How Unequal Can America Get Before We Snap?

[OldWiseGuy]

Much has happened since Mr. Reich's presentation. A whole new set of problems has arisen. However, the short answers to the problems he outlined are: Raise taxes on the top ten percent, and, use the revenue to initiate a nationwide program to repair infrastructure.

 

[amanuensis63]

My son has done concrete work for years while going to school. He graduated years ago but nothing has opened up for him. Recently he hired on as a concrete finisher for a large union company at $60,000 per year. Not bad for a 'fallback' job.

Sounds like the power of the unions at work there. That's a good thing. Unions get a bad rep because of excesses but in some ways I think we'll see the ascendency of unions again with massive income inequality. At some point we have to accept that Executives are NOT worth hundreds of times what a regular worker is worth.

The income inequality we see in the US today is not a function of a shift of productivity from the working class to the white collar workers, it's due in part because those at the top have found new and interesting ways to rig the game in their favor.

I've worked at a white collar middle level job at a company for nearly 10 years. Over that time I've averaged a 2% annual pay increase. Not even "cost of living", but that's our lot. Meanwhile millionaires at the top play checkers withour livelihoods and occasionally decree that thousands of us will have to be gotten rid of. For the "health of the company" dontcha know. And every few weeks you can see their stock trades on SEC websites and see that in one afternoon one of these folks will be able to pay for their kids college with one single stock sale. A couple weeks later they sell sufficient stock to be able to buy a house in the most ritzy part of any city on earth. That's just one sale, one exercise of a stock award. It's all great.

 

[Audacious]

Why income inequality is a problem is pretty simple: in the US, the top 20% of people in income own 85% of the country's wealth. There is a limited amount of money: therefore, the more equal the wealth is, the more your typical person has.

If 20% of people owned 85% of the food, it would be a problem, but if it's money people just pretend you're being greedy and it's a non-issue.

 

[Ken-1122]

Why income inequality is a problem is pretty simple: in the US, the top 20% of people in income own 85% of the country's wealth. There is a limited amount of money: therefore, the more equal the wealth is, the more your typical person has.

If 20% of people owned 85% of the food, it would be a problem, but if it's money people just pretend you're being greedy and it's a non-issue.

I disagree with you. There is this misunderstanding that the US economy is like a pie; and the larger piece the rich has, the less for everyone else. It doesn't work that way. The reason the rich has a larger piece of the pie than everyone else is because when they create wealth, they make the pie larger. So even though they get a larger percentage of the pie than everyone else, and everyone else has a smaller percentage of pie; because the pie is larger, everyone; even the middle income and poor will have more pie.

Ken

 

[Aldebaran]

I disagree with you. There is this misunderstanding that the US economy is like a pie; and the larger piece the rich has, the less for everyone else. It doesn't work that way. The reason the rich has a larger piece of the pie than everyone else is because when they create wealth, they make the pie larger. So even though they get a larger percentage of the pie than everyone else, and everyone else has a smaller percentage of pie; because the pie is larger, everyone; even the middle income and poor will have more pie.

Ken

This is correct! Wealth is not a static thing. It is something that is built up. A great example is New York City. Imagine all the buildings no longer there, and it's just one big piece of empty land. How much money do you think it would sell for as just a tract of land? Now, put all the buildings back in place. How much will it all sell for now?

 

[amanuensis63]

I disagree with you. There is this misunderstanding that the US economy is like a pie; and the larger piece the rich has, the less for everyone else.

Yet whenever raises are assessed by companies at the end of the fiscal year it is done based on a set budget. And funny enough as companies' productivity goes up the budgets for raises get smaller and smaller and smaller. And CEO salaries keep going up and up and up.

It doesn't work that way. The reason the rich has a larger piece of the pie than everyone else is because when they create wealth, they make the pie larger.

The rich do not create wealth. They oversee companies that meet demand created by the population. There are very few CEO's of major companies that actually "invented" anything. The obvious exceptions aside.

DEMAND creates wealth. Rich CEO's don't create much of anything except memos which is how we know they are "leaders".

So even though they get a larger percentage of the pie than everyone else, and everyone else has a smaller percentage of pie; because the pie is larger, everyone; even the middle income and poor will have more pie.

Ken

Yet that has not happened over the last 30+ years. The middle class incomes have stagnated while CEO salaries rise like a rocket. PRoductivity is up but the folks actually doing the WORK aren't seeing as much payback.

 

[HannahT]

You can use generalities if it makes you feel better. I realize stereotypes are 'in' today because they seem to work for people.

CEO's are in charge of running companies if they didn't start one. If you feel that all CEO's do is create memos that show they are leaders? Start writing some since that's all you need to bring in the big bucks. Problem solved.

It's insane that people seem to think that's all there is to it. Demand doesn't just appear. You have to show people there is a demand, and then marketing, etc comes into the equation. You find markets, and work those markets to create the demand - and keep that demand up. It doesn't just happen.

People are so upset about large company's, and yet its the small to mediums that move and shake things economically more so. Those companies owners, CEO's or whatever title they gave themselves worked their butts off to get that going and keep it going for years to come. Friends of mine are retiring after doing so for many YEARS, and they sold their company to someone else. They were on call 24/7 for more years than I can count, and they created the demand for their product. It wasn't done by writing memos to show they are leaders. They earned their retirement and then some. They certainly didn't start out well off, and they took huge risks to heap their rewards. They did something instead of waiting for someone to be 'fair' to them.

Are there greedy, selfish little pigs in business? For sure! They don't represent the whole, and ignoring smaller businesses who are getting killed currently...yet still make it somehow...are a bigger piece of the pie in business than people give them credit for.

Big companies can move part of their operations out of the country, and they can move out of the USA completely too. Many have done that, and their employees are left to be Fry Guys at McDonald's because the job market isn't there.

Productivity increases in many cases is done by automation, yet I realize people tend forget that part. That has a HUGE effect on things. More automation? Less productivity is shown on the employees side, because it works 24/7 with no breaks, raises, or benefits. How does it effect things at times? Employee retires or quits and they are not replaced. Parts of the job is handed over to others, and automation takes the rest. Remember that when you go into a store and you have a self checkout lanes that people use. They have one employee that covers 6 or more registers. Automation took 5 jobs - human received one. That's just one example that many should relate to, because self checkout is becoming more popular. McDonald's will have less registers, because you can walk up to the machine and place your order, pay for it, and your handed your food. Automation means less human jobs in the field, and its growing.

 

[Audacious]

I disagree with you. There is this misunderstanding that the US economy is like a pie; and the larger piece the rich has, the less for everyone else. It doesn't work that way. The reason the rich has a larger piece of the pie than everyone else is because when they create wealth, they make the pie larger. So even though they get a larger percentage of the pie than everyone else, and everyone else has a smaller percentage of pie; because the pie is larger, everyone; even the middle income and poor will have more pie.

Ken

Then why is there no correlation between the amount of money the rich have and the amount of money the median person has?

 

[Ken-1122]

Yet whenever raises are assessed by companies at the end of the fiscal year it is done based on a set budget. And funny enough as companies' productivity goes up the budgets for raises get smaller and smaller and smaller. And CEO salaries keep going up and up and up.

Is that how the company you work for do business? Mine doesn’t. The success of our Union negotiations are pretty much tied to how well the company does.

Now don’t get me wrong; I’m not suggesting all companies are like the one I work for, I’m suggesting they aren’t all the one YOU work for.

The rich do not create wealth.

Let’s use Bill Gates for example; are you saying when he started Microsoft, wealth was not created?

They oversee companies that meet demand created by the population.

Bill Gates doesn’t oversee Microsoft. Not all rich oversee companies.

There are very few CEO's of major companies that actually "invented" anything. The obvious exceptions aside.

Warren Buffet is a CEO; he doesn’t even get a salary, (he doesn’t need one) and he didn't invent anything. Are you saying since he started the company Berkshire Hathaway; wealth hasn’t been created?

DEMAND creates wealth. Rich CEO's don't create much of anything except memos which is how we know they are "leaders".

CEO’s aren’t the only rich people ya know! And if you have a problem with CEO pay, take that up with the Board of Directors who hired him at that pay. Evidently they know more about the CEO than you do; if the board feels he is worth the pay, who are you to say otherwise?

Yet that has not happened over the last 30+ years. The middle class incomes have stagnated while CEO salaries rise like a rocket. PRoductivity is up but the folks actually doing the WORK aren't seeing as much payback.

Today’s worker has to face competition the worker of 30 years ago didn’t have to face. Not only do they compete against the guy next door for a job, they have to compete against the guy over seas whose wages are usually much lower for the same job as well. This often drives wages down. That is an unfortunate reality that results when big companies do much of; and sometimes most of their business overseas.

Ken

 

[Ken-1122]

Then why is there no correlation between the amount of money the rich have and the amount of money the median person has?

Are you sure? The rich of today is much richer than the rich of 50-60 years ago, yet the average person has a much larger house, more clothes, more cars, more luxury items and pretty much a higher standard of living than the average person of 50-60 years ago.

Ken

 

[Audacious]

Are you sure? The rich of today is much richer than the rich of 50-60 years ago, yet the average person has a much larger house, more clothes, more cars, more luxury items and pretty much a higher standard of living than the average person of 50-60 years ago.

It's not that much higher for 3/5 of the population, lol.

Also: countries with more income redistribution than we have -- practically every other modern nation -- have a higher standard of living by most measurements. Compare Germany to the US, for instance.

 

[Ken-1122]

It's not that much higher for 3/5 of the population, lol.

Also: countries with more income redistribution than we have -- practically every other modern nation -- have a higher standard of living by most measurements. Compare Germany to the US, for instance.

To compare the US to other countries; today vs years ago is not a fair comparison because after WW-2 Europe and Asia were pretty much destroyed and the USA was the only country open for business, so we were much richer than the rest of the world. It took Europe and Asia approx 30 years to repair itself and get caught up, so today the US has to compete with the rest of the world on a level playing field something we didn't have to do 50-60 years ago.

As far as the chart, perhaps today the same pay buys more because homes are bigger, cars are better, luxury items are cheaper; everybody has them now. Perhaps technology is the reason, but it seems people have more today than they had yesterday; everybody has a cell phone, everybody has a computer, people paying $200 per month to get a hundred channels on TV and computer access. People seem to spend a lot more today than they did 50-60 years ago.

Of course the average worker isn’t going to get as much of a raise as the super rich because the super rich is often invested in companies and when companies sell more stuff overseas than in the US, the company and all invested in the company will get the benefit of those overseas sales, but the US worker does not, because those companies will often have factories overseas as well and those foreign workers get that benefit, not the US worker.


Ken

 

[Audacious]

To compare the US to other countries; today vs years ago is not a fair comparison because after WW-2 Europe and Asia were pretty much destroyed and the USA was the only country open for business, so we were much richer than the rest of the world. It took Europe and Asia approx 30 years to get caught up, so today the US has to compete with the rest of the world in a way they didn’t 50-60 years ago.

The fact that we do worse in quality of life statistics than countries which had huge economic problems post-WW2 really tells you something about how well income redistribution works.

 

[Ken-1122]

The fact that we do worse in quality of life statistics than countries which had huge economic problems post-WW2 really tells you something about how well income redistribution works.

I will admit I don't know much about the economic status of some of the Countries you mentioned so I cannot comment on that, but I will bet Greece had a higher standard of living than us as well..... until they went broke! The US is a very large country with a very diverse population. Because of that we have economic issues in this country many of the smaller, less diverse countries don't have to worry about. I doubt income distribution contributes to the success of their country. If you believe it does, perhaps you can explain how.

Ken

 

[OldWiseGuy]

It's not that much higher for 3/5 of the population, lol.

Also: countries with more income redistribution than we have -- practically every other modern nation -- have a higher standard of living by most measurements. Compare Germany to the US, for instance.

Actually this graph reveals that our income distribution is pretty reasonable. I think more facts would be helpful though.

Personally I have moved steadily upward from the 5th to the 2nd quintile over my working life. Is there a graph for that?

 

[Viren]

Is that how the company you work for do business? Mine doesn’t. The success of our Union negotiations are pretty much tied to how well the company does.
Ken

You're lucky. Only 11% of the U.S. workforce is unionized. That's a big reason why wages have stagnated despite the increasing in productivity.

 

[Ken-1122]

You're lucky. Only 11% of the U.S. workforce is unionized. That's a big reason why wages have stagnated despite the increasing in productivity.

I don't know if I would call it "lucky", the reason we are Unionized is because we voted to do so. You would probably be surprised at how many workers don't want to be a part of a Union. I wouldn't exactly call them unlucky; would you?

Ken

 

[FanthatSpark]

For the OP question.
http://www.counterpunch.org/2015/10...rt-system-neoliberal-americas-tax-collectors/

 

[amanuensis63]

To compare the US to other countries; today vs years ago is not a fair comparison because after WW-2 Europe and Asia were pretty much destroyed and the USA was the only country open for business, so we were much richer than the rest of the world.

And ironically not too long after the economic slump just post WWII we had the largest expansion of the middle class. In fact we arguable invented the middle class during that time.

During those post war decades the productivity of the US increased as did median middle income wages in lock step. After 1980 and the Trickle Down Revolution of the GOP that relationship stopped. Since then median middle income wages have essentially stagnated.

It took Europe and Asia approx 30 years to repair itself and get caught up, so today the US has to compete with the rest of the world on a level playing field something we didn't have to do 50-60 years ago.

Very true. BUT our version of competition is more self-aimed. We are among the largest importers of goods. So that means we are competing with ourselves for cheaper goods and in the process gutting our own economy. A country CANNOT simply be the world's shoppers. We have to do something for money too.

Of course the average worker isn’t going to get as much of a raise as the super rich because the super rich is often invested in companies and when companies sell more stuff overseas than in the US

Yes and no. Remember the corporations decided to eliminated fixed benefit pensions in lieu of 401k's and making the entire population "stock traders". Even though most of us have no idea how that game really works. As one commentator put it: the regular joe is putting money into the stock market and financing the fun-times the various high level investors have. We bankroll their casino fun.

, the company and all invested in the company will get the benefit of those overseas sales, but the US worker does not, because those companies will often have factories overseas as well and those foreign workers get that benefit, not the US worker.

This is very true. The people at the top realized that they don't have to be humans in any stretch of the imagination and they can farm out jobs and destroy families at will because the only legal obligation the CEO has is to the investors. Yet, ironically enough, the CEO's NEVER move to China themselves. Because they know that they want the jobs in the worst places because those have the lowest standards of living. As China has become more middle-class they've moved production to Indonesia. That's all one needs to know.

The American worker may have it "good" but it's a deal with a particularly nasty devil. We've made the deal that we get all sorts of fun goodies and toys in the now but in the long run we will suffer and suffer greatly.

All aided and abetted by folks who have rigged the game for themselves.

 

[Ken-1122]

And ironically not too long after the economic slump just post WWII we had the largest expansion of the middle class. In fact we arguable invented the middle class during that time.

Yes after WW-2 Europe and Asia was destroyed and the US was the only country open for business, so we had unheard of growth. As far as the middle class, we always had a middle class, it’s just that the average person saw his standard of living increase during this time because of the war.

During those post war decades the productivity of the US increased as did median middle income wages in lock step. After 1980 and the Trickle Down Revolution of the GOP that relationship stopped. Since then median middle income wages have essentially stagnated.

Trickle Down Economics was during the Reagan administration. It was very controversial; some agreed with it, some disagreed with it, but say what you will about Reagan, when he was elected in the late 1970’s we were in the middle of a bad recession; we had double digit inflation, double digit mortgage rates, unemployment was high, the country was a wreck, and wages were already stagnated long before the 80’s. Things did improve by the time he left office.

Very true. BUT our version of competition is more self-aimed. We are among the largest importers of goods. So that means we are competing with ourselves for cheaper goods and in the process gutting our own economy. A country CANNOT simply be the world's shoppers. We have to do something for money too.

We are also among the worlds largest exporters too!

Yes and no. Remember the corporations decided to eliminated fixed benefit pensions in lieu of 401k's and making the entire population "stock traders". Even though most of us have no idea how that game really works. As one commentator put it: the regular joe is putting money into the stock market and financing the fun-times the various high level investors have. We bankroll their casino fun.

I think that is mostly the result of foreign competition.

This is very true. The people at the top realized that they don't have to be humans in any stretch of the imagination and they can farm out jobs and destroy families at will because the only legal obligation the CEO has is to the investors. Yet, ironically enough, the CEO's NEVER move to China themselves. Because they know that they want the jobs in the worst places because those have the lowest standards of living. As China has become more middle-class they've moved production to Indonesia. That's all one needs to know.

It kinda goes both ways ya know; foreign companies build stuff over here as well. All those Toyota’s and Honda’s you see roaming around are usually made here by American workers.