a thoughtful web.
Good ideas and conversation. No ads, no tracking.   Login or Take a Tour!
comment by wasoxygen
wasoxygen  ·  2956 days ago  ·  link  ·    ·  parent  ·  post: Everyone in America is More Broke Than You Think - What About You, Hubski?

Title: "Everyone In America Is Even More Broke Than You Think"

Question: Compared to what?

First paragraph: "The massive and growing gulf between rich and poor..."

Okay, so the not-rich are "not rich" compared to the rich. Details at 11.

Or, in other words, if Rihanna cuts a new single tomorrow and I buy it, Rihanna will be richer. If the single is any good, I will also be richer, in the terms that matter: my life satisfaction. The Huffington Post will only consider my cash position, even though I don't eat dollars, and consider me "more broke."

I continue to struggle to understand the attention given to relative measures of well-being compared to absolute measures of well-being.

Reading on:

    Highlighting this gap, more than half of U.S. wage earners made less than $30,000 last year ... not far above the $27,010 that marked the federal poverty line for a family of five in 2012.

Wouldn't it make more sense to compare the income of a single wage earner to the poverty line for a family of one? But that number is only $11,170, and does not support such a sensational comparision.

Why does the poverty line increase when there are more mouths to feed in a household? The Department of Health and Human Services appears to recognize that people, on average, create more than they consume, which goes a long way to explaining the success of our species.

Much of the gap between low and high-earning households can be explained by common-sense causes:

1. Households with higher incomes have more earners per household.

2. Households with lower incomes more often have people with no income.

3. Households with higher incomes are much more likely to have a married couple.

4. Households with higher incomes more often have people in the prime earning ages of 35-64.

5. Households with higher incomes more often have at least one full-time adult worker.

6. Households with higher incomes more often have better-educated people.

These characteristics are not evidence of a permanent, entrenched gap. Rather, it shows that many people begin life in the lower, red section of the infographic, and progress into the higher-earning blue and even black sections. Those who make good decisions about education and cohabitation are more likely to follow this path to prosperity.

It isn't easy for everyone, and some people enjoy advantages that others lack. But I was surprised by the results of the Income Mobility Quiz at how typical it was for people to escape the lowest rung of poverty, often leaping right to the top.





steve  ·  2956 days ago  ·  link  ·  

    Why does the poverty line increase when there are more mouths to feed in a household? The Department of Health and Human Services appears to recognize that people, on average, create more than they consume, which goes a long way to explaining the success of our species.

I know my experience varies wildly from most... but as a single income household full of kids... I have basically impoverished myself. The poverty line goes up because children are FRIGGING EXPENSIVE. it's not just food. It's clothes. It's seats in a car. It's school field trips and supplies. It's co-pays and hospital visits.

wasoxygen  ·  2956 days ago  ·  link  ·  

Yeah, I think I got this point exactly backwards. When you have more household members, you need more income to get by and stay under [edit: over, duh] the higher poverty line. This reflects the pattern that "additional household members" are usually children, and when they grow up and start earning their own income they usually move to their own household.

Children are frigging expensive. I've seen "total cost of ownership" numbers estimated, including higher education, and it ends up sounding like "have kids or retire 20-30 years early."

This article, and the one I mentioned in response, focus on household income, not well-being, so the children are left out of the picture. But I don't think this changes the explanation of the gap.

user-inactivated  ·  2956 days ago  ·  link  ·  

    I continue to struggle to understand the attention given to relative measures of well-being compared to absolute measures of well-being.

Money comes with influence. If you're middle class you can go to your senator's favorite bar, act and dress like you belong there, and have a conversation with him without the mediation of staffers and in a context where he's kindly disposed. If that's not your scene you'll need to be a little manipulative and burn a thousand bucks or so on the right clothes and haircut, but it's not out of reach for a lot of us.

If you're rich you make big campaign donations to several congresscritters, and you don't have to be subtle.

If you're poor you don't have either option.

wasoxygen  ·  2956 days ago  ·  link  ·  

I agree, political corruption is a problem. I think we should talk about why political mechanisms lead to bad outcomes, how the wealthy and connected can manipulate those with political power to their own advantage, and how politicians benefit by such deals.

Yet income diversity is typically portrayed as inherently evil. The villain is usually the wealthy CEO, who provides voluntary opportunities for people of all income levels to earn and spend. It is rarely the successful athlete or entertainer, who contributes just as much to inequality by providing voluntary opportunities for people of all income levels to be entertained.

Invariably the solution to the inequality "problem" is to give more power to politicians.

b_b  ·  2952 days ago  ·  link  ·  

    Wouldn't it make more sense to compare the income of a single wage earner to the poverty line for a family of one? But that number is only $11,170, and does not support such a sensational comparision.

Dude, I think you're putting way too much thought into this. In the future, you should probably avoid Huffington Post. You're too smart for them. To me, they represent one of the leaders of the downfall of journalism. Shame on everyone who shared this article.

wasoxygen  ·  2952 days ago  ·  link  ·  

    you're putting way too much thought into this

Heh, it's hard for me to see this as a criticism. I am pretty good about ignoring who is talking and how they are talking in order to focus on the ideas. This is an idea that everyone, from the White House to the Ivy League, talks about.

It may be a silly article, but it's an opportunity for me to learn why people believe that inequality (or "wealth diversity" in my snarky jargon) is bad. I was laughing out loud listening to a podcast on the subject yesterday. The guest argued that Academy Award winners live longer than runners-up, showing the harm of unequal status. Also, Cubans claim to live a little longer than U.S. residents, and Cuba has a lower Gini coefficient; Q.E.D. The host points out that a lot of Cubans flee Cuba to get to the land of inequality.

b_b  ·  2952 days ago  ·  link  ·  

Sure it's a hot topic, but beating up on HuffPo for being wrong on any topic is a waste of time. I didn't read this article, because I have a boycott of them (it's my personal belief that bad journalism is a big part of our problem, so I try not to give clicks to organizations whom I've sworn off), so I could be wrong. That said, I'm pretty sure the title of the article is enough for me to glean that it's not something worth breaking a boycott over.

I think the point that most people miss with inequality is that inequality per se isn't a bad thing. It can create motivations and innovations from people striven to succeed. However, what we need to be mindful of is dynamism. Some historical data suggest that when wealth becomes too concentrated that dynamism is limited, because the spending power of the middle class is limited. So the real question that we should be asking is "How do we set policy that encourages economic dynamism?" rather than "How do we reduce inequality?" Some of those policies might look similar in the short term, but much subtlety is lost when we start ragging solely on "rich people" (as in the samples I gave that were summarily dismissed in the other thread on this topic yesterday).

wasoxygen  ·  2952 days ago  ·  link  ·  

Maybe you're right; I'm not contributing much by criticizing the stupidest sentence in an article that isn't very rigorous to begin with. But it's here, and people are looking at it and talking about it, it doesn't seem helpful to ignore it either.

    inequality per se isn't a bad thing

I wouldn't mind seeing this sentiment expressed quite a bit more often. It was stated, and disputed, in a more serious, wall-of-text post that got two shares.

I think people see inequality as harmful because "The rich get richer and the poor get poorer." Evidence and casual observation show that this is generally false; the poor get richer too.

So your claim that "when wealth becomes too concentrated that dynamism is limited" sounds like a vague restatement: when inequality grows the rich get more dynamism and the poor get less dynamism. Saying "the spending power of the middle class is limited" suggests that individual members of the middle class have less power to spend when inequality grows. Can you back this up?

b_b  ·  2952 days ago  ·  link  ·  

    Saying "the spending power of the middle class is limited" suggests that individual members of the middle class have less power to spend when inequality grows. Can you back this up?

The most compelling argument I've heard is from Robert Reich. His reasoning is that about 70% of GDP is domestic consumption, most of which is derived from middle class spending. Given that income and wealth have accrued at the top fast than the growth rate of the economy, some of those gains have come at the expense of people lower down on the economic ladder. Therefore, an appreciable part of the increases in living standards over the last few decades have come as a result of debt fueled consumption, as opposed to real economic gains (even though productivity is much higher now than 30 years ago). Essentially, many people have had to mortgage their futures to keep their head above water. Here is the tl;dr of the books he's written on the topic.

wasoxygen  ·  2952 days ago  ·  link  ·  

    Here is the tl;dr

Alas, my response is likely to be longer than the summary. Point by point.

    Some inequality of income and wealth is inevitable

Agreed.

    at what point do these inequalities become so great as to pose a serious threat to our economy, our ideal of equal opportunity and our democracy ...We are near or have already reached that tipping point

More on these three threats below.

    we are heading back to levels of inequality not seen since the Gilded Age of the late 19th century

So I read the introduction to the article sentence by sentence, looking for bad news. I don't see it. I see "real wage growth of 60% between 1860 and 1890, despite the ever-increasing labor force."

It's not all wine and roses:

"However, the Gilded Age was also an era of abject poverty and inequality as millions of immigrants—many from impoverished European nations—poured into the United States, and wealth became highly concentrated."

But this is just saying that poor people moved from impoverished Europe to America, as "American wages were much higher than those in Europe." People's actions suggest that they were better off in America than they would have been in Europe. People also came from the far East: "Immigration from Europe, China, and the eastern states led to the rapid growth of the West, based on farming, ranching and mining." Pointing out suffering in America without considering the suffering in the places immigrants came from tells only half the story.

There were two big financial panics, in 1873 and 1893. I am no historian, but I don't see factors that can be clearly attributed to increasing inequality. The causes listed are inflation, speculative investing, trade deficit, war in Europe, fires in Chicago and Boston, and crop failure in Argentina. It's not obvious that these would have been less severe had there been greater equality.

Reduced desperation encouraged labor reformers to advocate for an 8-hour workday and elimination of child labor. "Local governments built schools and hospitals, while private schools and hospitals were founded by local philanthropists." Religious organizations prospered.

Sounds like an awful lot of improvement in a short time, with some speed bumps and growing pains along the way.

    The data on widening inequality are remarkably and disturbingly clear.

No objection on the clarity. On to the three threats.

The economy

    Because the rich spend a smaller proportion of their incomes than the middle class and the poor, it stands to reason that as a larger and larger share of the nation’s total income goes to the top, consumer demand is dampened.

1. What do the rich do with the portion of their income that they don't spend? They invest it. That investment enables other people to spend.

2. But suppose the rich actually hide what they don't spend under a mattress. If the rich have incomes higher than before, they are still spending more. If the poor have higher incomes than before, they are also still spending more (even if their incomes are a smaller percent of total income). I have seen claims that real median income has been "stagnant" in recent years. Even if that's true, it implies constant spending by the median household, not dampening.

"If the middle class is forced to borrow in order to maintain its standard of living..." Even stagnant real income enables a maintenance of living standards without increased debt. Inflation is hard to measure, and may not well reflect the increasing cost and popularity of higher education, nor the decreasing cost of consumer goods. Anyway, "when debt bubbles burst" it's going to be a mess, but I don't see that Reich shows that inequality makes it any worse.

    Consider that the two peak years of inequality over the past century—when the top 1 percent garnered more than 23 percent of total income—were 1928 and 2007. Each of these periods was preceded by substantial increases in borrowing, which ended notoriously in the Great Crash of 1929 and the near-meltdown of 2008.

Guilt by association. We have been here before, and you can find any correlation you want if you look at enough data.

Reich draws special attention to two years when the top 1% earned more than 23% of the total. I have argued that this is less inequality than we should expect in a Pareto distribution, the pattern that describes many natural phenomena, like hard drive error rates and the size of sand grains. If 20% earn 80%, and 20% of the 20% (4%) earn 80% of the 80% (64%), then 0.8% should earn 51.2%.

Income in the U.S. is much less lopsided, and the top 1% earn far less than 50%.

Do the years 1928 and 2007 really stand out, or did Reich select them because really bad things happened shortly after? If this one-factor explanation is right, the early 1970s should have been pretty good times. They weren't.

Equal opportunity

    Widening inequality also challenges the nation’s core ideal of equal opportunity, because it hampers upward mobility.

I found that income mobility is far more common than I expected. But there's a more fundamental difference in my perspective.

    But even under the unrealistic assumption that its velocity is no different today than it was thirty years ago—that someone born into a poor or lower-middle-class family today can move upward at the same rate as three decades ago—widening inequality still hampers upward mobility. That’s simply because the ladder is far longer now. The distance between its bottom and top rungs, and between every rung along the way, is far greater. Anyone ascending it at the same speed as before will necessarily make less progress upward.

I can hardly go on after reading this paragraph. It's really a struggle.

Reich is upset that human beings have more potential to improve today than ever before. The ceiling is higher. It takes longer to reach each rung in the ladder now, because each rung is higher than ever. Even if people improve at the same speed as before he complains that there are newer and greater levels to attain.

yellowoftops tells us that this is an old idea, but I have trouble accepting that people believe it.

Can someone tweet to Reich and demand a response to a clear question? "True or False: If a poor person improves year by year, but a rich person improves faster, it would be better if they didn't improve at all."

Democracy

I am bailing out here, but I would probably agree with Reich about the political implications of inequality.

If my neighbor earns twice as much as me, she should be able to afford two cars when I can afford one. But if she can get the city to repave her driveway using my tax dollars, it's a problem. I see it as a problem with government, not with inequality.

"Democracy is the illusion that my wife and I, combined, have twice the political influence of David Rockefeller." - Butler Shaffer

wasoxygen  ·  2952 days ago  ·  link  ·  

    Given that income and wealth have accrued at the top fast than the growth rate of the economy, some of those gains have come at the expense of people lower down

Purely theoretically, I don't see why that follows. The economy at large grows at, say, 5%. Those at the top enjoy gains of 20%. Those in the middle have gains of 4%. Those at the bottom have gains of 1%. Everybody wins, unless by "at the expense of" means "some people don't win as much as others."

Thanks for the link, I'll check it out. Maybe it will scratch an 862-day-old itch.

user-inactivated  ·  2952 days ago  ·  link  ·  

    Shame on everyone who shared this article.

::Double Checks::

::Feels Shame::