Is income inequality a legitimate issue, or a misleading measure?

[yllus]

Does inequality still matter?

In a widely-lauded 2003 paper that looked at trends in the income and wealth of high-income households from 1913?1998, economists Thomas Piketty and Emmanuel Saez showed that the earnings and accumulated wealth of the happy few at the top have dived with each recession, reducing their share of national wealth and income with each dip of the business cycle.

Salaries, bonuses, and hourly wages now make up a much larger part of the total income of those near the top of the earnings ladder than they did even 20 or 30 years ago, when high-income households depended much more heavily on gains from investments of capital. The ladies and gentlemen of leisure who live off inheritances have ceased to dominate the upper ranks of income. These days, the people who really rake it in invest long hours striving for high pay. "The working rich have replaced the rentiers at the top of the income distribution," as Piketty and Saez put it.

The way in which the working rich get paid has changed, too. The annual compensation of hedge fund jocks, Wall Street rainmakers, and corporate honchos is increasingly determined by performance-based bonuses, which have made the incomes of America's biggest earners increasingly sensitive to the vicissitudes of the market.

"High-income households are highly exposed to aggregate booms and busts," report Northwestern University economists Jonathan A. Parker and Annette Vissing-Jorgensen in a recent National Bureau of Economic Research working paper. They estimate that our current bust is hitting the income and consumption of households in the top 20 percent of income earners significantly harder than the households in the 80 percent below. And the higher up the distribution you go, the harder the hit is likely to be.

Let's assume then that the financial collapse and recession really have hit high-income households the hardest, resulting in a dramatic decline in income inequality. Is that a good thing? A disaster that leaves almost everyone worse off is no improvement?especially for low-income workers who have lost their jobs. Likewise, a stretch of economic progress that leaves almost everyone better off is hardly a disaster?even if income inequality rises in the process.

It's always an item of interest to me that we accurately measure the issue we face in our society. The author of this article, Will Wilkinson, argues in a paper for the Cato Institute that "in a wealthy nation like the U.S. income is a poor measure of economic well-being and income inequality is an even worse measure of social justice." If fluid economic mobility is the goal, perhaps simply looking at income inequality is on its way out as an accurate measure.

Of course, this all still focuses us on measuring the symptoms instead of addressing the root problem:

We can slash the level of income inequality in an instant by slapping even higher taxes on big earners. Or we can slash the level of income inequality by falling into recession. But neither remedy addresses the real problem, which is persisting poverty, not income inequality.

 

[glenn1]

There is nothing inherently wrong with income/wealth inequality in this country - those who create value get rewarded for it. There are and should be economic consequences for the lazy, those who act stupidly (drop out of school, etc), or who otherwise do not add any value to the system.

 

[senseamp]

Not so much inequality itself, but the fact that income is distributed to people who don't contribute much actual value to economy, but instead create "interesting" financial products or run companies into the ground and get golden parachutes. Definitely creates wrong incentives, and is detrimental in the long term.

 

[Gonad the Barbarian]

Income inequality isn't inherently a bad thing, but a lot of bad things can promote income inequality.

 

[Patranus]

You go to school, get an education, work hard, and make money.

You smoke weed, screw around in school, break the law and go to prison, and you don't make money.

I really don't get this idea why people think they are entitled to the results of the hard work of others.

 

[TruePaige]

Originally posted by: Patranus
You go to school, get an education, work hard, and make money.

You smoke weed, screw around in school, break the law and go to prison, and you don't make money.

I really don't get this idea why people think they are entitled to the results of the hard work of others.

Hey, no reason to drag weed into this.

 

[IronWing]

Originally posted by: Patranus
I really don't get this idea why people think they are entitled to the results of the hard work of others.

Damn straight! So let's cut the pay of executives and tax the jesus gibblets out of stockholders who profit off the hard work of company employees.

 

[Vic]

Originally posted by: TruePaige

Originally posted by: Patranus
You go to school, get an education, work hard, and make money.

You smoke weed, screw around in school, break the law and go to prison, and you don't make money.

I really don't get this idea why people think they are entitled to the results of the hard work of others.

Hey, no reason to drag weed into this.

Strange thing, but there are a hell of a lot of self-made millionaires out there who smoke weed and didn't finish school.

 

[bamacre]

Originally posted by: Vic

Originally posted by: TruePaige

Originally posted by: Patranus
You go to school, get an education, work hard, and make money.

You smoke weed, screw around in school, break the law and go to prison, and you don't make money.

I really don't get this idea why people think they are entitled to the results of the hard work of others.

Hey, no reason to drag weed into this.

Strange thing, but there are a hell of a lot of self-made millionaires out there who smoke weed and didn't finish school.

I smoked weed, and finished school. Actually, while finishing school.

 

[Vic]

Originally posted by: bamacre

Originally posted by: Vic

Originally posted by: TruePaige

Originally posted by: Patranus
You go to school, get an education, work hard, and make money.

You smoke weed, screw around in school, break the law and go to prison, and you don't make money.

I really don't get this idea why people think they are entitled to the results of the hard work of others.

Hey, no reason to drag weed into this.

Strange thing, but there are a hell of a lot of self-made millionaires out there who smoke weed and didn't finish school.

I smoked weed, and finished school. Actually, while finishing school.

What? Unpossible! Everyone knows that drunken frat boys get straight-A's while potheads flunk out the first semester! Patranus said so on the internet so it must be true!

 

[IronWing]

Originally posted by: Vic

Originally posted by: TruePaige

Originally posted by: Patranus
You go to school, get an education, work hard, and make money.

You smoke weed, screw around in school, break the law and go to prison, and you don't make money.

I really don't get this idea why people think they are entitled to the results of the hard work of others.

Hey, no reason to drag weed into this.

Strange thing, but there are a hell of a lot of self-made millionaires out there who smoke weed and didn't finish school.

Now I wish I smoked weed. I could be retired.

 

[Vic]

Originally posted by: ironwing

Originally posted by: Vic

Originally posted by: TruePaige

Originally posted by: Patranus
You go to school, get an education, work hard, and make money.

You smoke weed, screw around in school, break the law and go to prison, and you don't make money.

I really don't get this idea why people think they are entitled to the results of the hard work of others.

Hey, no reason to drag weed into this.

Strange thing, but there are a hell of a lot of self-made millionaires out there who smoke weed and didn't finish school.

Now I wish I smoked weed. I could be retired.

Heh. Black-and-white worldviews are fun!

 

[bamacre]

Originally posted by: Vic
Everyone knows that drunken frat boys get straight-A's while potheads flunk out the first semester!

Who do you think I was buying the pot from?

 

[IronWing]

Originally posted by: Vic

Originally posted by: ironwing

Originally posted by: Vic

Originally posted by: TruePaige

Originally posted by: Patranus
You go to school, get an education, work hard, and make money.

You smoke weed, screw around in school, break the law and go to prison, and you don't make money.

I really don't get this idea why people think they are entitled to the results of the hard work of others.

Hey, no reason to drag weed into this.

Strange thing, but there are a hell of a lot of self-made millionaires out there who smoke weed and didn't finish school.

Now I wish I smoked weed. I could be retired.

Heh. Black-and-white worldviews are fun!

They are a time saver*.










*paraphrased from the Onion

 

[Craig234]

Originally posted by: yllus
It's always an item of interest to me that we accurately measure the issue we face in our society. The author of this article, Will Wilkinson, argues in a paper for the Cato Institute

You are posting Cato institute garbage propaganda.

Of *course* income inequality is a 'valid measure'. There are levels that are too high causing problems, levels too low that cause problems, and the best levels in between.

The only people trying to convince you income ineuqlaity should not be used as a measure are those who are trying to get you to support policies screwing you.

 

[soccerballtux]

Guys, life has been getting better and better even for the poorest of the poor. I know, because I'm there. I'm got more debt and am taking on more than any welfare recipient would ever be allowed to.

50 years ago we were just getting around to installing AC in everybody's house. Now it's in public transit buses. Did we have 26" flat screen TVs for $300 50 years ago? No way.

Life is getting better; people's expectations are changing that's all.

 

[WhipperSnapper]

Originally posted by: Patranus
You go to school, get an education, work hard, and make money.

You smoke weed, screw around in school, break the law and go to prison, and you don't make money.

I really don't get this idea why people think they are entitled to the results of the hard work of others.

I suspect that there are a great many hard-working, law abiding people, many of whom did go to school, who don't smoke weed, who didn't screw around in school, and who never attained prosperity beyond that of being merely middle class who feel that some members of the upper classes mooch off of their hard work, and that that is where the sentiment comes from. They might believe that a great many members of the upper class never earned the income they have or that they are at least unjustly compensated and overcompensated.

The picture might be a little more complicated than your rather simplistic description of it.

 

[Craig234]

Originally posted by: soccerballtux
Guys, life has been getting better and better even for the poorest of the poor. I know, because I'm there. I'm got more debt and am taking on more than any welfare recipient would ever be allowed to.

50 years ago we were just getting around to installing AC in everybody's house. Now it's in public transit buses. Did we have 26" flat screen TVs for $300 50 years ago? No way.

Life is getting better; people's expectations are changing that's all.

You confuse the progress of technology and industry with the equality of progress.

If the top 0.01% see their share of the wealth go from 20% to 80%, but you get air conditioning and cable tv you didn't used to have, you are going to fail to notice the fact that your political system has been coo-opted by the extrem concentration of wealth and how your economic well-being is going to get nailed.

The infrstructure for the middle class is being gutted, and there will be a price.

The fact that the main repository of the wealth of the middle class - but not the wealthy - the value of homes, has had a massive bubble that popped but left the middle class with record debt, is a huge transfer of wealth from the middle to the top in the longer run. You have this tiny little view as you look at your big screen tv bought on credit and say 'things are good'.

You are really an example making the case that the American public are not capable of being responsible citizens generally, as you do not get informed on these issues.

 

[bamacre]

Originally posted by: soccerballtux
Did we have 26" flat screen TVs for $300 50 years ago? No way.

No, but the costs of things like food, health care, and education are proportionately more expensive, i.e., they take up a bigger percentage of Americans' incomes.

 

[soccerballtux]

Originally posted by: bamacre

Originally posted by: soccerballtux
Did we have 26" flat screen TVs for $300 50 years ago? No way.

No, but the costs of things like food, health care, and education are proportionately more expensive, i.e., they take up a bigger percentage of Americans' incomes.

If people would cut back on spending and live within their means, it wouldn't be possible for suppliers to raise the prices-- people just wouldn't buy it. There's plenty of fine places to get a good education without spending more than $5000/year. Shopping for value/dollar in education rather than the big names. Food is NOT a big expenditure, you can eat plenty healthy for very cheap.

Health care and education...know what's common between those two? Government involvement. Education prices didn't balloon until Congress got in the business of giving out student loans to anybody and everybody and subsidizing school through Pell Grants in such a way that the opportunity cost to the student of going to the school doesn't change. When schools learned how much money there was out there through Stafford Loans they found they could just increase their costs by that same amount and their numbers would stay the same.

With healthcare, Medicare has put a strain on the health system. Why are healthcare prices so high? It's supply and demand, if someone could accomplish the same work for cheaper they would and would undercut everybody else and make millions. My doctor friend studied 17 hours/day with his buddy in med school to get where he is now. And you want to tell him he's charging too much. If he's charging too much, why don't you go get educated and undercut him? Not many people are willing to put their life on hold till they're 28 to become a doctor. Nobody will if you legislate prices down. Price caps lead to nothing but rationing, history has proven this time and again.

 

[SammyJr]

Originally posted by: Patranus
You go to school, get an education, work hard, and make money.

You smoke weed, screw around in school, break the law and go to prison, and you don't make money.

I really don't get this idea why people think they are entitled to the results of the hard work of others.

Or more commonly:

Go to school, get and education, work hard, get laid off because your job can be done more cheaply overseas.

Get a job at a factory, work hard, get laid off after 20 years because your job can be done more cheaply overseas.

Screw around at school, drink lots of beer, get a cushy job because your family is well connected.

Hard work and education isn't a guarantee of success. It helps a lot, but connections and luck are just as important.

 

[irwincur]

I really don't get this idea why people think they are entitled to the results of the hard work of others.

Because they are soon to be the majority.

 

[Stuxnet]

Originally posted by: Craig234

Originally posted by: yllus
It's always an item of interest to me that we accurately measure the issue we face in our society. The author of this article, Will Wilkinson, argues in a paper for the Cato Institute

You are posting Cato institute garbage propaganda.

I feel bad that you've been ignored, so I'll bite: did you read it?

 

[Suspicious-Teach8788]

Originally posted by: jbourne77

Originally posted by: Craig234

Originally posted by: yllus
It's always an item of interest to me that we accurately measure the issue we face in our society. The author of this article, Will Wilkinson, argues in a paper for the Cato Institute

You are posting Cato institute garbage propaganda.

I feel bad that you've been ignored, so I'll bite: did you read it?

Now he might, just to comment on it, but the first step is always to attack the source. If enough people jump in too (because an attack on Fox News is obviously very easy), then the issue itself will get ignored, but if not then it's time to read and cherry pick what arguments to downplay in the article.

 

[blackangst1]

Originally posted by: soccerballtux

Originally posted by: bamacre

Originally posted by: soccerballtux
Did we have 26" flat screen TVs for $300 50 years ago? No way.

No, but the costs of things like food, health care, and education are proportionately more expensive, i.e., they take up a bigger percentage of Americans' incomes.

If people would cut back on spending and live within their means, it wouldn't be possible for suppliers to raise the prices-- people just wouldn't buy it. There's plenty of fine places to get a good education without spending more than $5000/year. Shopping for value/dollar in education rather than the big names. Food is NOT a big expenditure, you can eat plenty healthy for very cheap.

Health care and education...know what's common between those two? Government involvement. Education prices didn't balloon until Congress got in the business of giving out student loans to anybody and everybody and subsidizing school through Pell Grants in such a way that the opportunity cost to the student of going to the school doesn't change. When schools learned how much money there was out there through Stafford Loans they found they could just increase their costs by that same amount and their numbers would stay the same.

With healthcare, Medicare has put a strain on the health system. Why are healthcare prices so high? It's supply and demand, if someone could accomplish the same work for cheaper they would and would undercut everybody else and make millions. My doctor friend studied 17 hours/day with his buddy in med school to get where he is now. And you want to tell him he's charging too much. If he's charging too much, why don't you go get educated and undercut him? Not many people are willing to put their life on hold till they're 28 to become a doctor. Nobody will if you legislate prices down. Price caps lead to nothing but rationing, history has proven this time and again.

QFT.