Serious Income Inequality

BenTheDemon

Banned deucer.
You all probably know that I'm a Socialist, but I will try my best to present both sides of the argument fairly.
These graphs explain income inequality far better than I could in words:


There are a few ways to take these numbers. I will present the major two.

Liberal Argument: The growing wealth gap between the rich and poor is a huge problem. It is probably the biggest factor to recession/depression. To put it in perspective, the last time income inequality was this high was in 1928 (Right before the Great Depression). The rich use tax loopholes to horde their money while contributing little to the economy. They invest their money in China and other places with cheap labor and unethical environmental practices. The "hard work" argument falls flat on its face when you consider Stock Market Manipulation and the fact that the Walton Family (6 people that inherited money from their father) have more wealth between them than 40% of Americans COMBINED. And they then use their power to bust up unions, pay unlivable wages, and essentially rule us with economic power.

Conservative Argument (My 10th Grade History Teacher was a staunch Conservative, so I will attempt to paraphrase him on this issue.): Income inequality is a non-issue. The rich getting richer does not harm the poor. Though the gap may be getting larger, and the percentage may be getting lower, in ACTUAL income, the poor have gotten richer along with the rich. The rich also create jobs for all of us, so taxing them would hurt us as well. The rich also have every right to give their enormous wealth to their kids regardless of whether or not they've earned it. Investing in other countries is natural because of our barbaric taxes and labor laws.

Discuss everything about the topic here!
Happy posting. :)
 
The chart pretty much discredits any argument that says inequality is not a problem. There's also the fact that the only reason why there is any income inequality at all is because it was legislated, in the form of tax breaks, subsidies, and bailouts. Corporations (or rather the people at the helm) love to whine about sky high taxes, which is especially laughable now that effective rates are lower than they were under the last administration, and profits and productivity are at an all time high. How is it that the hardest working people in the richest country on earth are the least paid? How is it that someone can work two full time jobs and still can't afford to make ends meet? Some work full time and live on the street, only occasionally being able to spend the night at a homeless shelter. How does that even happen? Doesn't exactly mesh with the narrative that hard work = success. More like hard work means more wealth for those up top and little to no recognition or sympathy for the workers who generated that wealth with their labor.

The "free market" is a cult, and capitalism in practice has been and always will be an exploitative system where the government colludes with private power to maximize profit and run anyone else under its tank treads in that pursuit. Even if we could create a more equitable system, a scenario similar to the bar graph headed "what they would like it to be," the fact remains that this system is unsustainable in its overuse of resources and our tepid relationships with other countries who hate our guts but love our money. Our overproduction and overconsumption will one day render the planet uninhabitable, and we'll only have ourselves to blame.

So, yeah, I'm pretty much a cardboard cutout here. A socialist at heart pursuing an IT career, a field that encompasses many of the major companies that are largely part of the overall problem. Maybe I'm after the wrong line of work.

[edit] It should probably be noted that "inequality" is more or less in quotes, because clearly having everyone paid exactly the same is not feasible. Obviously some are going to be paid more than others, but it's hard to justify CEO's in America being paid over 300 times more than the average worker.
 
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High income inequality and a situation in which a barely expanding group of wealthy people hold a regularly increasing portion of the worlds wealth can only lead to a liquidity trap due to a fall in demand. The classical libertarian view of economics held by economists such as Adam Smith also lines up with the view that growing inequality is a poor outcome for the economy.

There will always be inequality under a capitalist system though (because how much money you have determines how much you can make, and this snowballs), it's a question of how much is actually a problem and if/when you even it out (I like the idea of a very high estate tax beyond a certain threshold).
 

Cresselia~~

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Well, I doubt that paying everyone equally would be fair, since there are bound to be people who work better than the others or possess certain skills that the others don't.
IF you pay them equally it is actually unfair for the better ones. It feels like someone is suggesting that everyone should get a C in the exam just to be fair, but it is not fair because some deserves a fail and some derserve an A.


( I am politically pro elitism, provided nothing is inherited and everyone is equal at birth. I believe that governments should tax more than 50% from inheritance. )
 

Asek

Banned deucer.
I think this is being overblown. Since currency was established, there has always been that 'cream of the crop' so to speak or the 1-2% that earn a lot more than everyone around them, for example the aristocracy in feudal England. This group tends to hold the majority of a society's wealth and usually know what to do with it. If everyone has plenty of money nobody would do any work as they wouldn't need to have money and the economy would stall. There is a need for some people to earn more than others and the people who DO earn more have usually worked their asses off to get to where they are now and stay there (even people who inherit such as Gina Rinehart usually expand extremely well). From what I can see around me in everyday life the average person has enough money to live happily anyway. I come from a family thats pretty strapped for cash for a developed countries standard, but we get by. I don't know how bad this problem is in America but I really can't see it as too big of a deal in Australia

I think i may have missed the point in this thread but w/e
 

GatoDelFuego

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I used to think this was one of the biggest problems out there, but a run of an economics class taught me some valuable lessons. The first is that the rich do not create jobs. Jobs are a system of supply and demand--the consumer creates the need for jobs. Second, wealth inequality is bad for an economy. A greater equity by all parties involved in a market means a greater transfer of goods between all parties--boosting an American economy.

Many jobs are being outsourced in America, but this is a good thing. Keeping poor manufacturing jobs is bad for any developed country that would like to attract skilled workers. America is still a fantastic place for startups, as online apps can bring in millions and other small businesses can do great depending on the market. Sure, the bottom 60% of Americans hold almost no share of the pie, but the pie IS massive. Also, as much as we'd like to think it, the rich aren't feeding their money around each other to make it grow. It comes from consumers. If anything, a wealth gap this massive is coming from a transfer of funds from the middle to upper class people. Every time I see somebody in Starbucks with a $4 drink and a new iPhone complain about how little they have to spend, I shake my head... Any system where we pay for athletes to be paid billions a year but complain about a 1% stealing all the money is hypocritical.

The most important thing to know is that the income gap cannot be solved through welfare, as the payment has to come from somewhere, and it's almost always the poor. Taxing the rich doesn't actually tax the rich, you know....while the income gap is a problem for people that don't know how to handle finances, if people started paying attention to what they're buying, it would be a lot less severe.
 

scene

Banned deucer.
One reason income inequality is growing is because of the fact that educated, rich men now tend to marry educated, rich females and vice-versa, as well as poorer and less educated men and women also marrying each other. There's much less marriage between classes now, and that produces particularly well-off and particularly impoverished families, contributing to income inequality.

That said, I don't see income inequality as a particularly bad thing - if you work hard, you'll get rewarded in society (of course there's other factors, but hard work is a major one). Inequality is fine - if you take this example;
[edit] It should probably be noted that "inequality" is more or less in quotes, because clearly having everyone paid exactly the same is not feasible. Obviously some are going to be paid more than others, but it's hard to justify CEO's in America being paid over 300 times more than the average worker.
It's actually pretty easy to justify - you'll probably find this CEO brings in around or about 300 times the revenue an average worker does to the firm. Add the economic rent good CEOs earn because they're rare and in high demand, it's very logical that bosses should earn vast salaries. I don't think there's anything wrong with inequality when it's a product of different levels of return and work.
 

GatoDelFuego

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I don't think there's anything wrong with inequality when it's a product of different levels of return and work.
So you actually think CEOs work 300 times as hard as their average worker? Not even the manufacturer or the salesman, the average worker? I completely understand that quality CEOs are hard to come by, but saying "they work harder" is in my opinion poor justification for massive income disparity. I wouldn't want to see a business major paid even ten times what I'm projected to make for what they're studying compared to engineering.

American corporate income disparity is extremely high, and it creates a reliance on the rest of the company to take paycheck hits during hard times--just look at the bonus crisis in the bank bailouts. On the other hand, companies like Costco that has a CEO paid under a million has created a happier employee environment that in turn invest their money back into the economy rather than being hoarded away.
 
So you actually think CEOs work 300 times as hard as their average worker? Not even the manufacturer or the salesman, the average worker? I completely understand that quality CEOs are hard to come by, but saying "they work harder" is in my opinion poor justification for massive income disparity. I wouldn't want to see a business major paid even ten times what I'm projected to make for what they're studying compared to engineering.

American corporate income disparity is extremely high, and it creates a reliance on the rest of the company to take paycheck hits during hard times--just look at the bonus crisis in the bank bailouts. On the other hand, companies like Costco that has a CEO paid under a million has created a happier employee environment that in turn invest their money back into the economy rather than being hoarded away.
To add to this point, executive pay in America is a huge fraud. It's a good-old boys network that rewards incompetence and failure with exorbitant bonuses.

Tag, you're it
Take a look at this. Click on any country highlighted, and that will compare the CEO to worker pay ratio in that country with the US. I think you'll find that the only country that even comes close to that level of inequality is Canada, with Austria being the best by far. Still easy to justify?
 
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WaterBomb

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To add to this point, executive pay in America is a huge fraud. It's a good-old boys network that rewards incompetence and failure with exorbitant bonuses.
Don't you think you're generalizing just a tad? Not all executives are "good old boys" that are "incompetent and fail". Sure there are plenty that are, but there are also plenty that aren't. Just like there are plenty of poor people that work hard as well as poor people that are lazy.

To the point of pay differences, let's remember that as one advances up the corporate management ladder the responsibilities and risks increase. So yes, a CEO may not put in more sweat and labor than the average grunt on a day to day basis, but that CEO is also responsible for those who work under him and ultimately the success of the company itself. The average worker needs only to worry about himself as he isn't supervising others, so he's not at risk for losing his job because OTHER people aren't working hard enough. To me, this added responsibility justifies the fact that the CEO is paid many times more than the average worker. Now, is 300x fair? Probably not, but it's probably closer to being fair than a 1:1 ratio.

On the topic itself, what exactly would you propose is a good solution to this income gap? I'm all for people having equal opportunity and being rewarded proportionate to the work they put in, but how exactly is that even achieved in a conceivable way? Socialism looks good on paper, but it relies completely on every worker in that system working EXACTLY as hard as everyone else, without incentive to do so. This is literally impossible to expect of a group of human beings, who are imperfect creatures. You're not going to have many people claiming the wealth gap is fair, but unfortunately there isn't a whole lot that can feasibly be done about it in my opinion.
 
Don't you think you're generalizing just a tad? Not all executives are "good old boys" that are "incompetent and fail". Sure there are plenty that are, but there are also plenty that aren't. Just like there are plenty of poor people that work hard as well as poor people that are lazy.

To the point of pay differences, let's remember that as one advances up the corporate management ladder the responsibilities and risks increase. So yes, a CEO may not put in more sweat and labor than the average grunt on a day to day basis, but that CEO is also responsible for those who work under him and ultimately the success of the company itself. The average worker needs only to worry about himself as he isn't supervising others, so he's not at risk for losing his job because OTHER people aren't working hard enough. To me, this added responsibility justifies the fact that the CEO is paid many times more than the average worker. Now, is 300x fair? Probably not, but it's probably closer to being fair than a 1:1 ratio.

On the topic itself, what exactly would you propose is a good solution to this income gap? I'm all for people having equal opportunity and being rewarded proportionate to the work they put in, but how exactly is that even achieved in a conceivable way? Socialism looks good on paper, but it relies completely on every worker in that system working EXACTLY as hard as everyone else, without incentive to do so. This is literally impossible to expect of a group of human beings, who are imperfect creatures. You're not going to have many people claiming the wealth gap is fair, but unfortunately there isn't a whole lot that can feasibly be done about it in my opinion.
First off, no one is suggesting a 1:1 ratio, as was repeatedly stated throughout this thread. Second, in a worker co-opt society, everyone has equal (or in the neighborhood of equal) stake in the company, so yes there absolutely is an incentive to put in equal work. When the company does well, everyone does well, not just the select few detached individuals at the top. Is a man not entitled to the sweat on his brow, after all? Look into the Mondragon society for some reference. I don't know if anything like that will ever happen here in the US, or if it could be applied to every industry, but the misconception you hold onto about such a system is sadly common.

Regarding CEO pay in general, I did neglect to mention that this "good old boys" network of cronyism is also set to keep CEO compensation artificially high, regardless of performance. Such a system would certainly explain how it is that CEO pay has risen so dramatically over the years while worker pay stagnates. I would highly doubt that over the years CEO's have been working that much harder over the years. Not to knock the inherent risk and stress levels associated with the work, but 300 times the pay of the average worker is simply grotesque. Even if you legitimately do put in hard work, meet your goals, and keep productivity up, it's just too much.
 

Reverb

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Right now, we have a Gini coefficient of 0.477 ("1" is one person has all the money; "0" means that we have complete equality). That is high compared to other developed economies, but I wouldn't advocate policies that redistribute income to alleviate this problem. The best way to improve income inequality is to reduce poverty, which entails enacting pro-business policies that give opportunities to low-income people.
 

BenTheDemon

Banned deucer.
Right now, we have a Gini coefficient of 0.477 ("1" is one person has all the money; "0" means that we have complete equality). That is high compared to other developed economies, but I wouldn't advocate policies that redistribute income to alleviate this problem. The best way to improve income inequality is to reduce poverty, which entails enacting pro-business policies that give opportunities to low-income people.
Please define "Pro-business policies".
 

Chou Toshio

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I assume we're talking about the US here, since this is really a US issue more than anywhere else (so many other successful, capitalist countries have succeeded in not becoming as unbalanced).

1st off-- I'm pretty sure the graph doesn't do the pay discrepancy justice (if we're just talking about America)-- the gap is actually MUCH wider than the impression given by the graph.

2nd-- It's as Waterbomb says, the reason why CEO pay (especially in the US) gets more and more exorbitant is because of the risk taken on by a CEO; when you screw up as a CEO, it's your head that society (not just the company...) will have on a stake. When a company needs a scapegoat, guess who it's going to be...

I'm not at all socialist-- quite the contrary, a stalwart capitalist who believes in the importance of competition in developing a healthy economy; a purely social one is a recipe for disaster. You need competition and market forces to develop greater overall wealth, and create better resource allocation in goods/services production.

That said, allowing only natural market forces to dictate how the world works also leads to major consequences. Humans are social animals that require society to survive; but society's functional needs are never exactly inline market behavior (which is driven by individual and company desires/needs, and not social ones), and so rules and a certain degree of social resource re-allocation is an important ingredient in MAINTAINING a healthy economy and community.

I don't know why greater significant taxes on the extremely wealthy haven't been put in place-- it's come to the point where BOTH parties are running on that principle; so it's not like you can chock it up to a "cultural" issue when the majority of Americans agree with the concept (and VOTE for it).

I guess the social issue is the best way to return those taxes to the lower/middle classes in a form that is meaningful, yet will not strip away at their motivation. That's not something I've seen a very satisfying answer to from any group or faction (and unfortunately, I seem to be not-smart-enough to see an answer myself).
 
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...but I wouldn't advocate policies that redistribute income to alleviate this problem.
How do you think this problem started in the first place? Apparently we have no problem legislating it one way, but the other way? Screw that! That's socialism!

The best way to improve income inequality is to reduce poverty, which entails enacting pro-business policies that give opportunities to low-income people.
Help the poor as long as it's convenient for the executives whose companies lobbied for special economic privileges that ultimately led to this abject inequality? I sincerely hope you're joking.

It's as Waterbomb says, the reason why CEO pay (especially in the US) gets more and more exorbitant is because of the risk taken on by a CEO; when you screw up as a CEO, it's your head that society (not just the company...) will have on a stake. When a company needs a scapegoat, guess who it's going to be...
I understand the reasoning behind this, but is the risk really worth 300 times the average worker pay? I could tolerate maybe 100 or 150, but not 300. That's just grotesque. Why are we the only country that assumes the risk to be worth this much? For perspective purposes, your country, on average, pays CEO's 67 times the average worker pay. That's far more equitable. I would kill for a 1:67 ratio.
 
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Reverb

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I sincerely hope you're joking.
I take issue with that last line. I took the time to write out a thoughtful reply. You may not agree with me, but that doesn't make it okay for you to be rude. Pro-business policies refers to improving economic activity in low-income areas. You could create tax incentives for businesses that operate in certain neighborhoods, for example.
 
I take issue with that last line. I took the time to write out a thoughtful reply. You may not agree with me, but that doesn't make it okay for you to be rude. Pro-business policies refers to improving economic activity in low-income areas. You could create tax incentives for businesses that operate in certain neighborhoods, for example.
My apologies. "Pro-business policies" is often code for something else, bandied about by greedy CEO's and bought politicians. The policies themselves, once implemented, are almost never what you suggest. They ultimately end up further enriching the ones up top. Call it a knee-jerk reaction on my part.
 

Reverb

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My apologies. "Pro-business policies" is often code for something else bandied about by greedy CEO's and bought politicians, and the actual policies themselves, once implemented, are almost never what you suggest, and ultimately end up further enriching the ones up top. Call it a knee-jerk reaction on my part.
It's all good. And yeah, while I support free markets, I abhor crony capitalism. You wouldn't have income equality issues if it weren't for the encroachment of the political system on the business sector.
 
It's all good. And yeah, while I support free markets, I abhor crony capitalism. You wouldn't have income equality issues if it weren't for the encroachment of the political system on the business sector.
Ah, but there's the point of contention. Can capitalism exist on its own without becoming crony capitalism, or is the latter the inevitable result of the former? If you let private power grow enough, it's going to do whatever it takes to establish permanence. And everyone has a price.
 

Chou Toshio

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I understand the reasoning behind this, but is the risk really worth 300 times the average worker pay? I could tolerate maybe 100 or 150, but not 300. That's just grotesque. Why are we the only country that assumes the risk to be worth this much? For perspective purposes, your country, on average, pays CEO's 67 times the average worker pay. That's far more equitable. I would kill for a 1:67 ratio.
No, it isn't. But market forces drive it in that direction. Hence the criticism of the system in the rest of my post (ie. I agree that CEO pay in the US is grotesque).
 
People talking about CEO pay, while I somewhat agree, I think you're missing a much larger problem.

Some perspective: Tim Cook (Apple CEO -- I believe he is the highest paid CEO too) made something like 4.25 million in 2013, Warren Buffet increased his net worth by over 4 Billion and Bill Gates increased his net worth by over 9 Billion in the same period.
 

Crux

Banned deucer.
Firms that are large enough to be able to afford to pay CEOs sums of that degree of enormity almost certainly distort any market mechanisms that may exist due to enormous price setting ability. Pretty sure if you're arguing for markets you can't also condone cartelised business monopolies!
 
I think that income inequality has been increasing because of outsourcing. Manufacturing jobs that used to pay decent salaries have largely disappeared while low-wage service sector jobs are employing those laid off from factories. The tech revolution has created a lot of high-skill tech jobs requiring education and expertise. This is one reason why income inequality has grown since the 1980s. Those work in the tech sector have gotten a lot richer whereas the people working in low-wage service jobs have not. With the mid-level manufacturing jobs gone, this has led to a polarization of people into low-end and high-end jobs, driving up income inequality.
 

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