Inequality: The Reason for the Weak Recovery

[Sunstone]

An economist argues that the reason for the weak recovery is economic inequality.

Discuss.

 

[MysticSang'ha]

An economist argues that the reason for the weak recovery is economic inequality.

Discuss.

I'd add the qualifier "monstrous" to the inequality, since a level of income inequality is to be expected in a meritorious economy. But the top earners have earned their income about as much as I've earned the Brooklyn Bridge...which is little to none.

I mean, I crossed it a couple dozen times about 20 years ago. That should get me about - ooooh, I don't know - a solid $7 million? Think of how it has stood so well since I've used it!

 

[Sunstone]

Good point, Heather. It's not economic inequality per se that's the issue here. It's economic inequality so extreme that it endangers the economy and political process that's the issue.

 

[freethinker44]

I mean, I crossed it a couple dozen times about 20 years ago. That should get me about - ooooh, I don't know - a solid $7 million? Think of how it has stood so well since I've used it!

You don't make money by doing things yourself, you make money from people who things themselves and then you just call the accomplishments yours. So since I heard about you crossing it a couple dozen times, I figure I should get at least over 9000 times more than you.

 

[freethinker44]

Good point, Heather. It's not economic inequality per se that's the issue here. It's economic inequality so extreme that it endangers the economy and political process that's the issue.

I think addressing inequality is just addressing a symptom of the problem. The real problem is what causes economic inequality. Personally, I blame the economic system itself. Any system built around competition will create losers, that's just the nature of competition.

It's kind of like a horrible game of musical chairs. We go round and round and then by the nature of game, someone loses. Then whoever is left starts the process over again and eventually you end up with more and more losers and less and less winners, but the winners win more and more every go around.

 

[Sunstone]

I think addressing inequality is just addressing a symptom of the problem. The real problem is what causes economic inequality. Personally, I blame the economic system itself. Any system built around competition will create losers, that's just the nature of competition.

It's kind of like a horrible game of musical chairs. We go round and round and then by the nature of game, someone loses. Then whoever is left starts the process over again and eventually you end up with more and more losers and less and less winners, but the winners win more and more every go around.

That's quite an interesting point.

 

[Quintessence]

I think addressing inequality is just addressing a symptom of the problem. The real problem is what causes economic inequality. Personally, I blame the economic system itself. Any system built around competition will create losers, that's just the nature of competition.

It's kind of like a horrible game of musical chairs. We go round and round and then by the nature of game, someone loses. Then whoever is left starts the process over again and eventually you end up with more and more losers and less and less winners, but the winners win more and more every go around.

Perhaps we need a bit less competition and far more cooperation? Ye gods, I remember back when I didn't have to worry about money. I'm still not a competitive person, but I feel like I have to be or I won't get to eat or pay my rent. I would much rather just cooperate and help people in good spirits.

 

[MoonWater]

well clearly 95% of the populace just aren't working hard enough They should ask for more hours or get a second job... third job?... fourth?

It's remarkably short-sighted for the top 5% to keep funneling the money upward when you consider that they will all fail if no one in the working class can afford to buy from them.

This is why I'm in favor of a living wage model for the minimum wage, to even out the playing field, help pull more people out of poverty, and give the working class more spending power to re-invest in the economy.

Its interesting how those who complain about so many people being on the government dole are also so against taking measures to help get those people off the dole like increasing minimum wage.

 

[freethinker44]

well clearly 95% of the populace just aren't working hard enough They should ask for more hours or get a second job... third job?... fourth?

I heard they actually spend almost a third of their day sleeping. Bunch of lazy freeloaders if you ask me, they spend all night laying down with their eyes closed and then have the nerve to complain about being hungry.

 

[MoonWater]

I heard they actually spend almost a third of their day sleeping. Bunch of lazy freeloaders if you ask me, they spend all night laying down with their eyes closed and then have the nerve to complain about being hungry.

tell me about it, those 8 hours could be put to far better use working another full time job. You know the old saying "coffee, you can sleep when you're dead"

 

[Penumbra]

An economist argues that the reason for the weak recovery is economic inequality.

Discuss.

Median US household net worth is rather low compared to many developed countries, even though the mean is fairly high, because it's so incredibly concentrated. And for income, there aren't any large and developed countries that have more income inequality than the US- only developing countries and a few developed city-states.

The US has the highest per capita healthcare expenditure, and much less financial support for higher education than other developed countries, with the combination being that with increased health care costs and tens of thousands in student debt per person (and very low incomes for most non-college-educated workers unless they run a business or are very skilled in certain trades), people have a lot less for saving and spending on other things. The bottom 50% literally have almost no combined financial net worth at all. Add to that flat or regressive taxation structures in some aspects, and the fact that a high portion of taxes go to military spending rather than flowing back into healthcare or education (US has one of the higher percentages of military spending to GDP, about 2-3 times as high as many highly developed countries with only a few exceptions) and it's just not a good recipe for the middle and working class to have buying power for a recovery.

 

[Penumbra]

Some people say that the wealthy class should pay lower taxes so that they can hire more workers, but they're not going to hire more workers if their customers (working and middle class people), don't have disposable income to buy their products and services.

 

[Monk Of Reason]

The poor are typically a burden on the economy, especially if we take care of them.

The middle class is the engine that powers our economy.

The upper class and some in the upper regions of the middle class are the ones that make investments that allow for businesses to prosper.

Only 2 of these "classes" seem to be inherently necessary. Finding a way to push the lower class into the middle class and making sure the middle class has enough spending power is the key to creating a healthy economy. If too much money gets placed in the upper class in terms of proportional amounts of the wealth in the economy then we get a lot of people with the ability to start a business but not enough customers to support said business.

 

[esmith]

Well to start with, what is income "inequality"? The definition that seems right to me is:
From: Income Inequality Definition | Investopedia

The unequal distribution of household or individual income across the various participants in an economy. Income inequality is often presented as the percentage of income to a percentage of population . For example, a statistic may indicate that 70% of a country's income is controlled by 20% of that country's residents.

According to My Source the median household income started to drop in 2008 and has dropped approximately 5.0% from 2008 to 2012 and has gone up by 19% since 1967.
below graph from My Source

The below chart shows the S&P Index since 1950 to 2012 Ticks are in 10 year increment.. Chart is from My Source

Now, it appears that the rise in the stock market closely follows the rise of mean (not median) income for the top quintile (population divided into 5ths). Now you will notice that the mean income has gone up for the majority of households. There is a big difference between mean and median income. (see Definition Now I do not have the data that says that the top quinitile derive all their income from the stock market; However, comparing the two graphs this appears to indicate that those with disposable income invested it in the stock market that their income would increase with the rise of the stock market. Now, some would say that if businesses paid their employees more then all would benefit not just the top. However, spreading the income would not have any marginal impact. Yes there is income inequality, but is there any realistic way to eliminate or even affect it in any reasonable manner?

 

[Revoltingest]

....is there any realistic way to eliminate or even affect it in any reasonable manner?

Warning:
- This is not a solution. It is a single step to improve things.
- Yes, it means increasing spending in some areas. In the long run, it looks cost effective.
In the short run, we could take it out of our foreign adventurism & foreign aid budget.

We need better education & vocational training for kids & people.

 

[esmith]

Warning:
- This is not a solution. It is a single step to improve things.
- Yes, it means increasing spending in some areas. In the long run, it looks cost effective.
In the short run, we could take it out of our foreign adventurism & foreign aid budget.

We need better education & vocational training for kids & people.

Yet as we see in NYC, there are those in political power that "appear" to favor "those that put them in the power" vice those they are supposed to be helping. As far as federal training....From: Article

according to the General Accounting Office, federal job training policy today remains fragmented and inefficient. Independent studies seem to indicate that the benefits of these programs modestly outweigh the costs, but that they are not enough, by themselves to lift their target populations out of poverty and that their benefits probably fade after four to five years.

Yet we hear little or no discourse on "vocational training" other than lip service, and this is from both sides of the political spectrum. I really do not see the problem of education fixed until the issue of the quality of teachers vs the seniority issue. Yes the involvement of parents is an issue that again is not being addressed, just shunted aside because it is a polarizing and unpopular subject except for a few.

 

[idea]

The quality of education rests in the hands of parents more than within the schools. The breakdown of families are the real cause of poverty. Those who have a strong family network - where parents/granparents/siblings support and take care of one another - do well. Those from broken families, without a support network, get stuck in bad situations.

 

[Monk Of Reason]

Well to start with, what is income "inequality"? The definition that seems right to me is:
From: Income Inequality Definition | Investopedia
According to My Source the median household income started to drop in 2008 and has dropped approximately 5.0% from 2008 to 2012 and has gone up by 19% since 1967.
below graph from My Source

The below chart shows the S&P Index since 1950 to 2012 Ticks are in 10 year increment.. Chart is from My Source

It dropped temporarily in the adjusted bracket because of the net losses experienced by those who were on the unfortunate end of the stock market crash and the housing bubble. Though it has since increased again. It is not trending towards a decrease in income inequality.

Though it is also questionable that it really saw a legitimate decrease in wealth rather than temporary income. Several people with money simply coasted with safe investments that yielded a low return. That was during the time where many people simply retained their funds rather than invested. So there was a decline in income without a decline in wealth which is unfortunately one of the root points of the debate.

Now, it appears that the rise in the stock market closely follows the rise of mean (not median) income for the top quintile (population divided into 5ths). Now you will notice that the mean income has gone up for the majority of households. There is a big difference between mean and median income. (see Definition Now I do not have the data that says that the top quinitile derive all their income from the stock market; However, comparing the two graphs this appears to indicate that those with disposable income invested it in the stock market that their income would increase with the rise of the stock market. Now, some would say that if businesses paid their employees more then all would benefit not just the top. However, spreading the income would not have any marginal impact. Yes there is income inequality, but is there any realistic way to eliminate or even affect it in any reasonable manner?

In some cases many people in the higher income brackets do make a large portion of their money through investments as this is the backbone of our economic system.

Though I wonder why you think that there would be no marginal impact if employees were paid more. I would like to know the logical deduction that brings us to this conclusion.

 

[Sunstone]

US Income Inequality is Now Highest since 1928. Something started going seriously wrong in the late 1970s or early 1980s.

 

[Avi1001]

An economist argues that the reason for the weak recovery is economic inequality.

Discuss.

The weak recovery is because we do not manufacture anything anymore.