Wealth Distribution in America

[Salty]

I agree. Frankly, I think I'm now more successful than I deserve. But there were decades in the past that I provided far more value than my compensation reflected.

Maybe that means I agree that CEO's are over paid. lol

Not really. I just think you have to prove yourself in life. For some, that's harder to do than it is for others.

 

[Salty]

Probably true. If you feel the urge to re-distribute some of that wealth to me, I promise to send you a nice "Thank You" card.

I'm rabid anti-re-distribution.

 

[TCABM]

Again, it's self-serving when those with control of the purse strings decide to line their own pockets, even though it's "only a fraction of it". The front line guy making $15/hr can't afford to buy much stock or 401K contributions, but he thanks the CFO for the couple of pennies added to his retirement, lol.

Just an observation, but wages are just a portion of total comp, as you know. You also know over a lifetime people generally increase the wage they can command because they gain broader/deeper knowledge and experience. It’s literally up to them to take the initiative to do so. The new-hire making $15/hr at 23yrs old will likely end up making double that (or more) over time.

And neither wages nor total comp have much more than a low correlation to wealth, which is generally accumulated over a lifetime. Decisions on what to do with those wages is what impacts wealth, and for most employees who’ve had 401k opportunities, the default election has been opt out. That required them making a decision to invest.

Beginning next year, 401Ks will be mandatory opt in. That means the employee will have to make an active decision to not invest. It’ll take a decade or so to start seeing what impact that has on wealth generation for individuals, but early data will be able to at least look at opt-in vs opt-out rates to get an idea of long term impacts that has.

Before we go too far down the rabbit hole on 401ks, just realize the local Bill Miller’s BBQ starts at $14/hr with a matching 401k plan, health, and tuition assistance.

https://onboarding.billmillerbbq.com/assets/material/forms/employee_handbook.pdf

 

[Larry in TN]

Again, it's self-serving when those with control of the purse strings decide to line their own pockets, even though it's "only a fraction of it".

If there is profit to distribute, the company has already earned it and the value of the company stock has already increased because of it benefitting all shareholders.

The front line guy making $15/hr can't afford to buy much stock or 401K contributions

He works there for $15/hr because it is better pay/benefits/conditions than his other options. Without that job he would be worse off.

Quit worrying so much about those at the top. They are the ones that create the pie that the rest of us share.

 

[Mxfarm]

 

[Half Fast]

Quit worrying so much about those at the top. They are the ones that create the pie that the rest of us share.

 

[tspear]

Hang on there.

Capital gains have been taxed differently from regular income for over a century (since 1922). In fact, from 1954-1967 capital gains rates topped out at 25%, while they were re-set to 28% in 1987.

Think about it for a moment. If you bought a house in 1990 for $100K, and today you sell it for $350K, have you really earned any actual value? No, of course not - the "gain" isn't really a profit, it's just a reflection of inflation. If you take that $350K down the street to buy another house, it isn't going to buy anything larger or in better condition that what you sold, there is no actual "gain" from the transaction. Why should it be taxed at all?

Historical Capital Gains Rates

Wolters Kluwer takes a historical look at capital gains rates in the United States.

www.wolterskluwer.com

The tax rule changes in the early 80s were based on the theory of "trickle down economics". E.g. let the rich get richer and they will pull up those below them.

Tim

 

[tspear]

In college, roughly three decades ago, I took a social studies class focused on education and industrial policy.
I am going to get the percentages wrong, but I think you will get the sentiment.

In an agricultural society, e.g. pre-1800, there was a need for 80% unskilled labor, 19% managers and 1% thinkers
In the industrial age, it changed to 80% unskilled labor, 10% managers, and 10% thinkers.
In the information age, it is changing to 10% unskilled labor, 80% thinkers and 10% managers.

Our society, educational system, and tax policies do not reflect this fundamental change in requirements. Or tax policy is still based on the industrial age, our education system is still structured around an agricultural society. Yet, our workforce, and our companies are largely operating in an information age.

Tim

 

[Kitch]

Quit worrying so much about those at the top. They are the ones that create the pie that the rest of us share.

Bingo.

If it wasn’t for a handful of multimillion/billion dollar companies that need grunts like me and my guys to haul freight and repair broken trucks I would not be living a life that exceeds my wildest dreams. Man I love America

 

[172andyou]

Our society, educational system, and tax policies do not reflect this fundamental change in requirements. Or tax policy is still based on the industrial age, our education system is still structured around an agricultural society. Yet, our workforce, and our companies are largely operating in an information age.

Worse, our genes don't reflect that change either. So we still have the same percentage of people that aren't intellectually capable of doing anything other than unskilled work, but they've been fighting for a smaller and smaller piece of the pie for decades.

 

[tspear]

Worse, our genes don't reflect that change either. So we still have the same percentage of people that aren't intellectually capable of doing anything other than unskilled work, but they've been fighting for a smaller and smaller piece of the pie for decades.

I will disagree on this one. I have taken multiple people from unskilled labor positions, and trained them, sent them to school and turned them into great knowledge workers. People in general, have significantly more potential then we admit too. They often need both an opportunity and sometimes a push.

Tim

 

[Ed Haywood]

CEO's don't just walk in to a company and say "I'm your CEO, give me wads of money". Generally speaking, they've already proven they have a talent for increasing profits. They've likely spent decades proving themselves before they make the huge salaries. Not that luck doesn't have a lot to do with it as well.

Yes, exactly. More accurately, talented business executives with a track record of success don't walk in anywhere. Owners and boards hunt them down and do what it takes to bag them. They do that because they know that it is really hard to run a business well, and really easy to lose money by running a business poorly. They also know that the primary determinant of whether a business is run well is the management ability of those running it, so they want the best managers available.

There are few jobs as cutthroat as being a CEO. You get a bag of dough and LOTS of financial incentives to grow the pie for the investors. You also get 2, maybe 3 years to move the needle firmly in the positive direction. Fail and you get fired. In that regard it is very much like being an NFL coach. Win or go home.

And let me tell you, when you find a good one, you spend what it takes to keep them from being poached. Like a free agent QB.

Poorly run businesses are not good for workers either. Well run businesses operate with a healthy margin and avoid wasting resources. That gives them the ability to pay competitive wages and benefits. Well run businesses also grow, which creates promotion opportunities. Well run businesses last, which creates job stability.

None of this is hypothetical for me. I live in this world and make these decisions now.

 

[Larry in TN]

So we still have the same percentage of people that aren't intellectually capable of doing anything other than unskilled work, but they've been fighting for a smaller and smaller piece of the pie for decades.

Then why has their standard of living increased so much over those decades?

 

[cowtowner]

Your $15 an hour manufacturing worker has to compete against a $2 an hour guy in Vietnam.

Guy in China is making $300 a week and works 6 12 hour days. He buys a brand new car every couple of years

I own two manufacturing businesses. I pay my domestic workers very well, like 30% over market. But I push them hard for production. They know at the end of the year that if they aren’t in the ballpark on cost per unit, I will do something different.

Do you understand why?

I don’t set the price of my products. The market does. And I have a responsibility to my employees, my other vendors, my bank and especially my customers to control my costs. Every single dime.

Guys that are making twice what your guys are can make certain things for me cheaper than that $2 an hour guy that I have making something else in Vietnam

Could I bring a lot more of my manufacturing to the USA? You bet I could, but then I wouldn’t be able to compete against my competitors.

Along with dealing with the US government agencies that do nothing but want to raise my cost of production. I want to install a powder coating line. The cost for a consultant to walk through the EPA and Texas paperwork costs more than the actual line itself. That’s pathetic.

When people complain to me about China, I tell them in a lot of ways China is much more free than the USA. The Chinese and their government understand in order to get something done, you have to find a quick way to “yes” for an answer. In the US, the default answer is no, and all you have to do is look at the FAA as an example of that.

You should be happy your boss is making a ton of money. Otherwise he might want to pack up the whole line and move it to Monterrey or Ningbo. I see it every day. I’ve helped a few guys do it. I’ve also seen it move out of China as costs have gone up and move to Vietnam, Indonesia and India.

And then what happens to those people you are complaining about that have jobs but only making $15 an hour?

 

[SixPapaCharlie]

Soon only the wealthy are going to have access to higher education and health care. Then we're eff'd

 

[Salty]

Soon only the wealthy are going to have access to higher education and health care. Then we're eff'd

That's quite the assertion.

 

[2-Bit Speed]

I'm still trying to figure why anyone cares how much other people have. What business is it of ours?

 

[Baked Potato]

I'm still trying to figure why anyone cares how much other people have.

The positive correlation between income inequality and crime rates.

 

[tspear]

When people complain to me about China, I tell them in a lot of ways China is much more free than the USA. The Chinese and their government understand in order to get something done, you have to find a quick way to “yes” for an answer. In the US, the default answer is no, and all you have to do is look at the FAA as an example of that.

I was a federal contractor for over a decade (I am back in the commercial space now), one of the trite phrases multiple government staff told me. Is they will never get fired for saying no, but saying yes could hurt their career or get them fired.
Our current system is setup with an incentive system designed to avoid all risk, and reward the safe answer of no.

Tim

 

[tspear]

I'm still trying to figure why anyone cares how much other people have. What business is it of ours?

Societies where the wealth disparity becomes too great, tend to become unstable and eventually have nasty civil wars.

Tim

 

[Half Fast]

Then why has their standard of living increased so much over those decades?

(Rhetorical, I know, but I’ll answer anyway.)

Because the pie itself has gotten so much bigger that even a smaller percentage of the pie is still a bigger piece of pie.

 

[Kitch]

I haven’t done any research, but I find it hard to believe there is any more wealth disparity or income inequality today than there was during the gilded age or the depression era.

 

[Half Fast]

The positive correlation between income inequality and crime rates.

What positive correlation are you talking about?

The US crime rate has been falling for 50 years.

Besides, correlation <> causation.

 

[Baked Potato]

What positive correlation are you talking about?

The US crime rate has been falling for 50 years.

Besides, correlation <> causation.

There are plenty of studies showing the correlation.

 

[Salty]

Better give your money to criminals before they steal it from you.

 

[Half Fast]

Societies where the wealth disparity becomes too great, tend to become unstable and eventually have nasty civil wars.

Tim

Do you have an example where the lower group had wealth equal to the lower US group? I think that instability is less likely given two conditions:

1. Basic needs (and even some wants) are met: food, housing, etc.
2. Hope and a real possibility of upward movement.

 

[Half Fast]

There are plenty of studies showing the correlation.

Then inequality must be falling significantly because crime sure has been.

 

[Half Fast]

Better give your money to criminals before they steal it from you.

No need; let the government do it for you!

 

[Baked Potato]

Then inequality must be falling significantly because crime sure has been.

No, because it is not the only factor driving the increase or decrease in crime.

 

[Flatiowa]

“Let them eat cake” comes to mind when I think of wealth disparity, it works until it doesn’t, societies are strange things, I look back to the toilet paper madness of 2020 and still am thankful that the population went nutz hording toilet paper instead of food. The outcome could have been very different. I still kinda half seriously wonder if it was intentionally triggered for exactly that reason as a distraction.

 

[kyleb]

D

Again, it's self-serving when those with control of the purse strings decide to line their own pockets, even though it's "only a fraction of it". The front line guy making $15/hr can't afford to buy much stock or 401K contributions, but he thanks the CFO for the couple of pennies added to his retirement, lol.

Edit for clarification: I'm not saying that CFOs are often ignoring the little guy, or so greedy that they choose to reward themselves over the blue collar guys. I'm just saying sometimes the profits come before the workforce, and those who benefit the most are the upper-class citizens whose wealth is derived largely from stock performance. Moving the profits away from the lower levels.

Profits do come before the workforce. If the business isn't profitable, nobody will invest, the business will go downhill and subsequently cease to exist. OTOH, you do have to retain a qualified workforce. When the business can't do that, you're seeing an indication that the local economy and the business are mismatched. At that point, the business needs to relocate to more friendly environs or fold.

But your points do have merit. We talk about portability up and down the economic scale. If you're making $15/hr working 40 hours a week, you probably don't have a big enough nest egg to relocate into a better economic area.

That said... you can take a second job or otherwise do something to change the trajectory of your life (e.g. getting certified as a welder or plumber or...). I'm an engineer and did both of those things early-on during my engineering career. I went to night school on my own nickel to earn an MBA and once I had that, I took a second job teaching at a local community college. Ultimately my employer recognized my skills and work ethic and I earned my way into more pay, more responsibility, better roles, etc. which allowed me to give up the second job. But I didn't graduate from college (or HS or vo-tech school) and assume that was the end-all, be-all ticket to unlimited wealth. Yeah, your current training/abilities get you to what the market will pay for that skill. But if that's not enough, you have to do something different.

Point is, portability between "classes" of wealth still exists. You can be Bezos, or Gates, or Musk, but you won't get wealthy (or even moderately well off) by taking what the world gives you. You have to make opportunities for yourself - they are out there. Some opportunities (Hello, Mr. Gates) are bigger than others, but big opportunities do exist unless you're mentally or (maybe) physically incapable of changing your trajectory.

 

[Half Fast]

No, because it is not the only factor driving the increase or decrease in crime.

Then there is no apparent correlation. Crime is dropping and inequality is not. Even if you could show correlation that wouldn’t mean inequality is somehow “driving” changes in crime. As it is, they’re not even tracking.

 

[Flatiowa]

You have to make opportunities for yourself - they are out there. Some opportunities (Hello, Mr. Gates) are bigger than others, but big opportunities do exist unless you're mentally or (maybe) physically incapable of changing your trajectory.

But then “how will I have time to watch the big game on my jumbo tv, or ride my jet ski I only have 60 more payments on, or take the family to Tahiti with that new credit card I just got approved for, or use my camper I got with my home equity loan I took out against the portion of my house that’s valued above what my morgage is???!”

 

[Baked Potato]

Then there is no apparent correlation. Crime is dropping and inequality is not. Even if you could show correlation that wouldn’t mean inequality is somehow “driving” changes in crime. As it is, they’re not even tracking.

I see what you're saying - but expand this globally instead of just the US.

"Comparing across industrialized societies, higher inequality—greater dispersion in the distribution of economic resources across individuals—is associated with higher crime and lower social trust2,3,4,5,6,7. These associations appear empirically robust, and meet epidemiological criteria for being considered causal"

Why do inequality and deprivation produce high crime and low trust? - Scientific Reports

Humans sometimes cooperate to mutual advantage, and sometimes exploit one another. In industrialised societies, the prevalence of exploitation, in the form of crime, is related to the distribution of economic resources: more unequal societies tend to have higher crime, as well as lower social...

www.nature.com

Societies with higher inequality have higher rates of crime. While looking at a smaller area (country by country or city by city), one may increase and the other may decrease based on many factors, however that doesn't disprove a causation between income inequality and crime. Think of it this way - if there were very low inequality in the US, crime rates would likely be much lower, but that doesn't mean that trends wouldn't still be affected by other factors.

Many factors drive positive or negative changes in crime over time - unemployment, educational outcomes, family structure, environmental factors (pollution, lead, etc), changes in policing and social programs, and even changes in the way crime statistics are tracked. These things have an effect on the increase or decrease in crime over time, however there is going to be a baseline that is elevated or depressed based on a few overarching holistic factors, one of which is income inequality.

 

[SoonerAviator]

If there is profit to distribute, the company has already earned it and the value of the company stock has already increased because of it benefitting all shareholders.


He works there for $15/hr because it is better pay/benefits/conditions than his other options. Without that job he would be worse off.

Quit worrying so much about those at the top. They are the ones that create the pie that the rest of us share.

My point was just that there was an assumption that the guy making $15/hr was getting the benefit of the profits being sent out as dividends and such simply because he has a company 401K. The impact of a dividend or small stock price increase is lucky to be in the triple digits. He'd be better off with a $0.25/hr raise, but the CEO is better off sending the profits out as dividends.

I'm not personally worrying about "those at the top", I'm just illustrating how the financial incentives for those at the wealthier end of the spectrum are not necessarily what benefits those at the lower end of the spectrum, even if the same company is stamped on their paychecks. This moves "wealth" generated off of both the CEO and the front line worker disproportionately into the CEOs (or wealthy shareholders) pockets without doing much for the others. It's not new or novel as privatization of profits and socializing the losses has been around for a long time.

 

[2-Bit Speed]

Societies where the wealth disparity becomes too great, tend to become unstable and eventually have nasty civil wars.

Tim

You mean some people get envious of what the wealthy have and so destabilize or otherwise destroy their own country to get what they didn't earn? Like we're discussing now?

No one has yet here presented one compelling reason that they have any claim to any portion of a portion of what "the rich" have. Near as I can tell this entire idea is driven by envy and greed, as I mentioned earlier. Instead of complaining that someone has more than me, I'd rather be thankful for what I do have and find contentment where I am. I have many blessings to enjoy and I would much rather enjoy them than gripe about someone that appears to have been blessed (in one singular way) more than I could ever dream.

 

[kyleb]

But then “how will I have time to watch the big game on my jumbo tv, or ride my jet ski I only have 60 more payments on, or take the family to Tahiti with that new credit card I just got approved for, or use my camper I got with my home equity loan I took out against the portion of my house that’s valued above what my morgage is???!”

Absolutely. Then you whine about an economy with no opportunities and the like. But for most people ( maybe not the mentally or physically unable, convicted felons, UGA grads, etc.), the opportunity is there to change in such a way that it improves your life.

As a poster somewhere (here?) writes, there are two things people hate: 1) The way things are. 2) Change. It is up to you to change something about your life if you want things to be different.

 

[Flatiowa]

Perhaps the entire premise of this discussion on this particular forum is flawed.. it is a pilot forum and since pilots are actually a 1% subgroup of society that requires intelligence, determination, good decision making skills, and an entire host of other qualifiers to reach the point of becoming one the perspective is skewed?

 

[StraightnLevel]

I see what you're saying - but expand this globally instead of just the US.

You just made his point for him.

Inequality is not the driving factor. Poverty is the driving factor.

As has been said already in this thread, the status of the 0.001% is irrelevant. What matters is the lifestyle trend of the bottom 50%.

 

[Kristin]

The part of that I think you are omitting is that the size of the middle still shrank. So some did move up, but a similar portion moved down into the lower-class. So is it better to have a smaller middle class as long as the lower and upper class grow? Eventually you'll have a plutocracy where you have the wealthy and the poor with few in the middle-ground.

Without a middle class, democracy will die. Only the middle class really cares about democracy. The wealthy are safe even in a dictatorship. The truly poor are more focused on survival.