Wealth Gaps Are Large & Growing ...

[savory]

I thought many people ER would find this blog interesting. It discusses why there is a large wealth gap among very groups in the US and how it might be lessened.

Wealth Gaps are Large and Growing, But a Research-Driven Literacy Strategy Can Help | MetroTrends Blog

 

[brett]

I think that one of the other big causes is the fact that we are loosing high paid manufacturing jobs. They are going out of the country. And so are many other well paying middle class jobs. They have, and continue to be, outsourced to lower cost offshore locations. These are some of the very jobs that fueled the ability of middle income people to help support and encourage their children through college, university, or whatever other post secondary eduction they selected.

I am not optimistic given the escalating cost of education and training and the continued loss of these jobs. Just take a look at parts of Michigan and Ohio. It is not pretty.

 

[jerome len]

We live in the greatest country in the world.......do we want to become like Europe?

I don't know the answer but, today, it's getting harder to get people to accept entry level jobs.....they can get as much from subsidies, many times, as they make in an entry level job.......My liberal friiends think I'm a Republican......My conservative friiends think I'm a Democract. Basically, we used to scratch to make a living, grow in income through a good education and work ethic and require every healthy individual to do the same. I wish I had the answer. I work at a soup kitchen evey month....most of the people that come in need the food......but, they couldn't handle a good job if it was offered to them......how to we fix this? I truly wish I had the answer.

 

[Midpack]

Mostly good information, though I am noting the smell of bacon wafting by...

 

[haha]

We live in the greatest country in the world.......do we want to become like Europe?

I don't know the answer but, today, it's getting harder to get people to accept entry level jobs.....they can get as much from subsidies, many times, as they make in an entry level job.......My liberal friiends think I'm a Republican......My conservative friiends think I'm a Democract. Basically, we used to scratch to make a living, grow in income through a good education and work ethic and require every healthy individual to do the same. I wish I had the answer. I work at a soup kitchen evey month....most of the people that come in need the food......but, they couldn't handle a good job if it was offered to them......how to we fix this? I truly wish I had the answer.

All these people are doing is gaming the system, just like the people on this board who spend a great deal of time figuring out how to get the most and give the least. This proves once again that (surprise!) incentives matter.

Ha

 

[eytonxav]

One incentive for the mega corps that I would like to see, is more entry level jobs that pay a decent salary. After all, new entrants to the work force will ultimately be the consumers who will buy their products and services in the future. This is an area where there needs to be a little more balance with the outsourcing bandwagon that has been out of control for many years IMO.

 

[heeyy_joe]

The article cites debt, particularly student loans, as being responsible for this wealth gap. While I agree that is certainly a contributor, I believe it is much more due to poor decision making when it comes to automobiles. Leasing cars or otherwise changing out a car every three years for a new model is a killer on cash flow and the ability to save. Those that buy a sensible car and keep it maintained well past the loan payoff date are the ones, on average, that are able to make strides to accumulating wealth. Keeping up with the "joneses" has serious negative consequences. Too many people in our consumer society can't distinguish between a want versus a need.

 

[bluztuzumab]

What most of us think about wealth distribution in the US is completely wrong.

Before watching this, ask yourself how do you think wealth in the US is actually distributed between the population quintiles (0-20%, 20-40%, 40-60%, 60-80%, 80-100%), and then how you think it should be distributed. [Sorry in advance to those where discussing these types of numbers affects your sensibilities...]

http://www.upworthy.com/9-out-of-10...tely-wrong-about-this-mind-blowing-fact-2?g=2

 

[M Paquette]

This is an inevitable side effect of our move from the current odd social structure with a relatively large middle class, back to the classic social structure of a large base population, with layers of smaller populations, at higher income levels, taking on the burden of managing, maintaining, and organizing society. The current anomalous structure came out of an economic expansion that required significant manpower of modest skills to support manufacturing tasks. That expansion put an unprecedented portion of the economic gains in the hands of these workers, leading to the expansion of the so-called "middle class".

We are now simply reverting to the more classical structure, as the temporary need for modestly skilled manpower to support manufacturing fades away. (What some inaccurately call the post-manufacturing economy.)

 

[bluztuzumab]

This is an inevitable side effect of our move from the current odd social structure with a relatively large middle class, back to the classic social structure of a large base population, with layers of smaller populations, at higher income levels, taking on the burden of managing, maintaining, and organizing society. The current anomalous structure came out of an economic expansion that required significant manpower of modest skills to support manufacturing tasks. That expansion put an unprecedented portion of the economic gains in the hands of these workers, leading to the expansion of the so-called "middle class".

We are now simply reverting to the more classical structure, as the temporary need for modestly skilled manpower to support manufacturing fades away. (What some inaccurately call the post-manufacturing economy.)

But it turns out neither is close to being correct - it is more of a severe Tornado shape (extremely top heavy) when it comes to distribution of wealth with the 'middle class' not being much different than the 'poor' when compared to the wealth in the top 10, 5, 2, 1%... The top 1% have 40% of the wealth (that is known about), own 50% of the investments (stock, bonds, mutual funds), and account for ~25% of the income. The bottom 50% own only 0.5% of the investments.

 

[M Paquette]

But it turns out neither is close to being correct - it is more of a severe Tornado shape (extremely top heavy) when it comes to distribution of wealth with the 'middle class' not being much different than the 'poor' when compared to the wealth in the top 10, 5, 2, 1%... The top 1% have 40% of the wealth (that is known about), own 50% of the investments (stock, bonds, mutual funds), and account for ~25% of the income. The bottom 50% own only 0.5% of the investments.

That's the whole idea. Wealth is concentrated at the top, among those who understand best how to acquire and use it. The middle class and poor are merged in the bottom, effectively wealth-free class. The top 400 families control more wealth than the bottom 50% of Americans.

Suggested reading: http://davidbrin.blogspot.com/2011/09/class-war-and-lessons-of-history.html

 

[sengsational]

One incentive for the mega corps that I would like to see, is more entry level jobs that pay a decent salary. After all, new entrants to the work force will ultimately be the consumers who will buy their products and services in the future. This is an area where there needs to be a little more balance with the outsourcing bandwagon that has been out of control for many years IMO.

I am currently training my replacements. They're in India. Yes, plural. It will take about 3 of them to do my job, but they only cost one tenth of what I cost. Right now, partially trained, I can out do the entire team of 8.

But I wanted to comment on the economics of the "lets offer good paying jobs here in the US" idea. Companies will go for the lowest cost solution that solves the problem. Shareholders require that companies do this. Workers here need to be better than the competition or they will be gone. The world is getting smaller. Some use the phrase "race to the bottom", but I think the rest of the world has so much upside potential. Just too bad that the US position is, IMO, not sustainable. The best we can do is invite our friend from the south to come here legally and fill the bottom of the pyramid. I want hard workers looking for their own version of the american dream while all the while paying into the social security system.

 

[Sniggle]

Isn't some of the income inequality being driven by ZIRP? Middle and upper income folks have benefited from the stock market run-up in the last several years, while those on the lower end have seen any savings generate no income, and have seen prices for staples (food, fuel) rise.

 

[explanade]

Hmm, wealth is more concentrated at the top than ever.

Is the growth rate higher than it's ever been?

 

[bUU]

This article really crystallizes the issue for me:

23 Mind-Blowing Facts About Income Inequality In America - Business Insider

Especially this image:

http://static4.businessinsider.com/...sted-wages-have-been-flat-for-fifty-years.jpg

 

[mpeirce]

For an informative discussion on this topic you might want to listen to this interview between Russ Roberts, a professor of economics at George Mason University, and James Galbraith, a professor of economics at the University of Texas.

Galbraith argues that much of the mainstream analysis of inequality in the economics literature is flawed. Galbraith looks at a variety of different measures and ways of analyzing income data. In the podcast he focuses on how much of measured inequality is due to changes in specific counties or industries.

Galbraith on Inequality | EconTalk | Library of Economics and Liberty

 

[eytonxav]

But I wanted to comment on the economics of the "lets offer good paying jobs here in the US" idea. Companies will go for the lowest cost solution that solves the problem. Shareholders require that companies do this. Workers here need to be better than the competition or they will be gone. The world is getting smaller. Some use the phrase "race to the bottom", but I think the rest of the world has so much upside potential. Just too bad that the US position is, IMO, not sustainable. The best we can do is invite our friend from the south to come here legally and fill the bottom of the pyramid. I want hard workers looking for their own version of the american dream while all the while paying into the social security system.

While being competitive is the number one requirement for any company, is outsourcing or eliminating decent paying entry level jobs the only solution (and is the lowest cost solution the best solution or should it be best value)? To a large extent, I have not seen the stewardship by top executives towards employees, shareholders or customers in this day and age vs when I entered the workforce after college. Is this not to some extent a failure of leadership? As far as I'm concerned, greed at the top is a major contibuting factor, and since when has the top tier given a hoot about shareholders. These mega corps are run by sr exec teams as if it was their own personal empire, with handpicked BODs, who only seem to say yes to screwing the workers, yet they heap astronomical rewards on their benefactors to the dismay of shareholders. We can certainly agree to disagree, but I think this outsourcing craze which started back in the 90s, and while not the only factor, has contributed to the downfall of our middleclass in exchange for proping up shorter term objectives.

 

[Dreamer]

One incentive for the mega corps that I would like to see, is more entry level jobs that pay a decent salary. After all, new entrants to the work force will ultimately be the consumers who will buy their products and services in the future. This is an area where there needs to be a little more balance with the outsourcing bandwagon that has been out of control for many years IMO.

I agree. My DH and I both were in families that relied on welfare when we were growing up. I had never know any family member or friends of our family that had went to college. I started college and then freaked out about the student loan that I had obtained and how was I ever going to pay it back and dropped out of college. I was working waitress and cashier jobs. I went through training that was provided by the Manpower Training Act and took state and federal civil service tests at the end of the training. I was immediately hired by the state of OH and shortly thereafter went to work for the federal government. I retired from the fed gov after almost 33 years of work. I could do the work, I just needed training and the chance. The taxes that I have paid since the Manpower Training Act were far higher than the amount that I would have paid working as a waitress or cashier all of my life.

My DH served in the military and received his college degree courtesy of the GI bill. I feel very confidant saying that he would have never received a college degree without it.

I feel extremely grateful that those programs were available to both of us. Neither of us ever thought that we would end up as financially fortunate as we have at this time in our lives. It was beyond my wildest dream growing up.

I think there should be more training and entry level jobs. Some people just need a little training, instead of going to college and ending up with thousands and thousands of dollars of debt at the start of their adult lives.

 

[ziggy29]

We live in the greatest country in the world.......do we want to become like Europe?

Probably not. But we don't want to become like Bangladesh, either.

Are these really the only two choices? I'd sure like to think not.

 

[Gatordoc50]

There has been a shift from labor to capital. There are things we can do and things we can stop doing to shift it back. But it's gonna have to have a strong grass root component. Any hippies left out there?

 

[ziggy29]

There has been a shift from labor to capital. There are things we can do and things we can stop doing to shift it back. But it's gonna have to have a strong grass root component. Any hippies left out there?

IMO, our economy works best -- and our middle class that drives the economy is strongest -- when there is a healthy equilibrium between the leverage and "clout" of both labor and capital. Without getting deep into politics, I think it's pretty clear that the economy of the last few years has tipped the scales *vastly* in favor of capital. The last decade has seen the "value" of labor lag horribly compared to top-line economic growth for capital.

(And I lived in Silicon Valley in the late 1990s, so I've also seen the balance in favor of labor, where for skilled professionals double digit wage gains were fairly common.)

So to rephrase what I say above, perhaps the big economic challenge facing this nation is to see if we can restore some semblance of balance without creating a system that causes vast amounts of capital to flee (or remain parked in cash) to the detriment of growing our GDP. I don't think the usual talking points can address this, as all they do is either continue to increase the current imbalance or replace one imbalance with another imbalance in the opposite direction.

We have a growing number of folks who feel like they will *never* be able to retire, let alone early, largely because they can't keep up with the cash flow needed to adequately fund it. Wages are flat (at best), *real* inflation felt in essentials like food, energy, education and health care is moderately high, and has been mounting for several years. There's just little left for a lot of folks to save for retirement any more in a lot of cases.

Demonizing capital isn't helpful, and neither is demonizing labor. So can we help the middle class rebound in a way that doesn't encourage mass amounts of capital to "flee" from our domestic economy? Perhaps someone who can crack that one would deserve a Nobel Prize in Economics.

(Also moving this to the Politics thread as a precautionary measure.)

 

[SJ1_]

I thought many people ER would find this blog interesting. It discusses why there is a large wealth gap among very groups in the US and how it might be lessened.

Wealth Gaps are Large and Growing, But a Research-Driven Literacy Strategy Can Help | MetroTrends Blog

When I think of the wealth gap I always think of this guy in the cube next to me yrs. ago. We both graduated the same time and we both pretty much made the same salary. I had around 10 homes and banked my salary, he was broke and 30-40k in Credit Card debt.
If they took my money and gave half to him so we both had the same amount of money, in 5-10 years I would be banking my salary and he would be broke.
AMEND

 

[ziggy29]

When I think of the wealth gap I always think of this guy in the cube next to me yrs. ago. We both graduated the same time and we both pretty much made the same salary. I had around 10 homes and banked my salary, he was broke and 30-40k in Credit Card debt.
If they took my money and gave half to him so we both had the same amount of money, in 5-10 years I would be banking my salary and he would be broke.
AMEND

Sometimes true, but I think it's unfortunate that many folks today seem to assume that anyone suffering economic misfortune today only did so because of their own bad and/or irresponsible decisions, and that if they just would have been responsible and made better decisions, they'd be wealthy and able to retire at 50. A lot of good, hard working and responsible people are desperately thrashing around in the water in this economy, trying not to drown. And a lot of people just can't seem to accept that; it's more convenient to just believe that if they are struggling, it *must* be because they screwed up and they made their own bed. It absolves us of feeling any responsibility to help out or accept any personal sacrifice.

 

[Gatordoc50]

IMO, our economy works best -- and our middle class that drives the economy is strongest -- when there is a healthy equilibrium between the leverage and "clout" of both labor and capital. Without getting deep into politics, I think it's pretty clear that the economy of the last few years has tipped the scales *vastly* in favor of capital. The last decade has seen the "value" of labor lag horribly compared to top-line economic growth for capital.

(And I lived in Silicon Valley in the late 1990s, so I've also seen the balance in favor of labor, where for skilled professionals double digit wage gains were fairly common.)

So to rephrase what I say above, perhaps the big economic challenge facing this nation is to see if we can restore some semblance of balance without creating a system that causes vast amounts of capital to flee (or remain parked in cash) to the detriment of growing our GDP. I don't think the usual talking points can address this, as all they do is either continue to increase the current imbalance or replace one imbalance with another imbalance in the opposite direction.

We have a growing number of folks who feel like they will *never* be able to retire, let alone early, largely because they can't keep up with the cash flow needed to adequately fund it. Wages are flat (at best), *real* inflation felt in essentials like food, energy, education and health care is moderately high, and has been mounting for several years. There's just little left for a lot of folks to save for retirement any more in a lot of cases.

Demonizing capital isn't helpful, and neither is demonizing labor. So can we help the middle class rebound in a way that doesn't encourage mass amounts of capital to "flee" from our domestic economy? Perhaps someone who can crack that one would deserve a Nobel Prize in Economics.

(Also moving this to the Politics thread as a precautionary measure.)

+1
Maybe we can study emerging nations as compared to developed nations to observe how and when and under what circumstances the
shift occurs. IMO, the biggest change that causes the shift from labor to capital is the formation of and migration to cities.

 

[Texas Proud]

Sometimes true, but I think it's unfortunate that many folks today seem to assume that anyone suffering economic misfortune today only did so because of their own bad and/or irresponsible decisions, and that if they just would have been responsible and made better decisions, they'd be wealthy and able to retire at 50. A lot of good, hard working and responsible people are desperately thrashing around in the water in this economy, trying not to drown. And a lot of people just can't seem to accept that; it's more convenient to just believe that if they are struggling, it *must* be because they screwed up and they made their own bed. It absolves us of feeling any responsibility to help out or accept any personal sacrifice.

I think SJ1 was talking about someone who was working the whole time... I know a few people like this... they make decent money (teacher) and have nothing to show for it...

The worst is a woman I know... was married twice.... divorced twice because of spending... she has had houses repoed, cars repoed etc. etc... she is in real bad shape because she had tapped into her retirement funds (I did not know you could do that, but her brother told me she did)....

Now, she has a sister who is also a teacher... raised two kids on her own (other one had one)... owns her house outright... is not in debt... will be able to retire in her early 60s... (heck, maybe sooner since she will be getting a good pension)....


I have sympathy for the people who are thrashing around in the rough water that the economy has created.... but I think that number is small compared to the number who make bad decisions....