Income Inequality: Should it matter?

Let me preface this, before I get covered in monkey shit, with a statement about OWS (aka my attempt to pander to the right wing constituency here): I think the protesters are completely misguided in their efforts, many are completely uninformed or willfully ignorant, and I'm sick of walking around the barricades on Wall St.

With that said, I think it's still important to look at what is behind these protests. Their message may be incoherent and impractical, but their anger may be justified. Most (all?) of the people on this board are in or aspire to be in finance, which gives us a good understanding of the practical underpinnings of the financial crisis and it's after effects, but can also severely narrow our view of the (non finance) world.

This Business Insider slideshow has a variety of graphics about the growing divide between wealthy and non wealthy Americans. Many of the statistics you have heard touted elsewhere, but I think it gives a good summary of how the current situation differs from the past and differs from the rest of the world:

http://www.businessinsider.com/what-wall-street-p…

This Live Science article has a couple more insights:

http://www.livescience.com/16518-5-facts-wealthie…

What struck me most about the Business Insider slideshow is slide #20, which shows upward mobility in the US at an all time low (and trending downwards). Everyone loves the entrepreneurial success stories of Facebook, Google, etc. but the reality seems to be that the American Dream is harder to achieve than ever before. Record corporate profits simply aren't being reinvested, the middle class is dwindling due to wage stagnation, and the country as a whole seems to be in an economic confidence malaise.

My question to you all is- does income inequality really matter? If it does, what should be done to reverse course?

I am trying to avoid a dogmatic discussion on this, although on this board it will certainly devolve into that. Does anyone have any out of the box solutions that don't fit the cookie cutter Democrat and Republican talking points? You can say all you want about people being lazy or corporations being greedy, but I haven't seen or heard of many creative solutions.

When the Tea Party movement first began, some of their demands were written off as batshit crazy (I'll be the first to admit I was guilty of this). In spite of all this, they brought an important issue to the forefront of American politics and discourse- "what should the role of government be in our economy?". As the Tea Party groups organized and formed a more coherent message, they became a bonafide political player on the local and national scenes. It remains to be seen whether these protest groups will ever reach the influence of the Tea Party (probably not since the right wing always seems more organized than the left), but I think (hope) that the OWS movement will make us think about "should we as a country deal with growing income inequality, and if so, how?", instead of us just writing off their crazy proposals and waiting for winter to force the hippies home.

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Comments (35)

Oct 13, 2011 - 4:31pm

http://www.cbo.gov/

All the info you ever could want. This is where those income charts come from showing the exponential growth in high earners, compared to the low.

Income inequality is not an issue. If you look at tax rates and % of tax burden, it has lowered the most for low income individuals. The tax burden falls primarily on the upper earners. The poor don't pay.

http://www.cbo.gov/ftpdocs/53xx/doc5324/04-02-TaxRates.htm#table1A

The reason low income salaries haven't rose is because you add no value. The only way they will rise is if the government does a couple things

1) Mandate higher minimum wages

 - people will get laid off
 - prices will increase
 - outsourcing will increase

2) Direct payments from the rich to the poor

 - this will just increase the floor, but won't give the poor the tools to get rich or invest

The poor are poor for the same reason there have always been poor. Education, effort, or a combination of things.

Income inequality is bullshit because it is under the assumption that people are equal or there is some ideal of equality. We all have opportunity and freedom. Some have it easier, some harder, but that is life. Some invest, some save, some spend. We each make decisions in order to maximize our personal utility.

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Oct 13, 2011 - 4:49pm
ANT:
http://www.cbo.gov/

All the info you ever could want. This is where those income charts come from showing the exponential growth in high earners, compared to the low.

Income inequality is not an issue. If you look at tax rates and % of tax burden, it has lowered the most for low income individuals. The tax burden falls primarily on the upper earners. The poor don't pay.

http://www.cbo.gov/ftpdocs/53xx/doc5324/04-02-TaxRates.htm#table1A

The reason low income salaries haven't rose is because you add no value. The only way they will rise is if the government does a couple things

1) Mandate higher minimum wages

 - people will get laid off
 - prices will increase
 - outsourcing will increase

2) Direct payments from the rich to the poor

 - this will just increase the floor, but won't give the poor the tools to get rich or invest

The poor are poor for the same reason there have always been poor. Education, effort, or a combination of things.

Income inequality is bullshit because it is under the assumption that people are equal or there is some ideal of equality. We all have opportunity and freedom. Some have it easier, some harder, but that is life. Some invest, some save, some spend. We each make decisions in order to maximize our personal utility.

I think tax burden is a fair statistic to introduce, but it needs to be looked at in conjunction with other metrics as well as a practical evaluation of the marginal utility of a dollar of income for the wealthy and poor.

I think there are more fundamental, systematic issues here than just the minimum wage and tax rates(although the tax code is indeed a mess). It's fine if we don't raise the minimum wage and fine if we don't increase entitlement spending, but you don't even address your own conclusion about the lower classes not having the "tools to get rich or invest". The fact of the matter is- now is not like before. You can't just chalk this up to "education, effort or a combination of things". There are statistically significant differences in the divide between rich and poor.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
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Oct 13, 2011 - 5:14pm
whatwhatwhat:
As long as people have opportunities to advance themselves then income inequality is a red herring.

Why has upward mobility been in such a downtrend then? I don't think it is laziness- I think the number of opportunities are decreasing.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
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Oct 13, 2011 - 9:50pm
duffmt6:
whatwhatwhat:
As long as people have opportunities to advance themselves then income inequality is a red herring.

Why has upward mobility been in such a downtrend then? I don't think it is laziness- I think the number of opportunities are decreasing.


I didn't say anything about laziness although I think a sense of entitledness would be a more accurate description of our generation. I think upward mobility is only going to get worse. Our entire generation is completely fucked right now; boomers are going to work until they die and a shitty economy that can't spare jobs for astrology majors. I think a big part of it has to do with expectations that are ingrained in everyone at a young age; the worst being the college myth.

This is why I can't completely dismiss the OWS garbage because most of them were following shit they've been told from a young age. We've bred a completely obidient and complacent society that has been raised to not question anything. Everyone has been told to just take out student loans, "invest in your education", blah blah. Of course the result of that is a god damn modern dance major with $200k in student debt. Granted, mufuckaz are grown and should be held accountable for their (poor) decisions but the education system needs to be completely honest with students and not lead them down a path to poverty.

Oct 13, 2011 - 6:07pm

"As long as people have opportunities to advance themselves then income inequality is a red herring."

This is the crux of this issue. Equality of opportunity.

Unprecedented levels of (growing) income inequality are not alarming to moderates like me because we expect equality of outcome. In fact we expect the opposite. People are not equal, and given equal opportunities individual outcomes should vary widely. I'm OK with that, and in fact think that this is the moral way for society to be structured.

What worries me about growing income inequality is that it signals to me that equality of opportunity is fading. I accept that the stupid and lazy will do poorly, and I'm glad that the smart and hard working will do well. I just don't understand why the stupid and lazy of today are doing so much worse than the stupid and lazy of 30 years ago. Similarly, I don't understand why the smart and hard working of today are doing so much better than the smart and hardworking of 30 years ago. Call me crazy, but I just don't believe that the bottom has gotten any stupider and lazier and that the top has gotten any smarter and harder working. The underlying abilities (IQ distribution, etc) of a population just don't change to the observed degree in such a short time frame. So something else must have changed.

Part of it is tax policy. The rich keep a larger share of there income then at almost any other time (which I think is good). Part of it is social policy. Excluding entitlements (SS, Medicare, Medicaid), social welfare spending as a % of GDP has been declining steadily and substantially since the 1980s (I'm mixed on whether this is good, but am mostly OK with it). Part of it is globalization. There can be little question that trade liberalization has greatly increased returns to capital (a good thing) while simultaneously reducing returns to labor in the U.S. and other first world countries (not so good in my opinion). When you combine all those things, even though they are all good things from the perspective of growing GDP, generating new wealth, spreading democracy etc, there is no doubt that they've had a devastating effect on the American middle class.

The question is what do we do to ensure equality of opportunity in an environment where these macro factors are generally working to consolidate it in the hands of the few. Moreover, how do we do so in a way that keeps the pie growing in an absolute sense. Neither the rhetoric of the right or the left seems to offer a satisfactory answer.

Oct 13, 2011 - 6:37pm

Well you are starting to see white collar outsourcing also. There are a multitude of reasons. There are also new opportunities also. How many people are selling stuff online, have e businesses, can now learn online. Many great schools have online classes, night time classes, part time programs.

Things just change. More so now. Flexibility is the key. I am almost 30 and look back at my career and the jobs I have had and it has been a whirlwind. Some people just can't handle that pace.

I feel bad, I do, but what can you do. Other than just having a large portion of society forever on the public dole, you have to take responsibility. Life is pretty damn hard.

I think the issue is really becoming this. Are you willing to be satisfied with a small, but livable government hand out or do you want to risk it and live a great life.

This whole 1% crap is obscuring the issue. There needs to be either a big cut in spending or broad based tax increases on those who pay.

  • 3
Oct 13, 2011 - 6:39pm

So according to ANT, all poor people are poor because they are feckless and lazy. great analysis there moron. nobel winner right here. smh.

__________
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Oct 13, 2011 - 6:55pm
SaucyBacon85:
So according to ANT, all poor people are poor because they are feckless and lazy. great analysis there moron. nobel winner right here. smh.

Wow, where in my post did I say this?

A high school and then college education are the single best ways to get out of poverty. We have free high school and low cost community college and cheap state schools. You have to show up, do your homework and study. That is it.

There are many reasons why the poor ( lowest 20% ) are poor, but if you think everyone of them is screwed by some outside force you are lying to yourself.

Who the fuck says SMH anyway. Go back to AOL chat or something.

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Oct 13, 2011 - 6:48pm

Income Inequality only matters when access to opportunity is not equal across the board.

In the US, only 30% of adults have a college education. These are the only people that are going to be able to compete globally. Why? Because they control the global economy. The top 30% (and more specifically, the top 1%) of American's own and manage a significant portion of the assets in our economy. Thus, wealthy people own shares of American companies. American companies are run by wealthy managers, who also own signficiant stakes in those companies. For both to get more wealthy, they move factories offshore, they cut costs, and they profit as a result. The uneducated worker cannot compete in this type of society. For the record, I am not saying this is a bad thing. I am simply saying that globalization benefits the wealthy tremendously, and so it is in their best interests to promote it.

Your lifetime potential income is a direct function of your educational network. Your educational network is the level of education you attained, as well as the network of people you met while attending a specific institution (in other words, target schools vs non-targets).

looking for that pick-me-up to power through an all-nighter?
  • 3
Oct 13, 2011 - 7:13pm

Ok ant you've clarified it. sorry but ur original post just came off aristocratic in a very bad way. sure some people are poor cos of their own bs. but for the most part it's society's failure to put these people on track. you can't just hold ur nose off at the peasantry. history shows that they bite back and bite back hard! i ditched my bb now i'm using this pos backup phone with number keys hence the abbrevs. goddamn rim!

__________
Oct 14, 2011 - 12:17am
SaucyBacon85:
Ok ant you've clarified it. sorry but ur original post just came off aristocratic in a very bad way. sure some people are poor cos of their own bs. but for the most part it's society's failure to put these people on track. you can't just hold ur nose off at the peasantry. history shows that they bite back and bite back hard! i ditched my bb now i'm using this pos backup phone with number keys hence the abbrevs. goddamn rim!

If you expect the government to "put everyone on the right track", that's fine, but how about you move to a Scandinavian country where people may agree with you. Here in the great U.S., we believe in carving out your own track, regardless of obstacles or handicap.

Oct 13, 2011 - 7:20pm

Societies failure to put them on the right track?

Take note, cause now I am going to be an asshole.

Society has nothing to do with it. I have no part of this and I could give a shit if someone succeeds or fails. Only time society has an upheaval from the peasantry is when it is totalitarian. The majority of people in this country still believe in a working class ethic. We have countless safety nets and social programs. If some kid wants to get high and blow of school, I am 100% ok with that.

But don't expect me to give a shit if you can't afford a nice life. You've made your bed, now lay in it.

There have been and always will be poor. I don't know why we are even discussing this. Poverty in the USA is relative. The poor here are kings everywhere else. If you gave every poor person 50K per year in income we would still have poor people.

Some would shit out 10 kids. Some would piss it away on dumb stuff. Some would party it away. Maybe a few would invest in their education or kids.

As someone who has worked with and managed people who barely graduated high school, each and everyone of them deserves less than the minimum wage.

I usually say let them eat cake, but I just realized that I would be buying the damn cake for them.

And this is why I only donate to charities that benefit animals or educated people.

  • 3
Oct 13, 2011 - 7:24pm

Also, this whole concentration of wealth thing is bullshit.

Take a look at a wonderful experiment called the housing crisis.

People with shit credit finally could afford houses and had access to credit. What happened?

Oh, people with bad credit bought small houses they could afford and used this new found credit to buy school books for their kids.

NOT

They bought material things (that also depreciate instantly). Rich people stay rich because they invest their money. They save. People with no assets piss their money away. How many poor people smoke, drink, gamble. The lottery is just a tax on the ignorant. Same thing with cigarettes.

You cannot stop people from being and acting dumb.

  • 2
Oct 13, 2011 - 8:00pm

The only reason why man became the apex species was because unlike other animals, we care about our fellow beings and strived to achieve goals as groups. i see poor people as failed potential. it's not enough to just walk away. Our society is the victim here. this whole dog-eat-dog every man for himself bullshit is overrated. we need to inspire the unproductive to produce. and i don't mean throwing money at them. get em into the army, stick em in a classroom till their ears bleed with knowledge or something. dammit let's get these fuckers working!

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Oct 13, 2011 - 9:32pm
SaucyBacon85:
The only reason why man became the apex species was because unlike other animals, we care about our fellow beings and strived to achieve goals as groups. i see poor people as failed potential. it's not enough to just walk away. Our society is the victim here. this whole dog-eat-dog every man for himself bullshit is overrated. we need to inspire the unproductive to produce. and i don't mean throwing money at them. get em into the army, stick em in a classroom till their ears bleed with knowledge or something. dammit let's get these fuckers working!

I am going to assume you are not an American because while I support this idea, it goes completely against personal liberty.

I agree with you though. The poor need help and it isn't about throwing money at them. Unfortunately, people don't like it when other people try and raise their kids (even if it is for the best) and they sure as hell don't like people trying to force something on them.

This is the problem. Government cannot regulate personal behavior. It cannot make kids study, be there to make you stop and not have that last drink or wake you up on time. Somethings you need to do yourself.j

  • 3
Oct 13, 2011 - 10:24pm

It's all about culture. I've spoken and mentored many poor (mostly minority, some not) students. It's just a totally different mindset then from what I was raised. It's a mindset that focus on things locally (what the hip bars are in town, how people are doing in town), not a more global, international mindset. The people seem much more focused on short term goals (my paycheck, my club money, whatever).

There's no concept of saving and investing with these people who are working minimum wage and barely getting by. The only thing they see is getting enough money to do whatever they need to do. I'm not saying all are irresponsible, but I can guarantee you many more drug users, smokers, etc. etc. are of lower income.

Wealth is generated (usually) by a certain culture: save, live prudently, invest, etc. The parents who do this teach this to their children. The parents who don't give no example for their kids to live by. Most of these parents are young, sometimes single mothers who are just trying to get by. It's a very cyclical problem that is extremely tough to end. Transfers of wealth would do virtually nothing for these people, since they don't have the institutions, culture, or mindset to use the money to establish a financial base and dig themselves out of the poverty cycle. Since I saw my parents finish a college degree, save for retirement, etc. etc. I feel much more knowledgeable of these issues AND much more aware of the future. I know what I need to be doing in order to live at least comfortably. That's the reason I'm on this site, the reason I'm at a top 15 school, the reason I am investing in my own future and the future of my (future) kids.

People in poverty have to want to change. It's more of a bottom-up solution that, while difficult to stomach for the people who want to save the world and fix everything, is much more plausible. People have to see their sons and daughters busting their ass to make it into and get that scholarship to Yale, save money, get an awesome job, and teach all this to their children. Until that happens, all of the spending, reforms, and preaching in the world won't change a thing.

Oct 13, 2011 - 10:22pm

Wish there were more people like you rain. See so clearly at such a young age.

Oct 13, 2011 - 11:53pm

I didn't read most of the posts but I don't understand why any American would support outsourcing of jobs to the Phillipines or India. It's one thing for Patrick to hire a Personal Assistant based in the Phillipines, quite another for the CEO of an Investment Bank to outsource an IB analyst job to India. If we keep encouraging this, our jobs are going to be on the chopping block soon enough. We have to be honest with ourselves, a large portion of an Analyst's job can be outsourced. This is too much.

We don't need class warfare, we need age warfare, the rich, fat, old, white CEOs don't care about the young people. They will do anything to save a $ and line their own pockets. They enjoyed 40-50 years of a boom economy and now we're screwed. They had their fun now it's time to tell them to take a hike. We need to bumrush any company that outsources jobs and threaten them with physical harm if they outsource even one job.

A lot of technology innovation still comes out of America, so we're lucky in that regard. But what if China and India catch up to us in that regard ? Then they'll control the innovation, manufacturing jobs AND entry level white collar jobs.

Oct 14, 2011 - 12:08am

Banking jobs are already being outsourced to India. And while I agree that outsourcing hurts everyone, including eventually you and I, I think blaming it on some ethereal CEO is unfair. The CEO is just doing what the shareholders want. If they decide to pay higher costs for labor and become less competitive, the share price will suffer and he will find his own job outsourced to a better leader.

Jobs will leave this country and return to this country. We demonize outsourcing, but fail to realize that the worst culprit when it comes to stealing American jobs is technology and mechanization. If John Deere went out of business tomorrow we could have full employment from farming jobs alone. Think of how many machines put humans out of work.

We are competing in a global economy. We either adapt and get used to this or try and swim against the tide.

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Best Response
Oct 14, 2011 - 1:36am

I will speak from personal experience here.

In this country as a whole, there is incredible opportunity. Unfortunately, the sad fact of the matter is that there is not a perfect distribution or equality of opportunity by region (and consequently, by race, age, and several other factors).

I grew up in Philadelphia. Not the Main Line, not the surrounding counties, North Philadelphia where 79% of African-American males will die or be imprisoned at least once by the age of 21. I had a rough family background, I won't get into personal details but it was easily messier than most on here I'd say.

Opportunity there was scarce. I know kids who graduated high school illiterate, literally unable to read their own diploma; others excited simply to score four digits on the new SAT. You flipped bricks on the corner, ran white for a lord, repped colors, and learned to hate the cops because they'd watch perpetrators running away from a homicide and do nothing until the dispatcher called it out minutes later, or worse, pull up in an unmarked van in plain dark tees, run up to the porch of a house, and beat the completely innocent brother of a suspected copkiller or known druglord mercilessly because they couldn't get at the real criminal.

I feel absolutely blessed to have had the opportunities I did. Because of them, I studied, broke the 99th percentile on the SAT, finished high school years younger than most, got into a ream of good schools, and wound up bearing six-figure loans to cover what my merit scholarships wouldn't. I worked hard in school, did recruiting as a sophomore, and broke into the BB that year.

Income inequality is not an insurmountable barrier. Trust me, going from shoveling driveways, emptying trash, cleaning warehouses, and doing any odd job you could find to scrounge a dollar to stay out of banging, that first paycheck as a summer analyst is an incredible eye-opener.

I love some of the points in Reset's and blackrain's posts.

Reset:
What worries me about growing income inequality is that it signals to me that equality of opportunity is fading. I accept that the stupid and lazy will do poorly, and I'm glad that the smart and hard working will do well. I just don't understand why the stupid and lazy of today are doing so much worse than the stupid and lazy of 30 years ago. . .Call me crazy, but I just don't believe that the bottom has gotten any stupider and lazier and that the top has gotten any smarter and harder working. . .So something else must have changed.
Equality of opportunity is not fading. The 'something else' is indeed policy as you mention, but I do not see it being primarily due to taxation. I see it as an alarming trend of increasing adoption of what I call the "handout system." Give people enough entitlement programs long enough and they will quickly progress from viewing them as a limited privilege to a god-given, fundamental right. Taxes have nothing to do with it. Bloated, unrealistic entitlement programs are the root.

Blackrain's got it exactly right. It's a mentality. If you are complacent enough to expect Big Brother to stock your fridge, spoon your food, provide your cable, and wipe your crack all while you sit on your ass, being given money under any sort of wealth redistribution program will change nothing in your lifestyle beyond the one-month spending spree you go on because you just don't know any better.

The most amusing part of this whole thing is the logic that advocates of wealth redistribution argue with. "It is the government's moral obligation to ensure fairness in this land of opportunity!" Hey look, if you feel so strongly about it, by all means, take some of your money out of your wallet, go find someone who needs it, and hand it to them. Convince everyone you know to do the same thing. Then they get this indignant look. "It's the government's job...!" Well, it's empirically proven that the government is a less efficient allocator of funds than private parties are, so bypass the middleman and work to effect the social change you wish to see. Looking on the government to force other people's moral decisions is simply lazy. Be the change you want to be. That is my largest issue with this OWS nonsense, because most of them have looked everywhere possible to find someone to lay blame against, save inward.

I am permanently behind on PMs, it's not personal.

  • 5
Oct 14, 2011 - 4:36am

some thoughts:
The best policy to lower the gini coefficient and create jobs any president could pursue is tax reform. Remove all deductions (which is basically another form of spending) and eventually slash rates. Of special importance is removing the offshore profits exemption.

The last boom was fueled by the twin terrors of cheap credit and irresponsible hands. Consumption is going to stagnate for a while and we need to look at other avenues for growth which brings me to point three:

Throughout history we've had some technology, idea, or discovery that accelerated job and wealth creation(e.g. the steam engine, homestead act). As of now we have nothing. There also happens to be $2 trillion of cash not being put to use right now. To get that moving and into the pockets of the bottom 80%, we can either confiscate it or try giving those evil corporations an actual reason to spend it. This can come in the form of government funded research as well as entrepreneurs creating new businesses. We live in a $15 trillion economy. There has got to be something you're good at, someway you can create value.

Wages and prices are still too high. The credit boom created an artificial increase in aggregate demand which caused wages and prices to to rise above their productivity and real value. If we let them fall (I'm looking at you Ben), we can get closer to full employment. Perhaps the fed should target unemployment or maybe just maybe let aggregate demand fall.

Making money is art and working is art and good business is the best art - Andy Warhol
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Oct 14, 2011 - 6:22am

The middle class is dwindling due to wage stagnation????

It's not wage stagnation that is causing this, it's what they spend their income (I mean increase their credit card balances) on.....they spend their money mostly on short term consumables rather than on long term assets like education. I was in one town on the east coast and I remember the people at the next table were talking very excitedly about some contraption they bought for 19.95 that automatically scrambled an egg inside its shell. When I overheard them talk about their "benefits" I am thinking like WTF, why don't you save your money (i.e. my tax dollars) and just use a fork?? In my anger, I realised that I asked the wrong question. It's not why they spend our tax dollars on that kind of crap, the question is why do we keep subsidising it.

I think the solution is to remove the incentives to doing nothing while protecting the obvious disadvantaged in society.

Oct 14, 2011 - 8:38am
ebwhitaker:
The middle class is dwindling due to wage stagnation????

It's not wage stagnation that is causing this, it's what they spend their income (I mean increase their credit card balances) on.....they spend their money mostly on short term consumables rather than on long term assets like education. I was in one town on the east coast and I remember the people at the next table were talking very excitedly about some contraption they bought for 19.95 that automatically scrambled an egg inside its shell. When I overheard them talk about their "benefits" I am thinking like WTF, why don't you save your money (i.e. my tax dollars) and just use a fork?? In my anger, I realised that I asked the wrong question. It's not why they spend our tax dollars on that kind of crap, the question is why do we keep subsidising it.

I think the solution is to remove the incentives to doing nothing while protecting the obvious disadvantaged in society.

Sweet anecdote, but yes, there is wage stagnation. Not sure how you can argue otherwise nor why you only focused on that.

"For I am a sinner in the hands of an angry God. Bloody Mary full of vodka, blessed are you among cocktails. Pray for me now and at the hour of my death, which I hope is soon. Amen."
  • 3
Oct 14, 2011 - 8:07am

I love this site. I am learning so much... Thank you all.

"That dude is so haole, he don't even have any breath left."
Oct 14, 2011 - 1:58pm

I wasn't arguing that there wasn't wage stagnation, I was arguing that wage stagnation wasn't the cause of the dwindling of the middle class as you stated in your piece. I offered another cause in its place, and something that would contribute toward a solution. I would further argue that wages/income levels for the middle class were artifically boosted through credit cards spending.......and what did they do with that extra income.??? They spent it on consumption.

I focused on that because this segment of society appears to be destroying themselves through their own behaviour. If anything, the stagnation in the income levels is a result of the behaviour and spending habits.

Yes, too much wage disparity in a country isn't good as we see.

What are some possible solutions? Well, I think decreasing the incentives to do nothing would certainly contribute toward part of the solution. Some of those people I saw on TV at this Occupy Wall St. thing....may be beyond help.....(like that animal who took a shit on the police car) but for others who are genuine and want to do something with their careers, perhaps people in finance or anyone employed could volunteer some of their time to help people think through their job search, etc....sort of a "Wall Street Mentor Exchange". Match a finance/consultant/executive with a particular skill set or interest with someone who needs advice in that particular area. As a model of how it could work, I volunteer with a group called Grow Movement that matched me with a young real estate entrepreneur in Uganda. I spent 8 one hour sessions with him over the course of three months on Skype to help him think through his strategy, marketing plan, etc. Within a year he sold off one small shop that sucked his time and contributed little to his income, focused only on real estate, hired five extra staff and grew his revenues 4x. What's this guy doing with his extra money?? Investing in an accounting course I last heard rather than on some consumable like an egg blender.

Oct 14, 2011 - 2:06pm

As long as America allows freedom and liberty, people will always be poor and fail. Some retard drops 200K on an anthropology degree and they will be broke trying to pay it back.

But who am I to make decisions for another free person.

http://studentaid.ed.gov/PORTALSWebApp/students/english/cancelstaff.jsp

People who complain about crushing student loans could always serve the government, who will in turn forgive student loan debts after a number of years.

See, there is always an answer or way out. Some people just are too lazy to seek the truth.

This country is perfectly fine. We don't ask the poor to pay Federal taxes, we provide multiple safety nets, we have free grade school and low cost college. If you succeed cool , if you fail cool also.

I don't see an issue.

  • 2
Oct 15, 2011 - 12:52pm

So far this has been a pretty solid and rational discussion (by WSO standards anyway). However, by focusing the conversation on those folks in the bottom 10% on government assistance I think that we're largely missing the point of why OWS is angry.

People in the bottom 10% have always a pretty raw deal in life, trapped by some combination of lack of opportunity and their own terrible choices. The reason OWS is angry is because that raw deal is rapidly spreading upward. The lives of those in the bottom 40-50% today are very quickly coming to closely resemble the lives of the bottom 10% of 30 years ago. What was once the plight of high school drop outs (high unemployment, drug problems, high levels of single parenthood) is now the plight of the high school graduate and even the mediocre college graduate. Even the top of the college graduate pool is barely treading water economically. The Atlantic had a great article on this a few months back:

http://www.theatlantic.com/magazine/archive/2011/09/can-the-middle-clas…

Since people are breaking out the personal anecdotes, I thought I'd offer one of my own. My father studied engineering in college. While he was in college he worked stocking grocery store shelves at night. He studied all day and worked all night to support his young family. The pay was low, only $5 per hour, and tuition at his elite private engineering college was high at $300 per semester. His hard work paid off though. Eventually he graduated and landed a job as an engineer with a starting salary of $43,000 per year. Soon after he bought his first home for $78,000.

Sounds good right? The American dream. Let's look at what a comparable experience would look like today:

  • $5/hr in 1974 would be $21.85/hr today if we use CPI as a gauge. When was the last time you heard of someone working in a grocery store making $22/hr?

  • $300 per semester was $600 per year in tuition. Comparable tuition today would be $2622 per year. When was the last time you could go to a good college for $900K. It had not been renovated since the mid 1980's.

So in 1974 you could pay $3000 per year to go to a good college while working at night for $22/hr. You could graduate and take a 9-5 job that paid $188K/yr right out of school, and you could buy a house in a major urban area for $350K. Wow, that sounds awesome. Especially to me since I graduated from the same college with the same degree in 2003.

Only my experience was different. I had $70,000 in student loan debt because my tuition was $34,000/yr (today its approaching $50K/yr). I also worked nights to help pay for school. Only my night job paid about $9/hr. It was all worth it though because I graduated and got myself an engineering job in the same field as my dad. My starting salary was $49,000 per year. Now I don't want to sound like I'm complaining. I had good opportunities and I've done well for myself. The point is, compared to 2011, even my experience (much less my dad's) seems like the good old days.

Rightly or wrongly, this is why OWS is mad. Its not because Shaniqua and her 9 kids can't get enough food stamps. Its because little Johnny just graduated from the state college, his tuition was $15,000 per year, and his only job options pay $12/hr with no benefits.

Oct 15, 2011 - 1:19pm

$15,000 x 4 years = $60,000 = $700 a month in student loan payments for 10 years

http://www.finaid.org/calculators/scripts/loanpayments.cgi

$12 bucks an hour is 480 a week, about 2K a month. He isn't paying health insurance, so that is out. No 401(k) which is fine since he can start when he delevers and gets a little older.

Lets suppose he lives in Philly.

38.4 in state and city tax. Sucks, but he can walk and use public transportation.

With the tax bracket he is in he is paying 62.4 per weekly paycheck.

That plus city/state brings him to 380 per week or $1520 a month. Social security and Medicare will reduce this also ($41.00 a paycheck) so now he is at about $1350 a month.

Splitting a really nice place in Philly is $600 a month. So that leaves him with $150 a month after all is said and done. Now this isn't taking into effect that the interest on the student loan is deductible or that Philly taxes aren't exactly 8%, etc. But this is close.

So what to do. Well, you could work during college and come out with less than 60K. You could easily work another job and have much more money to spend and save (or de-lever quicker). We all work way more than 40 hours a week and I don't think it is unreasonable to expect this person to do so.

He could also do a variety of things that the government recognizes as part of their loan forgiveness program. After 7 years the government will pay off your loans and during that time you will get a reduced loan amount.

Also, he could choose a different major. Back office finance jobs pay more than 25K a year. Accounting jobs do. Government jobs do. Teaching does. Etc.

He could also live with his parents for a year, aggressively pay down those loans and wait to get some experience so he can make more than 12 an hour.

Problem is, this isn't easy or fun. It requires self discipline, hard work, sucking for a while. This is EXACTLY what OWS is protesting. They want an easy life. They think rich people just magically woke up one day. They ignore the hard work, prudent financial decisions, etc that all went into getting wealthy.

  • 3
Oct 15, 2011 - 1:43pm

ANT,

That's all well and good, but it doesn't change the simple fact that things are worse today then they were yesterday. It doesn't change the fact that while $15,000/yr tuition is reasonable, 10 years ago it $7000/yr. It doesn't change the fact that 10 years from now that same school's tuition will be $30,000/yr (yes, public school tuition has been increasing at 7-8% CAGR for the past 30 years). It also doesn't change the fact that in 10 years that first job will still pay $12/hr (if it exists at all).

Say all you want about choosing the right major, the right school, getting the right grades, or making the right choices. People are mad because, while its still very possible to make it, its gotten a lot harder and all the trends are negative.

I made all the right choices. I got an engineering degree from a top school, I got top grades, and I got a good job in the field. Then I got a masters in engineering from another top school and completed an MBA on the side all while working full time. I've saved, I've lived modestly, and I've invested. Now I'm a 3rd year associated at one of MBB and I just bought my first house. My life is good.

All that doesn't change the fact I'm 30 and my salary has just caught up to that of my 21 year old father in his first year out of undergrad. It doesn't change the fact that I work 100% more hours than he did. It doesn't change the fact that my ugrad tuition was 6X what his was AFTER adjusting for inflation. I'm one of the "winners" at this point, but I can still see why the "losers" are mad.

Oct 15, 2011 - 2:42pm

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