The point of the article is that the meritocratic system in this country is broken. In part this is because we have systematically transferred wealth out of the bottom to the top. For example, focusing on tax cuts that benefit high income individuals while cutting support for public colleges. These two things are usually done at different times with tax cuts usually to stimulate the economy and spending cuts coming to reign in budget imbalances. The result is that you could work your way through college in the 1960's by working about 20 hours a week. Now you'd have to work 40+ hours a week to pay tuition at a public university. The difference income throughout someone's working life between a college degree and no college degree is about 1,000,000 dollars. So the middle and lower middle income people don't see the benefits of tax cuts but they bear the burden of college tuition increases. And their long term earning potential suffers. And the country as a whole suffers because we have a less well educated work force.<p>You can repeat this pattern with a whole host of other programs and issues. For example, the minimum wage is still behind where it needs to be if it were adjusted for inflation. We're becoming a casino culture where people keep playing the game because they believe they're going to be the ones that turn out okay. For the most part, your ability to leave your social class is pretty close to zero, with the rich staying rich because their wealth can insulate them against bad decisions. The only real mobility for most people has been down.
And, it's only going to get worse while [1] 39% of Americans either believe they are already among the top 1% or believe that they one day will be. If your mentality is one of "Don't tax the top because that's me (or will be)", you're going to constantly vote against your own economic self-interest, and continue to support policies that help the real rich get ultra-rich.<p>1. <a href="http://www.nytimes.com/2003/01/12/opinion/the-triumph-of-hope-over-self-interest.html" rel="nofollow">http://www.nytimes.com/2003/01/12/opinion/the-triumph-of-hop...</a>
I always feel a number of important metrics are left out, either by accident or on purpose, when people talk about inequality. Most importantly when it comes to wealth itself, by most measures there is a very, very long tail of people with no wealth. 'No wealth' ranges from the most poor, to those living from paycheck to paycheck all the way to those who have as much debt as their assets. Many of these people are fine because, for example, their earnings potential over the next 40 years is good. They are wealthy in things like skills, social connections, etc. and they are certainly not comparable to someone with few skills, bad health and no money. The other issue is the longer term earning potential of top earners. Apart from the fact that companies are bigger and more global and that 'hits' can be bigger (like Kesha selling more records than The Beatles), the average tenure of a CEO has also gotten shorter and is around 5-7 years which usually can be described as the prime of their career, while the average worker can be anywhere in their career including eventually being a CEO one day.
Wow, the "ideal" wealth distribution based on what people want is simply nuts. If top quintile owns 35% and bottom two own 25% (perhaps 15% and 10%, respectively)...that means the richest would own 3.5x more than the poorest, on average.<p>(If you think this makes any sense at all, consider the <i>median</i> American has a net worth of about $45K. Having 3.5x that amount wouldn't allow you to retire, or even own a 3BR house in Minneapolis.)<p>A person's wealth should (hopefully) increase as they grow older and save more money. It's clear that the responders to this survey didn't account for that at all.
The fact that someone is rich does not mean he took anything from you, no matter how poor you are. Statements like "If poor people knew how rich rich people are, there would be riots in the streets" are not only stupid but also dangerous.
Every time someone says "X people have a higher net worth than Y% of people COMBINED" I get very, very skeptical. Some net worths are negative. Some net worths are significantly negative. A homeless man has a much higher net worth than 8,000 people who just graduated from medical school with some debt <i>combined</i>. Relevant article.[1]<p>[1] <a href="http://blogs.reuters.com/felix-salmon/2014/04/04/stop-adding-up-the-wealth-of-the-poor/" rel="nofollow">http://blogs.reuters.com/felix-salmon/2014/04/04/stop-adding...</a>
I think the popular conceptualization of economic inequality (effectively, "inequality is suffering") is misleading because it doesn't take marginal utility into account.<p>What I mean is, take the pizza-dividing example and suppose we have doubled the pizza. The inequality (expressed as the ratio of pizza owned to the available total) would stay the same but those with the smallest part of the divide would be noticeably less hungry than before.<p>In a world of plenty inequality would not mean suffering. More realistically, inequality would not mean (nearly as much) suffering in a world where a minimum slice of pizza was the birthright of a citizen.<p>Edit: This line of thinking is seriously flawed when applied to the real world. See drabiega's comment for why. metaphorm mentions some examples of where competitive costs may apply.
You want the economy to be top heavy. You want the best people managing the most money, and you want them to have the strongest incentive for managing it correctly.<p>When you have 10 billion dollars in capital and you are trying to figure out what to do with it, you want the people managing that money to be top-notch, 0.1% or better. And you want to make sure they have an appropriate amount of personal stake in the game. It's not necessarily <i>fair</i> to the 99% that they aren't given similar opportunities to manage that much wealth, but it's what's healthiest for the economy.<p>It's also healthy to heavily emphasize education, and make sure every kid is brought to their full potential. It's downright unhealthy to have an intelligent human being caught in a poverty spiral.<p>My point is that the emphasis should not be on the fact that we are a top-heavy economy. A healthy economy is going to be top heavy, potentially extremely top heavy. The emphasis should be on the bottom, where people are getting completely bottlenecked by their own poverty. The question shouldn't be 'how can we redistribute wealth?'. The question should be 'how can we give every person a proper education' and 'how can we make sure poverty does not get in the way of a person's creativity and potential?'
Nothing in the article explains why "economic inequality" is a bad thing. Which seems to be a logical pre-requisite to declaring it to be "worse than you think".
The estate tax should be near 100%. We do not need dynasties. I don't mind people making the wealth, but they can't take it with them. It shouldn't just transfer to their children.
The wealth of the US at times shortly after the second world war came from the broad middle class. Today the wealth of the US is lying in the hands of the top 1% of the society. Something must have been happening in between.<p>In the European Union there is also a similar trend. There exist studies that today it is much more difficult for somebody coming from lower income (and society) levels to become rich than it was 40 or 50 years ago. There is nearly no exchange anymore happening, because today's rich can rely on the fact that their money will beget more additional money nearly automatically. Also times are over, where many people build their riches from scratch. Most rich people today are rich in the second, third or fourth generation today.<p>Low taxes on wealth and inheritance are doing their job. But also the fact that earning money by just having (enough) money costs less tax than hard working for money in Europe (in Germany, you will pay for your worked-for money (if you earn enough) up to ~40% on taxes and additionally you have to pay social security fees that can eat up an additional 20% (estimated) of your earnings. For money you got threw having money, you will today come away with 25% flat rate tax.<p>With such tax laws in action, you could come to the view, that letting work your money for you is more difficult than working in a factory and must be promoted by the state.
The problem isn't wealth. The problem is <i>poverty</i>.<p>There isn't much of a practical difference between 1MM and 10MM or 10MM and 100MM. Or even 10K and 100K. It's not that there isn't any difference, it's just that (ignoring extreme scenarios like having to pay medical bills in the US) the difference is mostly a luxury.<p>But below a certain threshold, it's not a matter of luxury. It's a matter of being able to afford the bare necessities.<p>I don't make 100K/month. Right now I don't even make 10K/month. To be honest, I'd probably be able to cope (as I have had to in the past) with as little as 1K/month or less. But I don't mind if some investment banker or Fortune 500 CEO makes several orders of magnitude than me.<p>The problem isn't just that someone who works two full-time jobs can barely afford the absolute minimum of necessities. The problem is that making money is a requirement to have access to these essentials. We don't need more jobs, we need better social care. We don't need to cut rich people's wages, we need to eliminate poor people's reliance on wages to keep them housed, fed, warm, healthy and content (or "maintained" if that sounds less socialist and more business-y).<p>Minimum wage is a red herring. Minimum wages are (and should be) dictated by economical concerns alone. It's impossible to regulate them. You can dictate numbers, but that doesn't solve the problem they're meant to address.<p>Minimum wage jobs are not only useless because they can't pay for a living. They're also useless because they generally don't offer any opportunity for personal advancement. If you mop floors at McDonald's for a living, you're likely not going to turn that into a career. If anything, it's a stop-gap, but any effect it will have on your future occupations will likely have nothing to do with the actual tasks you performed (except maybe for a marketing sob-story if you make it big).<p>So separate the two concerns: give people what they need whether they have a job or not, and pay them whatever is economically sensible for any job they take.<p>Basic income and/or strong social services are a better solution than always trying to regulate businesses into supplying sufficient wages against market demands. If anything, the latter just encourages businesses to eliminate those minimum wage jobs entirely to reduce unnecessary costs.<p>You can't compete with technological progress. If you artificially inflate wages, that just makes the humans even less appealing.
I would love to see these types of metrics for other domains. I think any technical question about some distribution across the american population will produce results that contrast with reality, simply because people don't know how to reason about mathematical distributions or large numbers very well. This isn't to say that America does not have an issue with economic inequality, of course.
It isn't a zero sum game. The top 20% doesn't take away 84% of the wealth pie and leave the rest to us. They also create a lot of it. If fact, if the top 20% can create enough wealth for the whole country to live a good quality of life, that is not a bad thing.
Three things define American culture when it comes to economic values, decisions, and status:<p>1) The Lottery Effect
"...the other main reason Americans seem so unperturbed by the widening chasm between the rich and everyone else is what I like to call the lottery effect. Buying lottery tickets is clearly an irrational act -- the odds are hugely stacked against us. But many millions of us do, because we see the powerful evidence that an ordinary person, someone just like us whose only qualifying act was to buy a ticket, wins our favorite lottery every week. For many Americans, the nation’s rowdy form of capitalism is a lottery that has similarly bestowed fabulous rewards on the Everyman." - <a href="http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealth-inequality-should-we-care/the-lottery-mentality" rel="nofollow">http://www.nytimes.com/roomfordebate/2011/03/21/rising-wealt...</a><p>2) Last Place Aversion
"that poor Americans’ antipathy toward redistribution might be due not to their desire to one day be at the top of the income distribution, but to their fear of falling to the bottom. We show that humans have a deep psychological aversion to being in “last place” -- recall the shame of being picked last in gym class -- such that individuals near the bottom of the income distribution may be wary of redistribution because it could help those just below them leapfrog above them." - <a href="http://www.nytimes.com/roomfordebate/2011/09/19/do-taxes-narrow-the-wealth-gap/tax-policy-and-americans-last-place-aversion" rel="nofollow">http://www.nytimes.com/roomfordebate/2011/09/19/do-taxes-nar...</a><p>3) The Just World Fallacy
"The just-world hypothesis (also called the just-world theory, just-world fallacy, just-world effect, or just-world phenomenon) refers to the tendency for people to want to believe that the world is fundamentally just. As a result, when they witness an otherwise inexplicable injustice they rationalize it by searching for things that the victim might have done to deserve it. This deflects their anxiety, and lets them continue to believe the world is a just place, but often at the expense of blaming victims for things that were not, objectively, their fault." - <a href="http://en.wikipedia.org/wiki/Just-world_hypothesis" rel="nofollow">http://en.wikipedia.org/wiki/Just-world_hypothesis</a><p>Hopefully articles like this will get more people to understand these things.
We have an inequality problem in our own backyard: the disparity in equity between CEOs, SVPs/upper management, and rank-and-file employees.<p>I remember all the stories of how google made 1000 millionaires at IPO. Wonderful! They built a powerhouse and were rewarded. But Larry and Sergey had BILLIONs between them. Possibly more than all the rest combined. Two people (plus throw in Eric Schmidt and whoever else).<p>We all just accept this huge inequality and take it for granted, spouting some rationale about risk, etc. I do believe the founders and earlier people should have higher reward, but not at such extremes.<p>Every time an engineer joins a startup as employee #5 and accepts .5% of the company, they are promoting this huge discrepancy.
Or it's far better than you think. What if the cause of the misconception of the true distribution is that standard of living is far closer than ever before, so the relative distance of wealth is less visible.
"Work hard enough" doesn't mean the same thing it did in the middle of the 20th century. The amount of resources available to the everyman today is orders of magnitude larger, be it tips on frugality or ways to supplement income. They don't really expand upon it in this piece, but it feels like they're using it in the "older" sense, i.e. simply working your job dutifully and being conservative with your money.
At least some inequality is the result of our choices. Meaning, Google's new CFO is going to make 70 mln. But, how many people would like to be CFOs? CFOs work crazy hours and have insane amount of responsibility - many people wouldn't want that tradeoff. So, should we somehow normalize inequality numbers for this phenomenon ?
On this topic, I almost always concur with these people:
<a href="http://www.adamsmith.org/blog/tag/inequality/" rel="nofollow">http://www.adamsmith.org/blog/tag/inequality/</a>
Alternative title: Humans are bad at estimating things on logarithmic scales, and probably don't adequately factor in things like student loans and mortgage debt when estimating the wealth of the "poor"<p>My title is much less catchy.
The youtube infographic video doesn't work: <a href="https://www.youtube.com/watch?v=QPKKQnijnsM" rel="nofollow">https://www.youtube.com/watch?v=QPKKQnijnsM</a>
Is it just me, or does the article contradict its own conclusion?<p>> They asked about 55,000 people from 40 countries to estimate how much corporate CEOs and unskilled workers earned ... the patterns were the same for all subgroups, regardless of age, education, political affiliation, or opinion on inequality and pay<p>> One likely reason for this is identified by a third study, ... that suggests that our indifference lies in a distinctly American cultural optimism<p>If 55,000 people from 40 countries make the same poor estimate of the reality of inequality then surely the affect of American cultural optimism is insignificant?
Europe is unequal, not quite as much as the US, and yet they are implementing austerity. Why? Because capital needs to flow to where it is most useful. If it does not your economy suffers and everyone loses.