easy...
well, you do the math.
At the extreme, you can't just pay 100% of the labor market more money because they have a college degree. It just doesn't work like that.
Put in more base terms, there is only room for 1% of the people, in the top 1%. You may be able to, through the magic of increased production, decrease the price of everything in your economy. So that the other 99% of people can afford access to everything to which people in the top 1% have access. But even that is difficult in the extreme. It'd just be easier, over time, than is paying everyone in your economy more over time.
This is a real misunderstanding of economics. If you increase productivity through technology, it's possible for everyone to earn more real dollars (as a product of cost of living).
It's not a zero sum game. Imagine it this way. Everyone today is making more than hunt from a cave money. Why is that? Because a single human can produce more than the bare minimum for survival.
> Put in more base terms, there is only room for 1% of the people, in the top 1%.
That... seems to be a total misunderstanding of why people are concerned about income inequality. The fact that the sizes of the percentile buckets are fixes does not mean that the distribution between the buckets is zero sum.
There's no "just math" reason for why we pay some jobs more than others. It's not even a "just market" reason. There are elaborate regulations on income (c.f. tax brackets, minimum wage, investment taxes, mortgage deductions...) all across the board. And those aren't working well, as evidenced by the numbers in the linked article.
>At the extreme, you can't just pay 100% of the labor market more money because they have a college degree. It just doesn't work like that.
Actually this is exactly what should happen. Maybe the increase in wages isn't as extreme as 100% but it should be at least 2% per year. The problem is that it didn't happen during the last decade.
Sure, but it’s a collective social decision that’s generally seen as good for the average person. How popular do you think it would be if Walmart went on stage at the next shareholder meeting and said “yeah, automated terminals are working great, we aim to fire all our cashiers over the next few years”?
> some people with college degrees will have to be the ditch diggers so to speak. [...] It's just math
How about we pay the ditch diggers enough to live on? In fact, what the numbers are showing is that ditch diggers are poorer now than they were! Even if you refuse to share any of your tech industry gains, can't we at least keep ditch diggers at parity?
It's like playing an MMORPG-style videogame where the developers keep raising the level cap. The higher the cap, the worse off people who are just starting are (and why in those games developers keep having to provide a "catch up mechanics", like a scroll to rush you to level cap, or making stuff easier to obtain. In the real world that's a lot harder to do though).
Probably made worse by the vastly higher amount of dual income household, so someone with just 1 income is proportionally worse off.
A single unskilled worker vs a couple of high skill workers, competing for supply & demand against each other...yeah, the former's not gonna have fun.
A lot of people over 40 in Eastern Europe would rather go back to the Soviet Union than stay in their new capitalist dreamworld. Things weren't great, but at least they had a job, a roof, food and healthcare.
if external factors didn’t exist you might be right. But they do so you are wrong. It’s impossible to say if the system was sustainable because America meddled and interfered from the very first day out of fear for their own position. Kinda like how they murdered union leaders all around the works, overthrew governments for being not right wing enough and started wars for false reasons.
But sure, the problem was the system because that’s easy to believe, as it requires just accepting the standard American narrative.
This suggests that everyone going to college is doing well. That isn't the case. There are people who have master's degrees, but are earning $15/hour.
I agree with your point that populations can change over time. Fifty years ago, many people didn't get degrees and made good money. Today, people without degrees (and some with) don't make good money.
So instead of trying to segment in groups (the college educated vs. everyone else), let's just look at everyone. This removes the concern of our shifting populations.
One metric to look at is median income. Adjusted for inflation, it hasn't budged much in decades. In the past 42 years, it's increased about 32 percent.
In a consumer driven economy, with a savings rate of around 7%, most people are spending the vast majority of their income on consumption [competing with other consumers for some scarce goods], why would we think that median real income should increase significantly faster than inflation?
It's basic supply and demand. Globalization puts high downward pressure on wages because people in Asia can live on far less money than Americans. If you have to raise prices because of higher cost of living then your customers simply buy from somewhere else. Then there are certain degrees with too many graduates which flood the market which results in lower wages. Others have a shortage of graduates which means the companies have to hire from a labor pool where everyone is employed and therefore have to outbid their competitor to hire anyone at all. Add double income households which compete for rivalrous (if I have it, you don't have it) goods like housing and the end result is the US economy.
Income inequality comparisons are full of problems like this. Reflecting your intuition, I’d imagine most people would conceive of increasing income inequality to mean increasing gaps between people in the same station in life across two time periods.
But demographics have changed dramatically since 1970. For example, immigrants make up almost 3x as large a fraction of the population (from 5% to almost 15%) than in 1970. Obviously, if you add a large number of (typically) economically disadvantaged people to the population, income inequality is going to go up, even if there is no change in incomes for everyone else: https://www.migrationpolicy.org/sites/default/files/source_i....
Likewise, peoples’ incomes increase with age. The population overall has grayed significantly. Again, even if wealth inequality wasn’t increasing for people of any given age, changing the age distribution of the population will affect income inequality.
Finally, a larger fraction of the population now comprises historically disadvantaged minorities. While the income gap between races in the US is a huge problem, it’s a different problem than “income inequality” genetically, deserving more targeted solutions. (And even that income gap is hard to analyze, because the ages of people of different races in the US differ quite dramatically). The median age of non-Hispanic whites is 42. The median age of Hispanic people is 28. The median age of African Americans is 33: https://www.pewresearch.org/fact-tank/2016/07/07/biggest-sha...).
Income inequality probably is going up. But I’ve never seen a study that actually holds demographic changes constant so the result reflects peoples’ perception of what income inequality means.
I also suspect that some of these "oversights" aren't mistakes at all, but rather intentional obfuscation of facts.
Take note of how often you hear/read something like "incomes haven't risen in 30 years, but prices have gone up over 50% over that period". [Almost?] Inevitably, the income will be real income [inflation adjusted] and the prices nominal prices.
Do you have a source for such a comparison, everything I have seen is all real prices. I know rent and college had gone up about 50% in real prices and some things like food and high end electronics have gone down.
Honestly, your comment seems like intentional obfuscation of facts.
Housing costs are only going up because people are buying/renting bigger houses (despite the fact that mean houshold size has decreased by almost a full person in 50 years).
On a per square foot basis, you don't really see an increase.
How does this explain the price increases in older, urban housing stock? I’ve been renting 500-600 sq. ft. one bedroom apartments for the past seven years. My rent has gone up from $1900 a month to now $2790 month. This is all within the same zip code.
Pay attention over the coming 3 months to articles and headlines on inflation and wages on social and mainstream media. I think you'll find that well over half of them omit stating key assumptions/sources, and appear to be authored so as to lead the audience to the wrong (or at least an exaggerated) conclusion.
To be fair, pretty much all articles about literally any subject on social and main stream media fail to state key assumptions/sources - don't see why you'd think this topic is special in that regard. If we're going to debate anything in a sensible manner, we need to use actual publications by experts as the basis for those discussions.
You sound like a conspiracy theorist if you have no sources, the first couple google searches are not doing this[0],[1].
The public is being misled, by whenever someone complains about stagnant wages the response is "you have smartphones now", but we can't afford houses or healthcare how is this okay?
So your argument seems to be that all economists are in on this together to do what?
And your thankful your favorite youtube news personality has cracked the case (without publishing any research and has an opportunity to make money from getting views). Good thing he /she is looking out for you.
The bottom line is you sound incredibly foolish to me if you can't supply any sources of people trying to do this trick.
Even if you do find one or two examples, there are plenty of sound statistics that say people have it harder now finicailly then 50 years ago.
It’s not conspiracy theory, but rather the fact that data analysis is hard when you’re trying to account for confounding factors, and the media has incentives to report figures that make things seem more significant than they are.
Even things that are true are often reported in a way that obscures causal factors. For example, wages are stagnating, but total compensation (wages plus benefits) is not. Now, from an employee’s perspective, they might not care that their total compensation is growing because health insurance premiums are increasing but paychecks are staying the same size. But the employer has the exact opposite perspective: the employee is costing more money whether that money is going to to paychecks or benefits. Failure to articulate that distinction moreover leads you to the wrong conclusions. When you’re told about wage stagnation but growing corporate profits, you’re supposed to think employees are getting a smaller piece of the pie. That’s not true: https://www.nber.org/digest/oct08/w13953.html
> Total employee compensation was 66 percent of national income in 1970 and 64 percent in 2006. This measure of the labor compensation share has been remarkably stable since the 1970s. It rose from an average of 62 percent in the 1960s to 66 percent in the 1970s and 1980s, and then declined to 65 percent in the 1990s where it has remained from 2000 until the end of 2007.
The points you bring are certainly interesting, it seems to point to the fact that we are distributing healthcare very inefficiently and I would use this as an argument for government-run healthcare.
Here is the conspiracy theory presented with no examples:
>Inevitably, the income will be real income [inflation adjusted] and the prices nominal prices.
This is what I take issue with and I don't think that a comparison between real nominal prices happens in order to trick people. This seems like something high school student wouldn't get away with.
Then look at the article: nominal wages rose every year (as indicated in the chart), but the breathless headline suggests the opposite to the average American. Do you believe that the omission of the word "real" in the headline was purely accidental or intended to drive outrage clicks?
That's not what you said before at all, they don't do an inconsistent comparison of real and nominal, which what I thought the problem to be
>>" Inevitably, the income will be real income [inflation adjusted] and the prices nominal prices."
They don't specify which in the title, but they do in the article.
The biggest thing is there is no comparison between nominal and real prices. Acting like the nominal cost of things is not keeping up with real wages.
If you don't want to get tricked maybe read the whole article instead of just the title. It is a somewhat complex topic and takes some thought to put into it if you want to know what is going on.
I've seen the exact behavior I described; this was the fastest misleading headline I could find in a quick search.
I'll reply on thread next time I see one, which is likely to not happen in the next 24 hours. Hopefully, you'll take an open minded read to see where social and mainstream media accounts are biased for outrage and clicks over information content and will notice these on your own as well.
I always try to keep an open mind, I will admit if this happens regularly by mainstream media, but comparing real and nominal prices seems like a pretty difficult thing to get past people.
This is a complex topic and it can sometimes be tricky to kept track of how much was a dozen eggs, how much was a college degree, how many people had college degrees, how much is healthcare, how much would we spend on healthcare if the government was in charge, and thousands of other factors.
Newspapers and website are driven by viewership so there will not likely specific language in a headline, or even in the article sometimes.
You can't win elections if you actually start talking about most contributing factors. In that case, very soon you'll be discussing immigration as your most important point and start sounding like Trump. Woops!
I sympathise with this view, but I'm not sure it's that simple. If you're Chinese or Bangladeshi or from anywhere else that's a poster child of globalisation, you can still compete with the US labour force from your own country. If you're allowed to immigrate, you get access to infrastructure, cultural knowledge, a somewhat functional legal system, and other force multipliers which might allow you to compete with more efficiency... but you'd still be competing even if you were back home.
Consider an individual John from Texas with a total population of N.
Initially John's chances of getting a job: 1/N
Now, with the arrival of new immigrant, John's chances: 1/(N+1) i.e. he's worse off.
Sure it turned out better for the new immigrant and he can earn way more than his original country and thus this is better for humanity and the globe but it is of little relief to John who is worse off now.
My assumptions in this:
- John is a low skilled worker who will not be easily able to switch to another line of work like a software developer
- John does not have significant savings to fall back on.
Another fun fact:
- The will to let the low skilled immigrant in, in today's environment does not stem necessarily from a position of goodwill, rather it is a calculated position to keep the numbers of a voting bloc which consistently votes for a given party, constant. This can be easily explained by seeing where the opposition to limiting immigration comes from.
So keeping in mind the above 2 points, it becomes readily apparent that what politics has gotten good at is winning elections and not betterment of people. One of the parties has discovered that one of the easiest "hacks" or "optimizations" is to keep importing poor people and that way you will have a steady stream of voters, otherwise you might actually have to start improving the stock of existing population.
This is somewhat analogous to how simply being good at a written test for a position does not necessarily mean you're a good fit for that position but you've simply optimized for the selection process.
All of this to say that as far as a hypothetical John is concerned, it is of no merit to him that the world is a bit more efficient because a person from Bangladesh is able to work with a little more efficiency, indeed whatever small gains from that are outright eclipse by an increased competition in the local pool of jobs and resources.
The businessman who belongs to Johns town called William had decided to shift his manufacturing to Bangladesh as well as sell his wares in Bangladesh. It was good for the Bangladeshi worker and extremely good for William. Not so good for John and an unknown Bangladeshi entrepreneur who could not compete with William and went into oblivion.
Except that the N+1 economy is now bigger with +1 demand for johns labor; thus it is actually increasing. Further, there is a +1 supply for production and export making the economy more competitive and productive overall.
Economists used to believe that many things were zero sum, (ie if England allows French cheese imports it will be at the expense of British cheese producers. Yet often allowing imports and increased trade leaves both France and England richer as consumers in both places value the additional selection and the competition lowers prices or foreign items can charge a premium for their novelty). Immigration is similar; it’s not zero sum.
Blaming this on a cynical political motive to create a voting block is contrary to the history of commerce and global trade and also contrary to your own analysis. It seems to me that the party most opposed to immigration is also the party that had been driving inequality by 1. Promoting globalization while also decimating the social safety net that would ease the transition, 2. Shifting to regressive taxation on sales while drastically lowering taxes on capital and its accumulation i.e. inheritance taxes. 3. Destroying any bargaining power for workers and employees and resisting minimum wage increases. I could go on and on.
College is just a proxy for IQ. Shoving more people into college isn't going to make them smarter, if they don't have the mental horsepower. Basically you've got two levers, genetics and environment, and practically you can only change the latter by early intervention. Nutrition, enriching environment, and good education.
The credibility of the article is undermined by hyperbolic statements such as, "For a lot of children, when they’re 8 years old, it’s too late. If your parents aren’t engaged in the education system, in 10 years you’ll be competing in the labor market against people whose parents sent them to violin lessons and summer programs in the Dominican Republic. There’s inequality of opportunity."
It's too late for "a lot of children" by age 8? And you're underprivileged if you didn't attend a summer program in the Caribbean?
I think that's an un-generous interpretation of the quote.
Yes, I think there is good evidence that if you are in a poverty-stricken family and you don't get very early intervention, that by mid-elementary school it is too late for your average poor kid. The reason being that the rest of your environment of poverty is going to be pretty much pulling against you the rest of your childhood, so intervention while your hopes and goals are not yet formed is your best bet.
And come on, the author wasn't saying if you didn't attend a Caribbean summer program that you're underprivileged. I believe he was just using that to highlight the pretty extreme lengths that middle class and above parents go to provide their children with educational enrichment (including music lessons, sports programs, summer camps, etc.) that put poor kids at a lifelong disadvantage.
I largely agree with you. But the following line from the article is devastating, "For a lot of children, when they’re 8 years old, it’s too late."
And this mawkish line is published under the banner of Stanford, an arbiter of the truth. I expect better.
edit:
My comments seem to have sparked a nerve. I simply wanted to point out bad rhetoric that undermines the cause and weakens an institution of trust. The situation is bad, so there's no need to exaggerate or lie to deliver the point. And this isn't a partisan issue. A conservative like Thiel would deliver a similar message.
There is, however, a pernicious insinuation in that quote. The notion that if you haven't achieved x by y age you're done. That's a debilitating notion. And we have it in the tech community, if you can't code by z age give up. Or if you haven't achieved some startup success or some corporate title
at an early age you're a failure.
It is possible for both to be true: For many children, if they have not had early childhood intervention, by 8 years old it is too late, but that for any individual child, they can still improve their lot later in childhood (or even, of course, well into adulthood).
As a similar example, it is extremely likely that a child who is overweight or obese by middle school will be overweight or obese their entire life, and many scientists and clinicians believe that it is much easier to prevent childhood obesity than try to correct the weight imbalance later on. That doesn't mean that some people who are overweight kids won't eventually lose the weight and keep it off.
Hanging on to the hope that people can change at any point in life does not mean we should ignore the fact that many of our personality and social "guiderails" are laid down pretty early.
For a lot of 8 year olds that is accurate. Imagine not being able to read at 8. If your parents don't intervene you will be handicapped for life. On the other hand if your parents tutor you then it becomes a non-event.
Parents who were tutoring get paid less, reducing other opportunities perhaps?
(Working hypothesis, almost no parents tutor or can do so above primary school level in many field...)
The example they gave is pretty terrible, but yes, a lot has already been determined by age 8 based on parental engagement in their child’s education.
That said, it’s simpler than the example they gave. Some well-established examples:
- Did you read to your child from a young age? Bonus points if you did it in an “interactive” way.
- Did you engage with your children in dialogue using more or less proper speech (i.e., not baby talk). Ideally this is in a wide range of topics and with different types of language (e.g., description, narration, etc.). Ideally with some modeling of good language as well.
- Did/do you review your child’s homework with them? Ideally, did/do you sit with them quite a bit and review study strategies, time management, etc.?
- Do you constantly have new sources of learning available to your kids, and do you encourage them to use them (ideally by engaging with said materials with them)?
- Ideal but optional, do you try to give your children a wide range of experiences. Simple examples are field trips, intro to various sports, intro to various arts, etc.? The article characterizes this with very high end examples, but they can be done cheaply.
The parents who do these things give their children a huge advantage in life.
Some folks on HN may be asking something along the lines of “um, isn’t that what pretty much all parents do?” The answer is largely no.
A common (perhaps close to median) example of poor parental engagement in the education environment:
- Child is never read to... ever. Parent may not be so good at reading.
- Child rarely spoken to, except via commands. Household mentality is that children are meant to be seen and not heard.
- Child largely left alone to keep themselves entertained on their own in a resource-poor environment.
- Child is never helped with homework. Never encouraged to learn for the sake of learning. School is often disparaged, and doing well in school may entail being abused by family members and/or peers.
- Child never leaves their neighborhood, much less their town, state, or country. Much of what is seen on TV that is supposed to be a caricature of modern life is largely or completely unrelatable to the child’s own environment.
- Things like going to anything cultural that is oriented towards children is non-existent. No children’s museum, no children’s theater or orchestra. Sports will be whatever (if anything) is played locally.
These folks have an uphill battle in terms of fighting inequality.
If you want to do something to counter the second example, support Headstart programs financially and politically. These programs have proven results, but somehow find themselves consistently compromised in terms of funding. These programs are low-hanging fruit for easy wins.
Depends on the quality of the education system, it well could be that a gap gathered by 8 will have a huge impact. The system can be quite competitive at 8 (and in some countries, as early as 5 or 6)
My brother is a med student on the south side of Chicago, and he has been tell me about how much of a real shock it is to see how far behind some of the children are even by age 8. This isn't a lack of summer camp. It is illiteracy, completely stunted intellectual development, that is so far behind, it is obvious at the age, the child has 0 chance of competing in the US economy.
If anything, age 8 is an overestimate rather than an underestimate. Nowadays, the preschool years are considered crucially important towards determining lifelong outcomes. It's a good idea to not be poor from age 0 to 2.
I actually had a very similar conversation with my wife last night about our son's future education (wish me luck) where I effectively said the same thing.
To paraphrase my argument: reading, writing and math are too important to be taught at school or rely upon their standardised tests. if I have to wait for a test result from school to tell me my child can't do the thing, I've already failed. And in addition he'll have started on music, some sports, sciences and programming likely before he ever reaches a compulsory classroom.
This idea that teachers, in a group environment, with a standardised curricula can compete with that is just downright dishonest. And the idea that this is meritocratic and that children compete on some level playing field is absurd. You can't teach finance and programming and economics well at school because most current teachers do not understand or cannot implement such into their own lives,and philosophy just isn't taught in general.
By the time you reach cs 101 at university, how is the average child who learnt to type at school and that computing is an iPad with YouTube attached supposed to be realistically competing with the other students who already have 10 to 15 years of experience?
and if you cannot read or do math at 8, on average, what sort of life have you had and how do you compare with children already thriving and building upon what they know?
perhaps we also have a disagreement about where lower/middle skill jobs and wages are also going? you might be assuming "well, he won't thrive in comparison, but he can live a nice normal life at a "insert basic job here", under the assumption basic job will exist or have a good living standard.
By all means, I want a world where learning is available to all and we tell people that they can improve, but I'm not in denial about the stark probabilistic realities a lot of kids face, and I haven't even touched upon anti-intellectual attitudes and active consumerist/marketing/ ideological strategies that are actively trying to stop people learning to be educated or think critically...
It's probably too late by the time the child was born. Those stupid violin lessons or summer programs are not really a sign of competence. They are just a status symbol of rich families that can afford to let their children enroll in private school and an expensive ivy league college.
If you were to ask me then honestly it's only too late when you're 16 years old. At that point you should already know what type of college degree you want and you should have at least some experience in whatever you're going to spend 4-5 years of your life studying. But this has more to do with "finding yourself" than economic opportunity. If all you want to be is a corporate drone with a paycheck then you just need to look at the average salaries and the dropout rate to make sure you don't fail at something you're not passionate about.
Hi, black software engineer from Chicago's West side. From 1st through 4th, I attended a community elementary school where my older sister and I were the only students who could effectively read at all. The entire school was participating in a remedial education program where all the textbooks, 1st through 6th or so, broke words in sentences down by syllable. They barely practiced math, they were so focused on just getting the ability to read to be set in. This created immense ostracization for my sister and I. She graduated after two years whereas I stuck around for another two through fourth. To give you an idea what some of the parents were on, once a bunch of classmates, whom I somehow got grouped into, were held for detention after school in class in third grade because they were ruthlessly making fun of a girl. As we all mandatorily stood with our hands on our heads, I watched as her father walked her MUCH OLDER MALE COUSIN into the class, after school hours, and proceeded to order him to beat each of us up one-by-one for making fun of his daughter. I was second to last for a beating when my third-grade teacher finally returned to the class and stopped this assault. Mind you, my mother worked at the school and this older cousin knew this and knew her as well. I've also seen kids smacked around and chastised _in front of the class_, by their parent, for failing to fight back in a fight (which is kinda important to learn, but that ain't the way to do it).
After years of this someone finally took notice and transferred me to a school in a historically Jewish neighborhood on the north end of the city where I was finally surrounded by children that were my academic peers, on a hour or so bus ride each day early in the morning. My first day of class in my new school was when I discovered there was this thing called cursive writing.
I don't think enough people understand the situation for a growing child in the tougher areas of Chicago, this was just all in the 90s, things are worse now.
I wonder how much effect immigration has had on the matter of inequality.
I'm going off these assumptions:
-> Lesser immigration would've led to a higher GDP/capita figure for US.
-> More resources to subsidize college and lesser cut-throat competition for jobs.
-> Employers would be forced to pay higher wages and people would be more easily to retrain for different jobs.
-> Bonus points: We can help Africa and South american countries with a much higher monetary amount and resources to help them catch up to a developed world status.
That is true but we're talking about the still remaining low skilled jobs that simply could not be outsourced.
Now with a high number of low skilled immigrants competing with natives for those same remaining low skilled jobs that couldn't be outsourced, the outcome is worse for existing population.
There is also a trend where as much is outsourced as possible and what isn't outsourced is over tasked. I've seen outsourcing going from a direct replacement 1 to 1 to 3X the staff and the remaining non outsourced people have to basically be human databases and regurgitate info and critically think for this other group. Adding in constant instant message rooms that are mandatory to be logged into and constantly pinged is just insane. No employees win in this situation.
The effect you're talking about is not instant. If you get a lot of asylum seekers in a short time your GDP/capita will take a hit until they've been integrated into society and become a net positive.
And that period to get assimilated and become net positive might be a period of +- few decades which is an insanely long time in today's world of super fast moving money and economic conditions and 4 year hyper partisan election cycles.
Just look to the 3rd World if you want to know what the US will be like in the future. No middle class, lots of shanty/homeless camps, walls around properties, loss of pretty much all public spaces due to crime and violence.
Sounds like a really great place to be, can't wait.
Democrats and Establishment Republicans did this to us. It didn't have to be like this.
"when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts."
In other words, inflation is a policy choice to combat sticky wages, which (if you think that's a problem), the solution is to, apparently, screw labor by devaluing their wages from under them.
How does it give to the rich? The eroding value of the currency all but forces individuals and, e.g. pension funds, to dump resources into the stock market, venture investments, etc, which are largely playgrounds of the economically advantaged.
It also has unfortunate side effects like consumerism and environmental destruction, but that's outside of the scope of the OP.
The timing lines up, too. What happened 50 years ago that caused the divergence? With the ending of Bretton Woods, Nixon closed the gold window which was the last thing holding back policy from rampant inflation.
The article tell us: "You had the same thing with the Industrial Revolution that concentrated more and more wealth into the hands of capital. "
So, your identification of causation with the end of the gold standard it's not at all clear.
In a way, inflation can be re-distributive because is good for the debtor and bad for the lender.
Maybe, is time to accept that wealth accumulates, money call money, and the leveler are wars and disasters or some kind of political action. In other words, the system is not stable.
This is a huge myth propagated by economic planners who have never been poor. Typically, the poor don't have debt at all due to no access to banking services, and when they do have access to debt it's a double digit interest rates on short-term revolving basis. Inflation does not help that situation at all.
The idea that the rich have no debt is total nonsense. Most of the wealthy make money off of debt-based instruments. For example, trading on margin, shorting, options calls and puts, forex trading, all depend on low interest rates/expanding money supply to make long-term speculative adventures worthwhile.
It is, indeed, low interest loans, over the long term, which are the most helped by inflation.
> In other words, inflation is a policy choice to combat sticky wages, which (if you think that's a problem), the solution is to, apparently, screw labor by devaluing their wages from under them.
This is complete misunderstanding of how this works. Inflation does not increase the real return from stock markets. Inflation erodes also capital. Capital must work just to stay still.
Inflation or not, the wages reach equilibrium. You can't improve the aggregate sum of wages by deceasing inflation. If nominal wages are too high the equilibrium is found trough periods of unemployment. Small inflation keeps unemployment and friction in job markets in check.
>Inflation and Income Inequality in Developed Economies
>We find a U-shaped link between long-run inflation and income inequality. Low inflation rates are associated with higher income inequality. As inflation goes up, inequality decreases, reaches a minimum with an inflation rate of about 13%, and then starts rising again
> Inflation does not increase the real return from stock markets. Inflation erodes also capital. Capital must work just to stay still.
Actually, it is not so. What we call 'real return' in the stock market is stock prices as a percentage less consumer price inflation as a percentage. If inflation causes stocks prices to inflate more quickly than wages, then it will appear to boost real returns in the stock market because we aren't very good at measuring such things. To state the same thing in a different way, there is no special reason why consumer price inflation and asset price inflation should be the same thing.
Modern methods of money creation (ie, post what has been happening post 1970) focus on money creation by lending people money to buy assets. It seems quite unlikely that the inflation indexes in common use are the right adjustments to make to the stock market, house prices, etc, etc.
Look at the price of gold for example - according to the BLS [0] $165 dollars of gold in 1975 should be worth about $811 today. It is actually worth double that. Gold is a pet rock with no prospect of a real return, and also out of fashion as an asset. It is certainly not the sort of thing people borrow money to purchase - and that makes it a great indicator that asset prices are inflating much faster than the official inflation statistics, because even with those headwinds it is acting as though owning a pet rock is a productive long-term decision. It is quite likely that inflation is reallocating resources from workers to owners of assets.
>This is complete misunderstanding of how this works. Inflation does not increase the real return from stock markets. Inflation erodes also capital. Capital must work just to stay still.
I think you made a basic mistake there. The assumption you're making is that the inflation is spread over every single citizen. In reality there is no reason for that to happen. It is equally possible for all inflation to happen in the stock or housing market which is inaccessible to the average low income worker. Therefore the one who is staying still is the low income worker.
There are structural incentives to inflate asset prices (free wealth to the holders), though those aren't ironclad (bubbles burst). Bernhard J. Stein's work (1930s - 50s) is interesting here.
Commodity price inflation tends to have different mechanisms, as does wage erosion. There are other classes of economic goods, including public goods, taxes, interest and (in some cases distinguished from assets) capital goods.
For all that Adam Smith discussed these (the better parts of books 1, 2, and 5 of Wealth of Nations), they are, IMO, poorly considered in most modern economics. Marginal analysis only explains part of their dynamics.
I'm also increasingly convinced inflation is a symptom rather than a fundamental problem.
their are natural limits to inequality. As successful people sell out their will to compete. Good news is it opens up opportunities for not yet successful people.
>Because the low-wage jobs that left here are considered really good jobs in China. We’ve lifted a billion, two billion people out of poverty over the past 30 years.
This sort of shit is the worst. People in China doing well is not our problem, just like people in Germany doing well is not our problem, and there is something deeply racist at the root of this suggestion, as if poor people in China are stealing wealth that rightly belongs to Americans. This is not how productivity works. The people stealing from Americans are rich Americans.
Living standards have gone down and life has become much more economically insecure for most working people as a result of the policies that economists recommend. This includes globalization, free trade, low taxes, destruction of labor unions, and the like. The authors support these policies. These changes have been accompanied by a political system that no longer represents the left behind. So of course the losers are not compensated; that is by design, not accident. I think we have the choice to either become more equal or face increasing political instability and viciousness - and the latter is more likely, witness Trump, Brexit, etc. I have lost respect for economic analysis because it has been so out of touch with political and social consequences as to be hugely destructive to the fabric of society. Much more of this and I hate to see what will become of our society.
Economists have not necessarily been blind to social needs - policy makers and politicians benefiting from a revolving door of oligarchs enabled by various institutions culturally stationed to manipulate a larger population into working under these few for smaller and smaller pieces of power. Milton Friedman made it quite clear that a free market doesn’t provide a social safety net in any way and that a population that doesn’t succeed in the market should need some basic way to survive or we’s face huge social unrest. While America had social security and Medicare early on, we’ve dismantled their efficacy with a toothless, captured government while private sector has gained in power enormously in the form of multinational corporations the Founding Fathers all distrusted (they were no fans of the British East India Company).
I think we’ll have one or two more larger scale revolutions before people around the globe learn that consolidated power of any sort whether it comes from religions, the public masses (populism), government, corporations, or perhaps even science is dangerous.
A large portion of what reduced inequality was the destruction of wealth during World War II and the fact that the U.S. benefited afterward from being the last standing industrial economy.
I seriously doubt that.
We shipped essentially all able-bodied men off to war, so much so that we filled a lot of jobs with women. Birth rates were low because the men were physically absent.
People were encouraged to grow Victory Gardens so farm food could feed soldiers. Tobacco, sugar etc were all rationed. We stopped making cars and converted car factories to keep factories.
A lot of families had two incomes, no children and couldn't spend their money on luxury goods because they simply weren't available. Savings rates during the war were extremely high, above 50 percent some years.
The boys came home, bringing veterans benefits with them. This included help buying a house and going to college.
Unlike with modern lottery winners, this formula did not encourage people to just blow their money frivolously. They began buying houses at such high rates we invented new ways to throw them up quickly, giving rise to the modern suburb.
Celibacy, low birth rates, frugal living, hard work and high savings rates helped reduce inequality. A lot of that could be replicated. We just don't typically have the self discipline to do so individually.
I'm saying there were large-scale forces at work during WW2 that forced many people into that pattern. It's much harder to do on an individual basis without those forces, but can be done sometimes.
Among other things, I paid down debt while homeless. My last student loan payment was made in July 2017. I was back in housing in September the same year.
Of course, your framing sounds like I'm being accused of blaming the poor. I'm not. I'm just questioning the assertion of the article because it honestly doesn't fit with what I have read of history.
The Baby Boomer generation is the children of the WW2 veterans. It was a very widespread phenomenon.
There are factors at play now that are definitely different from then. Most new houses in the 1950s were about 1200 sqft. Now they are nearly 2500 sqft.
We desperately need to do something about our housing supply. But most people don't want to.
One aspect I haven’t seen much discussion about is that WWII may have acted as a kind of giant social mixer.
I mean this in the sense that people who might hardly meet each today were thrown together often more or less as equals. At least within the (ok, very limited) bounds of the race and gender norms of the day.
Today a programmer, middle manager or radiographer say can get to middle age without ever really “meeting” a labourer, truck driver or meat packer. I think that has pretty deep implications for labour solidarity.
> Q: A much steeper income tax has gotten attention — some pitching even 70%. Is that possible?
> Oyer: I can’t imagine a 70% tax rate. And I don’t think we’ll see a universal basic income for a long time. These are hugely expensive ideas.
Then Oyer is experiencing a failure of the imagination as well as historical recollection. Tax rates have been that high before. Today a marginal tax income over what, 100 million at 70%--even 50%-- and there's suddenly a lot more money to build a social safety net with.
"Using data from the Bureau of Labor Statistics, Warshawsky shows that because health care benefits are a larger share of compensation for lower-paid than higher-paid workers, measures of inequality and even measures of economic progress can be misleading or distorted. "
I wonder if multiple people of low incomes may someday pool income together and use it to buy housing and food that they can all use to live comfortably. I feel this may be the only way to solve the inequality crisis.
The article is a lot more substantive than the headline, but the frame that inequality is the problem will lead to 'solutions' that do not solve the real problems.
The root problem here is clearly that living standards are at risk of dropping. That is not necessarily linked to inequality - inequality can rise in tandem with living standards. The policy tools that raise living standards are not the same policies that promote equality (the experiences in the 20th and 21st centuries suggest quite the opposite).
If people became rich relative to their ability to raise living standards - which is the main line of defense for capitalism as a system, by the way - then we expect higher inequality because the people who figure out how to raise mass living standards by small amounts should become disgustingly wealthy. The problem is that current policies are making people rich who aren't productive members of society. They are making idiot bankers rich who set us up for things like the '07-'08 financial crisis, then bailing them out when it looks like the market might call their bluffs.
I read through to the end of TFA and they gave no FSolution. The only solution is to guarantee everyone a basic social security net for life that cover all the basics ie food shelter clothing healthcare and education. Anything more than that will need individuals to figure it out. As human civilization progresses our basic guarantees to human life also need to keep up and elevate.
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[ 3.3 ms ] story [ 191 ms ] threadTechies have been spared because round one pitted the US against India, but in reality Indian firms were happy to capture low-hanging fruit and never bothered trying to go head-to-head with US firms. China will be different. They don't want to do our menial work, they want to own markets.
You are not ready to compete with China, unless you are going to do "996" for $50k a year.
How much of this effect is the vastly higher percentage of people who now go to college? If you line up 100 people by vague estimation of their likely earning potential in 1970 and do the same today, but now 2.5 times as many people attend college, the population remaining with "no college" in 2020 isn't really the same population as it was in 1970.
China and the rest of Asia are magnitudes more competitive compared to 50 years ago. And prior to that US industry was unmatched thanks to the massive effects world war 2 had on the other, western industrialized nations.
If the rest of the world becoming more productive results in US workers being worse off, then something is severely wrong with US trade policy. For one, it contradicts the dogma that more trade is strictly beneficial.
But yeah, it's still trade, so there will be lows and highs, and ebbs and flows.
Ricardo's original idea was applicable with a narrow set of assumptions/conditions and didn't have much to say about who'd end up with the greater net wealth. I'm not sure how/why it was turned into a magical improve-any-economy law of nature.
It is strictly beneficial, in aggregate. But in any situation, there are winners and there are losers. There are no decisions you can make where everybody wins. If you live in a first world country and your skill set is worse than somebody in the developing world, you’re going to have a bad time.
The usually trotted-out theory of comparative advantage claims there are only winners.
I would argue anyone who says otherwise is either being disingenuous or doesn't actually understand economics.
That is not to say that is not trotted out frequently.
Also, to be fair, during my economics education they had this whole focus on modeling policies and finding optimizations where no one is worse off.
Of course, in the real world, that practically never happens... and there is an argument that the focus on efficient/competitive markets/ equilibria/rational agents is also a bit "wouldn't it be nice if the world was actually like this...", whereas in the real world only the most trivial goods/markets can vaguely be described as such...
Even if your skill set is greater, your cost of living is higher. So you'd have to be more than marginally better.
Also, the logical conclusion of where this seems to be headed is that if you're a low-skill person living in a first-world county, voting for protectionist, isolationist policies/politicians is a rational choice.
So, yes, they are crabs at the bottom of the pot seeing other crabs moving up, and they cannot abide by that.
Instead, I’ll just suggest that you find a good Freshman-level Economics textbook and read carefully. You may find it illuminating to understand the concepts behind complex policy decisions.
Given that none of the most successful economies developed without protectionism [1,2], you'll have a difficult time explaining that indeed. That pesky reality, always getting in the way of "good Freshman-level Economics textbooks".
[1] https://en.wikipedia.org/wiki/Comparative_advantage#Criticis...
[2] https://news.ycombinator.com/item?id=20320483
Perhaps if society used the increased wealth to benefit everyone the value of global interconnected trade could be felt by everyone. This is an easy fix, return to the post World War Two tax policy that built the middle class. Return to a well respected government that drives large scale work like highways, scientific research, the space program. Think about how much technology is a direct result of military research (GPS, the Internet, rocketry, etc) imagine if we mobilized on the same scale for exploring space, basic research and innovation and entrepreneurial activity.
We’ve also had a combination of tax and regulatory policy that has encouraged capital formation and increasing returns to capital, so labor’s share of returns has decreased.
To add to that, capital is exponentially more portable than labor. With globalization, capital in the form of investments can move wherever it needs to to grow, it's borderless. Labor however, in order to grow wealth has to physically move. Remote jobs for basic labor doesn't exist - that's almost exclusively knowledge work.
So if you're a coal miner, your ability to create wealth is extremely limited to certain physical places. If you're a remote Java dev, you can code from anywhere and grow wealth much easier, but there is a serious time cost to switching work. If you're an investor and just need to drop money into an account, not only can you do it from anywhere, you can move things around more or less immediately with little (relative) cost.
It's about portability of the thing that is growing the wealth. Labor = slow, Capital = fast.
In a world where everyone has a college degree, well, some people with college degrees will have to be the ditch diggers so to speak.
I don't know how you solve that problem? It's just math.
It's not "math" that humans have to engage in undesirable labor, under brutal conditions. We have thousands of years of developing tools that are contrary to that statement.
It is a collective social decision to say that an hour of someone's time is worth less than building a robot. That's the only reason why cashiers still exist.
If you go that route, then the people who build and program the robots will necessarily be paid less. Today that is likely a top 10% job. (More likely a top 5% job if we're being honest.) In a world where everyone has a college degree and there are 30 times the number of people who can program those things because the tools have gotten just that easy...
well, you do the math.
At the extreme, you can't just pay 100% of the labor market more money because they have a college degree. It just doesn't work like that.
Put in more base terms, there is only room for 1% of the people, in the top 1%. You may be able to, through the magic of increased production, decrease the price of everything in your economy. So that the other 99% of people can afford access to everything to which people in the top 1% have access. But even that is difficult in the extreme. It'd just be easier, over time, than is paying everyone in your economy more over time.
It's not a zero sum game. Imagine it this way. Everyone today is making more than hunt from a cave money. Why is that? Because a single human can produce more than the bare minimum for survival.
- who gets to buy prime location property
- who ends up in best schools
- who gets to own mines and infrastructure
- who gets to truly rule (too big governments are slow)
- every instance of packing problem where supply is limited by real scarcity or scaling by communication
That... seems to be a total misunderstanding of why people are concerned about income inequality. The fact that the sizes of the percentile buckets are fixes does not mean that the distribution between the buckets is zero sum.
There's no "just math" reason for why we pay some jobs more than others. It's not even a "just market" reason. There are elaborate regulations on income (c.f. tax brackets, minimum wage, investment taxes, mortgage deductions...) all across the board. And those aren't working well, as evidenced by the numbers in the linked article.
None of that stuff is "math". It's policy.
Actually this is exactly what should happen. Maybe the increase in wages isn't as extreme as 100% but it should be at least 2% per year. The problem is that it didn't happen during the last decade.
People who don’t want to waste time reading hotel reviews and deal-hunting on travel sites.
How about we pay the ditch diggers enough to live on? In fact, what the numbers are showing is that ditch diggers are poorer now than they were! Even if you refuse to share any of your tech industry gains, can't we at least keep ditch diggers at parity?
Probably made worse by the vastly higher amount of dual income household, so someone with just 1 income is proportionally worse off.
A single unskilled worker vs a couple of high skill workers, competing for supply & demand against each other...yeah, the former's not gonna have fun.
http://www.levyinstitute.org/publications/can-redistribution...
Like anything else redistribution falls on it's face if you go too crazy with it.
But sure, the problem was the system because that’s easy to believe, as it requires just accepting the standard American narrative.
I agree with your point that populations can change over time. Fifty years ago, many people didn't get degrees and made good money. Today, people without degrees (and some with) don't make good money.
So instead of trying to segment in groups (the college educated vs. everyone else), let's just look at everyone. This removes the concern of our shifting populations.
One metric to look at is median income. Adjusted for inflation, it hasn't budged much in decades. In the past 42 years, it's increased about 32 percent.
https://fred.stlouisfed.org/series/MEPAINUSA672N
But demographics have changed dramatically since 1970. For example, immigrants make up almost 3x as large a fraction of the population (from 5% to almost 15%) than in 1970. Obviously, if you add a large number of (typically) economically disadvantaged people to the population, income inequality is going to go up, even if there is no change in incomes for everyone else: https://www.migrationpolicy.org/sites/default/files/source_i....
Likewise, peoples’ incomes increase with age. The population overall has grayed significantly. Again, even if wealth inequality wasn’t increasing for people of any given age, changing the age distribution of the population will affect income inequality.
Finally, a larger fraction of the population now comprises historically disadvantaged minorities. While the income gap between races in the US is a huge problem, it’s a different problem than “income inequality” genetically, deserving more targeted solutions. (And even that income gap is hard to analyze, because the ages of people of different races in the US differ quite dramatically). The median age of non-Hispanic whites is 42. The median age of Hispanic people is 28. The median age of African Americans is 33: https://www.pewresearch.org/fact-tank/2016/07/07/biggest-sha...).
Income inequality probably is going up. But I’ve never seen a study that actually holds demographic changes constant so the result reflects peoples’ perception of what income inequality means.
Take note of how often you hear/read something like "incomes haven't risen in 30 years, but prices have gone up over 50% over that period". [Almost?] Inevitably, the income will be real income [inflation adjusted] and the prices nominal prices.
On a per square foot basis, you don't really see an increase.
http://www.aei.org/publication/new-us-homes-today-are-1000-s...
One of the commenters on the article you linked makes a good point:
"new single family homes are a very small part of the real estate market.
most of the big price moves have been in urban areas where single family dwellings uncommon and new homes extremely rare."
I worry that the public / workers / voters / policy makers are being misled/confused/misdirected.
The public is being misled, by whenever someone complains about stagnant wages the response is "you have smartphones now", but we can't afford houses or healthcare how is this okay? So your argument seems to be that all economists are in on this together to do what?
And your thankful your favorite youtube news personality has cracked the case (without publishing any research and has an opportunity to make money from getting views). Good thing he /she is looking out for you.
The bottom line is you sound incredibly foolish to me if you can't supply any sources of people trying to do this trick. Even if you do find one or two examples, there are plenty of sound statistics that say people have it harder now finicailly then 50 years ago.
[0] https://www.investopedia.com/ask/answers/101314/what-does-cu...
[1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
Even things that are true are often reported in a way that obscures causal factors. For example, wages are stagnating, but total compensation (wages plus benefits) is not. Now, from an employee’s perspective, they might not care that their total compensation is growing because health insurance premiums are increasing but paychecks are staying the same size. But the employer has the exact opposite perspective: the employee is costing more money whether that money is going to to paychecks or benefits. Failure to articulate that distinction moreover leads you to the wrong conclusions. When you’re told about wage stagnation but growing corporate profits, you’re supposed to think employees are getting a smaller piece of the pie. That’s not true: https://www.nber.org/digest/oct08/w13953.html
> Total employee compensation was 66 percent of national income in 1970 and 64 percent in 2006. This measure of the labor compensation share has been remarkably stable since the 1970s. It rose from an average of 62 percent in the 1960s to 66 percent in the 1970s and 1980s, and then declined to 65 percent in the 1990s where it has remained from 2000 until the end of 2007.
Here is the conspiracy theory presented with no examples: >Inevitably, the income will be real income [inflation adjusted] and the prices nominal prices.
This is what I take issue with and I don't think that a comparison between real nominal prices happens in order to trick people. This seems like something high school student wouldn't get away with.
https://www.nytimes.com/2019/05/02/business/economy/wage-gro...
Then look at the article: nominal wages rose every year (as indicated in the chart), but the breathless headline suggests the opposite to the average American. Do you believe that the omission of the word "real" in the headline was purely accidental or intended to drive outrage clicks?
They don't specify which in the title, but they do in the article. The biggest thing is there is no comparison between nominal and real prices. Acting like the nominal cost of things is not keeping up with real wages.
If you don't want to get tricked maybe read the whole article instead of just the title. It is a somewhat complex topic and takes some thought to put into it if you want to know what is going on.
I'll reply on thread next time I see one, which is likely to not happen in the next 24 hours. Hopefully, you'll take an open minded read to see where social and mainstream media accounts are biased for outrage and clicks over information content and will notice these on your own as well.
Initially John's chances of getting a job: 1/N
Now, with the arrival of new immigrant, John's chances: 1/(N+1) i.e. he's worse off.
Sure it turned out better for the new immigrant and he can earn way more than his original country and thus this is better for humanity and the globe but it is of little relief to John who is worse off now.
My assumptions in this:
- John is a low skilled worker who will not be easily able to switch to another line of work like a software developer
- John does not have significant savings to fall back on.
Another fun fact:
- The will to let the low skilled immigrant in, in today's environment does not stem necessarily from a position of goodwill, rather it is a calculated position to keep the numbers of a voting bloc which consistently votes for a given party, constant. This can be easily explained by seeing where the opposition to limiting immigration comes from.
So keeping in mind the above 2 points, it becomes readily apparent that what politics has gotten good at is winning elections and not betterment of people. One of the parties has discovered that one of the easiest "hacks" or "optimizations" is to keep importing poor people and that way you will have a steady stream of voters, otherwise you might actually have to start improving the stock of existing population.
This is somewhat analogous to how simply being good at a written test for a position does not necessarily mean you're a good fit for that position but you've simply optimized for the selection process.
All of this to say that as far as a hypothetical John is concerned, it is of no merit to him that the world is a bit more efficient because a person from Bangladesh is able to work with a little more efficiency, indeed whatever small gains from that are outright eclipse by an increased competition in the local pool of jobs and resources.
Economists used to believe that many things were zero sum, (ie if England allows French cheese imports it will be at the expense of British cheese producers. Yet often allowing imports and increased trade leaves both France and England richer as consumers in both places value the additional selection and the competition lowers prices or foreign items can charge a premium for their novelty). Immigration is similar; it’s not zero sum.
Blaming this on a cynical political motive to create a voting block is contrary to the history of commerce and global trade and also contrary to your own analysis. It seems to me that the party most opposed to immigration is also the party that had been driving inequality by 1. Promoting globalization while also decimating the social safety net that would ease the transition, 2. Shifting to regressive taxation on sales while drastically lowering taxes on capital and its accumulation i.e. inheritance taxes. 3. Destroying any bargaining power for workers and employees and resisting minimum wage increases. I could go on and on.
It's too late for "a lot of children" by age 8? And you're underprivileged if you didn't attend a summer program in the Caribbean?
Yes, I think there is good evidence that if you are in a poverty-stricken family and you don't get very early intervention, that by mid-elementary school it is too late for your average poor kid. The reason being that the rest of your environment of poverty is going to be pretty much pulling against you the rest of your childhood, so intervention while your hopes and goals are not yet formed is your best bet.
And come on, the author wasn't saying if you didn't attend a Caribbean summer program that you're underprivileged. I believe he was just using that to highlight the pretty extreme lengths that middle class and above parents go to provide their children with educational enrichment (including music lessons, sports programs, summer camps, etc.) that put poor kids at a lifelong disadvantage.
And this mawkish line is published under the banner of Stanford, an arbiter of the truth. I expect better.
edit:
My comments seem to have sparked a nerve. I simply wanted to point out bad rhetoric that undermines the cause and weakens an institution of trust. The situation is bad, so there's no need to exaggerate or lie to deliver the point. And this isn't a partisan issue. A conservative like Thiel would deliver a similar message.
There is, however, a pernicious insinuation in that quote. The notion that if you haven't achieved x by y age you're done. That's a debilitating notion. And we have it in the tech community, if you can't code by z age give up. Or if you haven't achieved some startup success or some corporate title at an early age you're a failure.
As a similar example, it is extremely likely that a child who is overweight or obese by middle school will be overweight or obese their entire life, and many scientists and clinicians believe that it is much easier to prevent childhood obesity than try to correct the weight imbalance later on. That doesn't mean that some people who are overweight kids won't eventually lose the weight and keep it off.
Hanging on to the hope that people can change at any point in life does not mean we should ignore the fact that many of our personality and social "guiderails" are laid down pretty early.
That said, it’s simpler than the example they gave. Some well-established examples:
- Did you read to your child from a young age? Bonus points if you did it in an “interactive” way.
- Did you engage with your children in dialogue using more or less proper speech (i.e., not baby talk). Ideally this is in a wide range of topics and with different types of language (e.g., description, narration, etc.). Ideally with some modeling of good language as well.
- Did/do you review your child’s homework with them? Ideally, did/do you sit with them quite a bit and review study strategies, time management, etc.?
- Do you constantly have new sources of learning available to your kids, and do you encourage them to use them (ideally by engaging with said materials with them)?
- Ideal but optional, do you try to give your children a wide range of experiences. Simple examples are field trips, intro to various sports, intro to various arts, etc.? The article characterizes this with very high end examples, but they can be done cheaply.
The parents who do these things give their children a huge advantage in life.
Some folks on HN may be asking something along the lines of “um, isn’t that what pretty much all parents do?” The answer is largely no.
A common (perhaps close to median) example of poor parental engagement in the education environment:
- Child is never read to... ever. Parent may not be so good at reading.
- Child rarely spoken to, except via commands. Household mentality is that children are meant to be seen and not heard.
- Child largely left alone to keep themselves entertained on their own in a resource-poor environment.
- Child is never helped with homework. Never encouraged to learn for the sake of learning. School is often disparaged, and doing well in school may entail being abused by family members and/or peers.
- Child never leaves their neighborhood, much less their town, state, or country. Much of what is seen on TV that is supposed to be a caricature of modern life is largely or completely unrelatable to the child’s own environment.
- Things like going to anything cultural that is oriented towards children is non-existent. No children’s museum, no children’s theater or orchestra. Sports will be whatever (if anything) is played locally.
These folks have an uphill battle in terms of fighting inequality.
If you want to do something to counter the second example, support Headstart programs financially and politically. These programs have proven results, but somehow find themselves consistently compromised in terms of funding. These programs are low-hanging fruit for easy wins.
To paraphrase my argument: reading, writing and math are too important to be taught at school or rely upon their standardised tests. if I have to wait for a test result from school to tell me my child can't do the thing, I've already failed. And in addition he'll have started on music, some sports, sciences and programming likely before he ever reaches a compulsory classroom.
This idea that teachers, in a group environment, with a standardised curricula can compete with that is just downright dishonest. And the idea that this is meritocratic and that children compete on some level playing field is absurd. You can't teach finance and programming and economics well at school because most current teachers do not understand or cannot implement such into their own lives,and philosophy just isn't taught in general.
By the time you reach cs 101 at university, how is the average child who learnt to type at school and that computing is an iPad with YouTube attached supposed to be realistically competing with the other students who already have 10 to 15 years of experience?
and if you cannot read or do math at 8, on average, what sort of life have you had and how do you compare with children already thriving and building upon what they know?
perhaps we also have a disagreement about where lower/middle skill jobs and wages are also going? you might be assuming "well, he won't thrive in comparison, but he can live a nice normal life at a "insert basic job here", under the assumption basic job will exist or have a good living standard.
By all means, I want a world where learning is available to all and we tell people that they can improve, but I'm not in denial about the stark probabilistic realities a lot of kids face, and I haven't even touched upon anti-intellectual attitudes and active consumerist/marketing/ ideological strategies that are actively trying to stop people learning to be educated or think critically...
If you were to ask me then honestly it's only too late when you're 16 years old. At that point you should already know what type of college degree you want and you should have at least some experience in whatever you're going to spend 4-5 years of your life studying. But this has more to do with "finding yourself" than economic opportunity. If all you want to be is a corporate drone with a paycheck then you just need to look at the average salaries and the dropout rate to make sure you don't fail at something you're not passionate about.
After years of this someone finally took notice and transferred me to a school in a historically Jewish neighborhood on the north end of the city where I was finally surrounded by children that were my academic peers, on a hour or so bus ride each day early in the morning. My first day of class in my new school was when I discovered there was this thing called cursive writing.
I don't think enough people understand the situation for a growing child in the tougher areas of Chicago, this was just all in the 90s, things are worse now.
I'm going off these assumptions:
-> Lesser immigration would've led to a higher GDP/capita figure for US.
-> More resources to subsidize college and lesser cut-throat competition for jobs.
-> Employers would be forced to pay higher wages and people would be more easily to retrain for different jobs.
-> Bonus points: We can help Africa and South american countries with a much higher monetary amount and resources to help them catch up to a developed world status.
How?
Labor has long been subject to outsourcing as a result of entities trying to reduce costs and increase profits.
Now with a high number of low skilled immigrants competing with natives for those same remaining low skilled jobs that couldn't be outsourced, the outcome is worse for existing population.
> We can help Africa and South american countries
It would be a significant improvement if the US stopped "helping" South America. Allende would like a word.
Sounds like a really great place to be, can't wait.
Democrats and Establishment Republicans did this to us. It didn't have to be like this.
How does it rob from the poor?
https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...
"when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts."
In other words, inflation is a policy choice to combat sticky wages, which (if you think that's a problem), the solution is to, apparently, screw labor by devaluing their wages from under them.
How does it give to the rich? The eroding value of the currency all but forces individuals and, e.g. pension funds, to dump resources into the stock market, venture investments, etc, which are largely playgrounds of the economically advantaged.
It also has unfortunate side effects like consumerism and environmental destruction, but that's outside of the scope of the OP.
The timing lines up, too. What happened 50 years ago that caused the divergence? With the ending of Bretton Woods, Nixon closed the gold window which was the last thing holding back policy from rampant inflation.
So, your identification of causation with the end of the gold standard it's not at all clear.
In a way, inflation can be re-distributive because is good for the debtor and bad for the lender.
Maybe, is time to accept that wealth accumulates, money call money, and the leveler are wars and disasters or some kind of political action. In other words, the system is not stable.
This is a huge myth propagated by economic planners who have never been poor. Typically, the poor don't have debt at all due to no access to banking services, and when they do have access to debt it's a double digit interest rates on short-term revolving basis. Inflation does not help that situation at all.
The idea that the rich have no debt is total nonsense. Most of the wealthy make money off of debt-based instruments. For example, trading on margin, shorting, options calls and puts, forex trading, all depend on low interest rates/expanding money supply to make long-term speculative adventures worthwhile.
It is, indeed, low interest loans, over the long term, which are the most helped by inflation.
This is complete misunderstanding of how this works. Inflation does not increase the real return from stock markets. Inflation erodes also capital. Capital must work just to stay still.
Inflation or not, the wages reach equilibrium. You can't improve the aggregate sum of wages by deceasing inflation. If nominal wages are too high the equilibrium is found trough periods of unemployment. Small inflation keeps unemployment and friction in job markets in check.
Small inflation keeps income inequality in check.
https://www.cepweb.org/wp-content/uploads/2014/05/CEP_WP_Inf...
>Inflation and Income Inequality in Developed Economies
>We find a U-shaped link between long-run inflation and income inequality. Low inflation rates are associated with higher income inequality. As inflation goes up, inequality decreases, reaches a minimum with an inflation rate of about 13%, and then starts rising again
Actually, it is not so. What we call 'real return' in the stock market is stock prices as a percentage less consumer price inflation as a percentage. If inflation causes stocks prices to inflate more quickly than wages, then it will appear to boost real returns in the stock market because we aren't very good at measuring such things. To state the same thing in a different way, there is no special reason why consumer price inflation and asset price inflation should be the same thing.
Modern methods of money creation (ie, post what has been happening post 1970) focus on money creation by lending people money to buy assets. It seems quite unlikely that the inflation indexes in common use are the right adjustments to make to the stock market, house prices, etc, etc.
Look at the price of gold for example - according to the BLS [0] $165 dollars of gold in 1975 should be worth about $811 today. It is actually worth double that. Gold is a pet rock with no prospect of a real return, and also out of fashion as an asset. It is certainly not the sort of thing people borrow money to purchase - and that makes it a great indicator that asset prices are inflating much faster than the official inflation statistics, because even with those headwinds it is acting as though owning a pet rock is a productive long-term decision. It is quite likely that inflation is reallocating resources from workers to owners of assets.
[0] https://www.bls.gov/data/inflation_calculator.htm
[1] https://goldprice.org/gold-price-history.html
I think you made a basic mistake there. The assumption you're making is that the inflation is spread over every single citizen. In reality there is no reason for that to happen. It is equally possible for all inflation to happen in the stock or housing market which is inaccessible to the average low income worker. Therefore the one who is staying still is the low income worker.
There are structural incentives to inflate asset prices (free wealth to the holders), though those aren't ironclad (bubbles burst). Bernhard J. Stein's work (1930s - 50s) is interesting here.
Commodity price inflation tends to have different mechanisms, as does wage erosion. There are other classes of economic goods, including public goods, taxes, interest and (in some cases distinguished from assets) capital goods.
For all that Adam Smith discussed these (the better parts of books 1, 2, and 5 of Wealth of Nations), they are, IMO, poorly considered in most modern economics. Marginal analysis only explains part of their dynamics.
I'm also increasingly convinced inflation is a symptom rather than a fundamental problem.
Foreign holding of US debt increased by few times since year 2000.
The more US government borrows, the more TBills are there for purchase for foreign institutional buyers at attractive prices.
Those are of course the real movers of the current account deficit: rates and tbill market
US exports and labour will never be competitive until US can radically rethinks its view on government spendings and debt policy.
This sort of shit is the worst. People in China doing well is not our problem, just like people in Germany doing well is not our problem, and there is something deeply racist at the root of this suggestion, as if poor people in China are stealing wealth that rightly belongs to Americans. This is not how productivity works. The people stealing from Americans are rich Americans.
I think we’ll have one or two more larger scale revolutions before people around the globe learn that consolidated power of any sort whether it comes from religions, the public masses (populism), government, corporations, or perhaps even science is dangerous.
I seriously doubt that.
We shipped essentially all able-bodied men off to war, so much so that we filled a lot of jobs with women. Birth rates were low because the men were physically absent.
People were encouraged to grow Victory Gardens so farm food could feed soldiers. Tobacco, sugar etc were all rationed. We stopped making cars and converted car factories to keep factories.
A lot of families had two incomes, no children and couldn't spend their money on luxury goods because they simply weren't available. Savings rates during the war were extremely high, above 50 percent some years.
The boys came home, bringing veterans benefits with them. This included help buying a house and going to college.
Unlike with modern lottery winners, this formula did not encourage people to just blow their money frivolously. They began buying houses at such high rates we invented new ways to throw them up quickly, giving rise to the modern suburb.
Celibacy, low birth rates, frugal living, hard work and high savings rates helped reduce inequality. A lot of that could be replicated. We just don't typically have the self discipline to do so individually.
Among other things, I paid down debt while homeless. My last student loan payment was made in July 2017. I was back in housing in September the same year.
Of course, your framing sounds like I'm being accused of blaming the poor. I'm not. I'm just questioning the assertion of the article because it honestly doesn't fit with what I have read of history.
The Baby Boomer generation is the children of the WW2 veterans. It was a very widespread phenomenon.
There are factors at play now that are definitely different from then. Most new houses in the 1950s were about 1200 sqft. Now they are nearly 2500 sqft.
We desperately need to do something about our housing supply. But most people don't want to.
I mean this in the sense that people who might hardly meet each today were thrown together often more or less as equals. At least within the (ok, very limited) bounds of the race and gender norms of the day.
Today a programmer, middle manager or radiographer say can get to middle age without ever really “meeting” a labourer, truck driver or meat packer. I think that has pretty deep implications for labour solidarity.
> Oyer: I can’t imagine a 70% tax rate. And I don’t think we’ll see a universal basic income for a long time. These are hugely expensive ideas.
Then Oyer is experiencing a failure of the imagination as well as historical recollection. Tax rates have been that high before. Today a marginal tax income over what, 100 million at 70%--even 50%-- and there's suddenly a lot more money to build a social safety net with.
http://www.econtalk.org/mark-warshawsky-on-compensation-heal...
"Using data from the Bureau of Labor Statistics, Warshawsky shows that because health care benefits are a larger share of compensation for lower-paid than higher-paid workers, measures of inequality and even measures of economic progress can be misleading or distorted. "
The root problem here is clearly that living standards are at risk of dropping. That is not necessarily linked to inequality - inequality can rise in tandem with living standards. The policy tools that raise living standards are not the same policies that promote equality (the experiences in the 20th and 21st centuries suggest quite the opposite).
If people became rich relative to their ability to raise living standards - which is the main line of defense for capitalism as a system, by the way - then we expect higher inequality because the people who figure out how to raise mass living standards by small amounts should become disgustingly wealthy. The problem is that current policies are making people rich who aren't productive members of society. They are making idiot bankers rich who set us up for things like the '07-'08 financial crisis, then bailing them out when it looks like the market might call their bluffs.