Author Topic: Incomes Collapsing in the US  (Read 357 times)

Offline cybercoma

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Re: Incomes Collapsing in the US
« Reply #15 on: February 09, 2017, 10:50:18 am »
If you read the OECD reports on inequality, you'll see that it stifles economic growth. That's an indisputable fact now. Lower economic growth is a bad thing not only for those at the bottom of the wealth distribution, but also those at the top. It also means publicly funded services, you know, like the military, hospitals, police, fire, water treatment, food safety inspection, etc., are going to be more difficult to fund without deficit spending. Deficits, furthermore, are going to be more difficult to manage with a stagnant economy. The problem with inequality is that the movement of money is vital to the economy. Money is the lifeblood of the economy and when it's pooling in one place and not moving around, the economy dies. That is why inequality is a problem, regardless of whether the tide is rising in total. You've even outlined in your recap of the TED talk why the rising tide is irrelevant to a discussion of a country's well-being. GDP (everyone's income increasing) is not a measure of social health in developed nations, period. That's why I'm focusing on inequality and baffled as to why you're ignoring it.

Offline TimG

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Re: Incomes Collapsing in the US
« Reply #16 on: February 09, 2017, 11:12:31 am »
If you read the OECD reports on inequality, you'll see that it stifles economic growth. That's an indisputable fact now.
No it is NOT a fact. It is opinion on causality inferred from a correlation analysis. You really need to learn what a fact is. A fact is they found a correlation. The assertion that one caused the other is an opinion. I have seen this BS in paper after paper where scientists keen to push whatever hobby horse they are flogging ignore such questions because they are inconvenient.

Offline cybercoma

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Re: Incomes Collapsing in the US
« Reply #17 on: February 09, 2017, 12:18:40 pm »
Do you have a satisfactory confounding influence that explains the relationship? I have the feeling an army of economists would have considered that.

Offline TimG

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Re: Incomes Collapsing in the US
« Reply #18 on: February 09, 2017, 01:04:17 pm »
Do you have a satisfactory confounding influence that explains the relationship? I have the feeling an army of economists would have considered that.
Ah yes - the "we can't think of anything else so our opinion must be  a fact" argument. Asserting that something is a fact requires evidence of causality backed up with repeatable experiments. Hypotheses derived from correlation studies can rarely meet that requirement but that does not stop career minded scientists from waving their arms and pretending - especially if the results are politically useful to people with money.

In this case, it makes no intuitive sense that relative changes in income would affect economic performance. It makes much more sense to say that a society that does not invest in human capital by providing reasonable access to education, healthcare and other services will experience slower growth. This in turn may CAUSE increasing inequality but inequality in itself causes nothing. It is only a symptom. You can also say that societies with rising GDPs tend to reduce inequality because growth provides resources to invest in human capital and that slower GDP growth increases inequality as people fight for a share of a smaller pie. In this case inequality is the effect - not the cause.

Another factor that is over looked in all of these analyses: the culture of different countries. Less equal countries tend to have started with a divided society and low social trust and these divisions widen over time. Equal societies tend to be homogeneous and have high social trust. This means a solution that works for high trust society like Sweden cannot be imposed on a low trust society like the US. It is simply naive to assume that increasing taxes and programs in places like the US would do anything to fix the low social trust. If anything such tactics would only make the divisions worse.

« Last Edit: February 09, 2017, 07:04:11 pm by TimG »

Offline Manob

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Re: Incomes Collapsing in the US
« Reply #19 on: February 09, 2017, 04:26:45 pm »
New forum, same discussion, how comforting!

Personally TimG's point of view seems more plausible to me... high inequality is likely to be a symptom of various social/economic issues that also cause other downsides like slower growth. Inequality is inherently a measure of outcomes, not causes. You can't address inequality directly, what you can do is look at underlying causes like education systems, healthcare systems, infrastructure, etc.

Living and working in the US, it seems inescapably obvious that a huge portion of the population simply doesn't have useful skills that can be used to get a well-paying job. So of course they're incomes aren't rising when the simple tasks they can do are being replaced by machines or done elsewhere for much lower than US minimum wage. That's not something you can fix by redistributing money around on the back end, what you have to do to try to address this is totally change the culture and education system to make it easier and more tempting for people to learn useful skills. There's been a decades-long shortage of people going into technical fields and yet more people have an instinctive revulsion to math than ever, while religion is replacing science in classrooms in half the country.

Offline ?Impact

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Re: Incomes Collapsing in the US
« Reply #20 on: February 09, 2017, 04:39:49 pm »
You can't address inequality directly, what you can do is look at underlying causes like

Greed

Offline Blueblood

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Re: Incomes Collapsing in the US
« Reply #21 on: February 10, 2017, 12:59:13 pm »
I know this might seem a little off topic, but I'm going to enclose the ted Cruz - Bernie sanders debate on healthcare as it touches on themes of left vs right and capitalism vs socialism.

https://youtu.be/2ugBYg1zbuY

IMO Bernie didn't have a good night...

Offline kimmy

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Re: Incomes Collapsing in the US
« Reply #22 on: February 12, 2017, 01:40:55 pm »
And the claims in the link which are not backed up with charts and sources contradict data here:
https://www.advisorperspectives.com/dshort/updates/2016/09/15/u-s-household-incomes-a-49-year-perspective

Over the last 50 years real incomes for the bottom half have grown 25% to 30%.

That's one way to summarize those graphs... an equally accurate summary would be that incomes for the bottom half grew substantially between the 1980s and 2000, but have fallen since.

Your premise is that everybody is getting richer so everybody should be happy, even if they're not getting rich as fast as others.  But your cite shows that everybody isn't getting richer. For the bottom quintile, they're poorer than in 1999. For the 4th quintile they're poorer than in 1999. For the middle quintile they're poorer than in 2000.  It appears that only the top 2 quintiles are actually getting richer.

As well, I'm curious about how "Household Income" is defined.  Does "income" include workplace benefits that have been increasingly chipped away in recent years?  If not, then it's not really an apples to apples comparison. If a job that paid $40k inflation-adjusted dollars 20 years ago pays $44k now, but no longer comes with a pension plan and benefits package, is isn't reasonable to say that income from that job has increase by 10%.

As well, I'm also curious about whether CPI calculations take into account things like increases to medical premiums (a BC example) or tuition fees.

 -k

Offline TimG

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Re: Incomes Collapsing in the US
« Reply #23 on: February 12, 2017, 02:16:25 pm »
CPI basket is here: http://inflationcalculator.ca/cpi-basket/
Tuition and government fees are included.

Will response to other comments later.

Offline cybercoma

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Re: Incomes Collapsing in the US
« Reply #24 on: February 12, 2017, 05:39:52 pm »
As well, I'm curious about how "Household Income" is defined.  Does "income" include workplace benefits that have been increasingly chipped away in recent years?  If not, then it's not really an apples to apples comparison. If a job that paid $40k inflation-adjusted dollars 20 years ago pays $44k now, but no longer comes with a pension plan and benefits package, is isn't reasonable to say that income from that job has increase by 10%.
 -k
Household income does not include workplace benefits. It includes literally those things that go into household income on your tax forms (pay, pension payments, disability, etc.).

Offline TimG

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Re: Incomes Collapsing in the US
« Reply #25 on: February 12, 2017, 07:07:13 pm »
That's one way to summarize those graphs... an equally accurate summary would be that incomes for the bottom half grew substantially between the 1980s and 2000, but have fallen since.
1) I was addressing the suspect claim in the op. The range I quoted matches the op;
2) My argument in this thread was about how "inequality" is irrelevant. What matters is real income. And if real income is falling then that is a concern but it has nothing to with inequality. The real income of the riches quintiles fell by more during the 2008 crisis but have since recovered faster. This is largely due the massive amounts of money printed which seems to do nothing other that inflate the portfolios of the already rich.
3) There are many was to fuss with the numbers. The source I quoted is sympathetic to the notion that the poor are losing out but his data still shows a net increase over 50 years. The op claimed a decrease over the same period which is likely due to some extremely dubious statistics.

Most countries are on a path that will inevitably lead to declines in real income across the board because entitlement spending is growing faster than revenues. We are in the stage where we will be squabbling about scraps as the ship sinks. People who are wealthy enough to not depend on a particular country are not going to be affected no matter what policy makers do. If policy makers want to go after the next tier of high income earners they will be chasing a lot of public servants with rich pension plans an even richer benefit packages. IOW, the "rich" are not the type of people that are normally perceived as "rich'. It is not clear how much money can be extracted from this class of people. Whatever is extracted is not going to delay the inevitable

Offline kimmy

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Re: Incomes Collapsing in the US
« Reply #26 on: February 13, 2017, 12:53:44 pm »
I think we can at least agree that not everybody's getting richer and not everybody should be happy to see the rich getting richer while half the country is making less (in real income) than they were 20 years ago.  I'd be interested to see equivalent statistics for Canada... my hunch is that it's not much different here.


Regarding the premise that income inequality itself isn't a problem: I conceptually have a hard time understanding how it couldn't be, in macroeconomic terms, a drag on growth.

Ultimately, our economy is driven by consumer spending. We have jobs because others are willing to pay for services we can provide.  But with so many people just not getting ahead financially, people aren't spending as much as they could. People are squeezing another year or 2 or 5 out of their car, they're delaying their home renovations, they're staying home and watching Netflix instead of going out to restaurants, and so on.  People would spend more money if they had more money.

And you can say "yes, but the money's still there, it's just in the hands of a smaller number of people"... but a handful of people can only eat so many meals, drive so many cars, and get their homes renovated so many times.

Take a billion dollars-- hypothetically the annual salaries and bonuses of 10 or 20 or 50 top CEOs and Wall Street bankers... imagine that billion dollars in the hands of 10,000 consumers instead.  From a macroeconomic standpoint, what creates more economic benefit: 20 already-wealthy people get $50 million each, or 10,000 average people get $10,000 each?  I strongly suspect that the latter would generate far more economic benefit, as people would start buying the things that are waiting on their "when I have more money..." list.

That's why I suspect that income inequality actually is, in itself, economically undesirable.  With all the growth in income going to a small portion of the population, consumer spending is being throttled back, and that can't be good for the economy. The engine that powers the economy is starved for fuel.

 -k

Offline Blueblood

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Re: Incomes Collapsing in the US
« Reply #27 on: February 13, 2017, 02:05:53 pm »
I think we can at least agree that not everybody's getting richer and not everybody should be happy to see the rich getting richer while half the country is making less (in real income) than they were 20 years ago.  I'd be interested to see equivalent statistics for Canada... my hunch is that it's not much different here.


Regarding the premise that income inequality itself isn't a problem: I conceptually have a hard time understanding how it couldn't be, in macroeconomic terms, a drag on growth.

Ultimately, our economy is driven by consumer spending. We have jobs because others are willing to pay for services we can provide.  But with so many people just not getting ahead financially, people aren't spending as much as they could. People are squeezing another year or 2 or 5 out of their car, they're delaying their home renovations, they're staying home and watching Netflix instead of going out to restaurants, and so on.  People would spend more money if they had more money.

And you can say "yes, but the money's still there, it's just in the hands of a smaller number of people"... but a handful of people can only eat so many meals, drive so many cars, and get their homes renovated so many times.

Take a billion dollars-- hypothetically the annual salaries and bonuses of 10 or 20 or 50 top CEOs and Wall Street bankers... imagine that billion dollars in the hands of 10,000 consumers instead.  From a macroeconomic standpoint, what creates more economic benefit: 20 already-wealthy people get $50 million each, or 10,000 average people get $10,000 each?  I strongly suspect that the latter would generate far more economic benefit, as people would start buying the things that are waiting on their "when I have more money..." list.

That's why I suspect that income inequality actually is, in itself, economically undesirable.  With all the growth in income going to a small portion of the population, consumer spending is being throttled back, and that can't be good for the economy. The engine that powers the economy is starved for fuel.

 -k

The problem with that premise is that over time our standard of living has also improved dramatically with people classified as poor owning cell phones, computers, and tvs which used to be luxury items.  It's really hard to make that assessment of what poor is in our country.  With that being said, is it income inequality or is it just jealousy as our poor compared to the poor in Africa are in totally different circumstances. 

As for the giving a billion dollars to 10,000 or just a few people is disengeniius.  The 10,000 people can buy their trivial things and then the money dries up or the invest it.  Same goes for the wealthy person getting the billion dollars, they invest it or spend it.  Chances are more likely that the wealthy person invests it and creates more of that money vs buying stuff and watching it go to zero.

The problem is that there has been this war on the investment class for a long time resulting in them saying there is too much uncertainty, I don't know when the next regulation is coming in so I am either going to invest overseas or wait until a more friendly government comes in which let's me do business or worse yet emigrate the country.  Venezuela has tried that experiment by soaking the rich and the country is literally a disaster.  I can't for the life of me see why people time and time again try that experiment and endorse it when it has continuously failed.

Offline TimG

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Re: Incomes Collapsing in the US
« Reply #28 on: February 13, 2017, 03:19:15 pm »
Regarding the premise that income inequality itself isn't a problem: I conceptually have a hard time understanding how it couldn't be, in macroeconomic terms, a drag on growth.
A thought exercise to illustrate why it does not matter. Which is a better society to be in:

1) A society where everyone's incomes are falling but inequality is dropping;
2) A society where everyone's incomes are rising but inequality is rising;

I would say 2) is better because the metric that matters is rising income, not inequality. Now rising inequality can be a symptom of dropping incomes but the problem is the dropping incomes and that is what we should talk about. Not the rising inequality. I personally find the inequality metric distasteful because of the neo-communist overtones  that "everyone should make the same wage". And, yes I know that people expressing concern about inequality aren't advocating communism that but the implication is there whether it is intentional or not.

Canada's inequality numbers are better that the US but that is because the big money makers (from actors to tech leaders) move to the US. The fact that the US is a draw for high income earners means its inequality numbers will be necessarily worse than countries that chase them away. This is another reason why 'targeting inequality' makes for bad policy.

That said, I don't see what can be done to stop the drop incomes because we are expanding entitlement spending faster than the economy. The current path we are on is going to end up with everyone getting poorer whether we like it or not. Increasing entitlement spending may offer short term relief to some but won't stop the long term decline.



Offline the_squid

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Re: Incomes Collapsing in the US
« Reply #29 on: February 13, 2017, 03:34:29 pm »
Quote
...people classified as poor owning cell phones, computers, and tvs...

My disabled friend has these things and she is definitely poor.  She pays for her own cell bill, but we bought her the TV and computer and pay for her cable bill.  When someone is mostly house-bound due to a disability, having a couple "luxury" items is a necessity, and it doesn't make her not poor!  That's extremely judgmental to look at someone's meager stuff and claim they can't be poor.

She also earns a few extra dollars because she has a computer and is extremely intelligent, has a degree in science and can find a few things she can do at home.  To say a computer is a luxury item is also living in 1990...   it's pretty much a necessity these days.