This is one result of clinging to manufacturing jobs- you may start off with what seems like a fantastic entry level income, but then it doesn’t rise much over the span of one’s career.
I came to learn that working for someone else was somewhat secure, but financially limiting. I gave up the security and became entrepreneurial. While I haven’t seen my income do anything like that higher curve, it did cease to move like the lower curves.
I agree that it is a problem, but as a deeper direction problem. It strikes me as being incredibly sad that children will go through with some 12 years of education, and still too often have so little to show for it in terms of material reward. Certainly, some people reject material reward as a high priority. But why do so many go into the game thinking that they will parlay their education into a manufacturing job, a bureaucratic job, or some other employment with guaranteed low future returns?
A better social safety net, particularly with respect to health care might modify this phenomenon somewhat. If a factory worker isn’t chained to his or her job for the medical benefits, for example, he or she might be more likely to become an entrepreneur. If you have a sick spouse, striking out on your own and trying to buy an individual health plan might just be flat impossible.
Some freedom to fail without starving might bring more flexibility to the economy. Of course, we don’t want to make it more comfortable to do nothing than to work, so I’m not sure how you strike the balance.
Notice that the biggest climb began in 1992 leading up to 2000 — the Clinton years. After recovering from the 2001 terrorist attacks, the slope of the curve becomes almost vertical under Bush.
Wealth pooled into the hands of a few seems to indicate a stagnant economy. Weather it’s a symptom or a cause, I couldn’t say. I think your economy is going to be more vibrant where you have a lot of people with a little disposable income versus one where you have a few people with tons of disposable income.
The problem here is the same problem that caused the French Revolution. Perhaps not just income inequality, but at least its product, the distribution of wealth.
I doubt many people have seen the graph above,but must have sensed it by living that disparity on a day-to-day basic.Obama’s famous comment on wealth distribution, made chatting with Joe the Plumber, probably seemed like a good idea to many. It may even have won him over some undecided voters.
It would seem to me that a major redistribution of wealth should be our top priority to get our stagnated economy circulating for us all.
Simply playing the dreaded ‘socialism’ card has always worked before,but hopefully we’re entering a new era of free thinking pragmatism.
What concerns me about the graph is not the income disparity it shows as much as the (almost) flat line that the lower quintiles show.
If, say, the middle 60% were shown to go from just under 50k in ’79 to just under 100k in ’05, society would be much better off no matter how much money the top 1% earned.
In addition, I don’t think it’s plausible that the top 1% have been creating that much additional value while the bottom 80% has not added additional value to the economy during that period of time. Therefore, a reasonable hypothesis is that the top 1% have been capturing most or all of the additional value created through the labor, ingenuity, or investment of the bottom 80.
You might feel a little better if you look at the relative amount of income taxes paid by the groups – see Effective Federal Tax Rates for some related info.
Table 2 shows the top 1% paying about 21% of total federal taxes – I’m not sure they are getting 21 times the benefit of government spending that the average person does…
If anyone can dig up a more recent reference I’d like to see it – my understanding is the top brackets are paying an even higher percentage under current tax law.
Tim Zank,
My answer should be as short as your comment(but it won’t be).
What agreements I make with my neighbor depend on our relationship more than his predicament.
Both my neighbor and I are beneficiaries and/or victims of economic policy,which go beyond either one of our personal efforts.
Government policy is responsible for how the money flows and who it flows toward and away from.Change policy and change ‘distribution of wealth’. Wealth is in many forms: profit,wages,dividends,investment.But one thing is sure: everyone who works contributes to the general wealth,so our system is always open to manipulation depending on level of access.
So re-distributing wealth is no different from wealth distribution: both are the result of government policy,mostly in the form of tax policy.Some people in charge are like Blago of Illinois and some are like Albert Schweitzer.So rules are important to lay out a path for all to follow.
And Tim,, I spent my working life figuring out how to explain complicated concepts to 16-yr olds,so if I sound simplistic,so be it.
Philosophical question (and I’m just rambling here)… is stagnation (defined for this purpose as neither growing nor declining) a bad thing? The chart is adjusted for inflation – basically, the bottom 80% should be able to live the same way now as they did 30 years ago. This doesn’t actually sound horrible to me. We seem very focussed on ensuring that things get increasingly better at an increasingly better rate. Businesses are intent upon making a *higher* profit than last year (after adjusting for cost of money). Must the future always be better and brighter, or could we be happy with a steady, reasonably well-lit existance?
Or is a decline in growth simply the writing on the wall to a actual decline to come?
Don’t be surprised if the top 1% isn’t getting 21 times the value.
The same Army that protects the homeless man and his cardboard box also protects the richest man, his multiple houses, and all his other assets, along with the way of life that allows him to prosper (unless you assume his brilliance would have allowed him to become a billionaire even if he had been born in Haiti rather than here).
If they each had to hire a private Army to do what the government does, how much do you think each would pay?
When I think of this issue, I think of the middle east. There you can see a modern day example of a small group of people that hold almost all of the wealth, while the large group of people have almost nothing.
I’m not saying that is where we are now, but it certainly isn’t someplace I want to go. Things get very unstable when things get that out of sync.
Health insurance costs and the cost of medical care are ruining this country. Insurance through an employer, when even available, keeps you tied to that employer even if the wages are not so good. The only people who can get anything resembling a quality individual health policy are those who are perfectly healthy. Yes, housing is a significant problem for some people but medical expenses are the most significant drag on the middle class.
Ok, 16 comments and nobody bit on the education item.
Does it not strike anyone that we are in a technological age, where education becomes increasingly relevant towards the incomes we earn? The problem this graph represents to me is that despite wide access to education, our population rather widely turns its’ nose up to it.
You can tax those who become educated and earn well into oblivion if you like. Would it suddenly make the underclass better educated? More motivated to earn for itself?
I’d be interested in seeing how strongly income earned by the top 1% correlates to academic achievement versus how strongly it correlates to family inheritances. Obviously the two could be tough to separate since people who stand to get a substantial family inheritance also have access to top notch schools.
But, I guess you could take a look at people without substantial family wealth who do well in quality schools, see how much wealth they acquire, and compare that to the wealth acquired by trust funders who do as well as or worse in school.
I suspect without knowing that we’ll find that huge wealth acquisition is more strongly a function of existing family wealth and connections than it is of high academic achievement.
But what good is education if what corporations really need is phone banks in India to save salary outlay? How many more work visas do corporations want the federal government to grant so they can hire foreign lower paid,but well-educated, workers to come in and bail them out?
There is something sinister going on. I don’t have statistics,but I’m always reading that American workers are ‘too expensive’ to hire,unless it’s in some kind of management job.
It seems the most secure jobs are also the lower paying ones: health care( unless you sell drugs or insurance),fast food,retail and service.
Why do the majority of my extended family over in Illinois work at Wal-mart? Maybe they’re all just these stereotypic generic dummies the conservative chat blogs define in low paying jobs… Some of them lost their jobs and they found work where there was a job. $9 an hour with minimal benefits is as good as it gets.And Wal-mart is reported to be booming even in in these bad economic times. Again, it just doesn’t add up.
What good is education? Really Lou? I’m utterly shocked! You’re a teacher, no?
What good? Entrepreneurial inclinations rather than aspirations to fill the phone bank, or assembly line. We need to stop thinking of jobs, and start thinking of creating. We don’t need others to have jobs waiting for us to shuffle off to, unless we make that our way of thinking.
Doug, I’m with you to a point on #19 there. I am not sure that having an education is a lock in correlation to wealth, but I’m pretty sure that an absence of education is pretty well a lock in correlation to the lower part of the chart.
There are obviously exceptions. I can think of social workers with masters degrees making $30k/yr, and truck drivers with a GED making $100k/yr.
But I disagree on the wealth being a matter of family and other ‘life’s lottery’ considerations. Those examples above are some. But if it is all about family and connections, what are we doing funding public education anyway? Isn’t it just a dog & pony show, if that’s true?
I’ll admit I don’t have stats on this, but I get the feeling (perhaps misguided) that an awful lot of the nation’s wealth is locked up among people who never contributed much value through labor or creativity. The rest of us are fighting over what’s left, and our ability to obtain (or create) that remaining wealth is based in large part on our educations.
Mike,
Of course education is important,notwithstanding any point I was making above. In my mind, here is what how American public education would look in a more perfect future world..
Public Education is too locally controlled and too locally funded.Local government is always trying to cut expenditures and teachers salaries may be their largest single budget item.So the local education talk starts and ends with tax money,and we rarely discuss curricula in the public forum. A school board’s job is working for tax payers who elected them and they invariably want lower taxes. And as usual tax cuts are (deliberately) not connected to program cuts.Its always the same argument : cut taxes/cut waste…and it’s assumed waste is legendary.
What our public high school students need in my mind is a strong liberal arts education with a national and world outlook.. A general LA education patterns critical thinking for America,and this is the kind of basic education that will lead to innovation and job creation with new enterprises.No one can think creatively educationally without having both a national and global view. LA should include some exposure to performing arts and music.These students have always been some of my personal favorites. But there also should be alternative education for those who want to participate in an apprenticeship-work program training.
Many schools need significant federal or state financial aid to offer a comprehensive educational program in local schools, so the federal goverment must take a larger role in financing and oversight in my mind.Too many local leaders are stuck in time,and some would still use federal funding and cut programs and taxes,and nothing would change. But,imo, any program mandated by the government must be paid by who mandates it, state or federal government.
My teaching experience taught me that what teens value mostly is their free time is their buddies’ company..very few are renaissance thinkers,so they shouldnt be making out their own HS curriculum which was one of the trends public education went through.
Work becomes a big issue at 16..anything for a few bucks..the work experience is probably a positive,but the demands from academics is bad. But budgeting time is what adults also have to do.
I changed my mind about sports as I taught longer. Sports for teens, both boys and girls, is, over all, a very positive character-building experience,as is some after school work .So it’s a matter of dividing up time and defining priorities and that’s why the legal age is not until 18.
The negative about work is that it often gives teens a false impression of how easy money comes. Many working teens have more disposal income then they will ever have in their adult lives.No wonder TV ads are aimed at them. Any working teen should immediately start paying for his upkeep at home and many don’t.Let him spend some of his money on home electric bills.It’s for his own perspective mostly.
I get the feeling (perhaps misguided) that an awful lot of the nation’s wealth is locked up among people who never contributed much value through labor or creativity.
A lot of what is counted as ‘wealth’ to a person is in no way ‘locked up’ – it is simply a credit for their ownership of productive assets.
To use Bill Gates as an example again, he has wealth counted in the billions of dollars.
But his wealth is not ‘locked up’ – it’s not, for example, made up of hundred dollar bills stuffing his mattresses.
His wealth is his ownership interest in a highly valued and productive company, which employs many thousands of people around the world, and produces products that are highly valued and widely used.
His having a lot of wealth and disposable income doesn’t make anyone else worse off, that I can see.
This is one result of clinging to manufacturing jobs- you may start off with what seems like a fantastic entry level income, but then it doesn’t rise much over the span of one’s career.
I came to learn that working for someone else was somewhat secure, but financially limiting. I gave up the security and became entrepreneurial. While I haven’t seen my income do anything like that higher curve, it did cease to move like the lower curves.
I agree that it is a problem, but as a deeper direction problem. It strikes me as being incredibly sad that children will go through with some 12 years of education, and still too often have so little to show for it in terms of material reward. Certainly, some people reject material reward as a high priority. But why do so many go into the game thinking that they will parlay their education into a manufacturing job, a bureaucratic job, or some other employment with guaranteed low future returns?
A better social safety net, particularly with respect to health care might modify this phenomenon somewhat. If a factory worker isn’t chained to his or her job for the medical benefits, for example, he or she might be more likely to become an entrepreneur. If you have a sick spouse, striking out on your own and trying to buy an individual health plan might just be flat impossible.
Some freedom to fail without starving might bring more flexibility to the economy. Of course, we don’t want to make it more comfortable to do nothing than to work, so I’m not sure how you strike the balance.
Notice that the biggest climb began in 1992 leading up to 2000 — the Clinton years. After recovering from the 2001 terrorist attacks, the slope of the curve becomes almost vertical under Bush.
How would you state what problem this represents?
That is, what is it about the data represented here that causes current troubles or bodes ill for the future?
[I’m not saying there is no problem – but I’m not sure what problem you see.]
Wealth pooled into the hands of a few seems to indicate a stagnant economy. Weather it’s a symptom or a cause, I couldn’t say. I think your economy is going to be more vibrant where you have a lot of people with a little disposable income versus one where you have a few people with tons of disposable income.
The problem here is the same problem that caused the French Revolution. Perhaps not just income inequality, but at least its product, the distribution of wealth.
I doubt many people have seen the graph above,but must have sensed it by living that disparity on a day-to-day basic.Obama’s famous comment on wealth distribution, made chatting with Joe the Plumber, probably seemed like a good idea to many. It may even have won him over some undecided voters.
It would seem to me that a major redistribution of wealth should be our top priority to get our stagnated economy circulating for us all.
Simply playing the dreaded ‘socialism’ card has always worked before,but hopefully we’re entering a new era of free thinking pragmatism.
Lou, how about you start, go buy your neighbor a new car he can’t afford, and maybe co-sign for his mortgage too.
What concerns me about the graph is not the income disparity it shows as much as the (almost) flat line that the lower quintiles show.
If, say, the middle 60% were shown to go from just under 50k in ’79 to just under 100k in ’05, society would be much better off no matter how much money the top 1% earned.
In addition, I don’t think it’s plausible that the top 1% have been creating that much additional value while the bottom 80% has not added additional value to the economy during that period of time. Therefore, a reasonable hypothesis is that the top 1% have been capturing most or all of the additional value created through the labor, ingenuity, or investment of the bottom 80.
You might feel a little better if you look at the relative amount of income taxes paid by the groups – see Effective Federal Tax Rates for some related info.
Table 2 shows the top 1% paying about 21% of total federal taxes – I’m not sure they are getting 21 times the benefit of government spending that the average person does…
If anyone can dig up a more recent reference I’d like to see it – my understanding is the top brackets are paying an even higher percentage under current tax law.
Tim Zank,
My answer should be as short as your comment(but it won’t be).
What agreements I make with my neighbor depend on our relationship more than his predicament.
Both my neighbor and I are beneficiaries and/or victims of economic policy,which go beyond either one of our personal efforts.
Government policy is responsible for how the money flows and who it flows toward and away from.Change policy and change ‘distribution of wealth’. Wealth is in many forms: profit,wages,dividends,investment.But one thing is sure: everyone who works contributes to the general wealth,so our system is always open to manipulation depending on level of access.
So re-distributing wealth is no different from wealth distribution: both are the result of government policy,mostly in the form of tax policy.Some people in charge are like Blago of Illinois and some are like Albert Schweitzer.So rules are important to lay out a path for all to follow.
And Tim,, I spent my working life figuring out how to explain complicated concepts to 16-yr olds,so if I sound simplistic,so be it.
Philosophical question (and I’m just rambling here)… is stagnation (defined for this purpose as neither growing nor declining) a bad thing? The chart is adjusted for inflation – basically, the bottom 80% should be able to live the same way now as they did 30 years ago. This doesn’t actually sound horrible to me. We seem very focussed on ensuring that things get increasingly better at an increasingly better rate. Businesses are intent upon making a *higher* profit than last year (after adjusting for cost of money). Must the future always be better and brighter, or could we be happy with a steady, reasonably well-lit existance?
Or is a decline in growth simply the writing on the wall to a actual decline to come?
Parker–
Don’t be surprised if the top 1% isn’t getting 21 times the value.
The same Army that protects the homeless man and his cardboard box also protects the richest man, his multiple houses, and all his other assets, along with the way of life that allows him to prosper (unless you assume his brilliance would have allowed him to become a billionaire even if he had been born in Haiti rather than here).
If they each had to hire a private Army to do what the government does, how much do you think each would pay?
T –
I don’t think your question is applicable, as posed. I’m not sure it’s even meaningful, in this context.
When I think of this issue, I think of the middle east. There you can see a modern day example of a small group of people that hold almost all of the wealth, while the large group of people have almost nothing.
I’m not saying that is where we are now, but it certainly isn’t someplace I want to go. Things get very unstable when things get that out of sync.
Health insurance costs and the cost of medical care are ruining this country. Insurance through an employer, when even available, keeps you tied to that employer even if the wages are not so good. The only people who can get anything resembling a quality individual health policy are those who are perfectly healthy. Yes, housing is a significant problem for some people but medical expenses are the most significant drag on the middle class.
Ok, 16 comments and nobody bit on the education item.
Does it not strike anyone that we are in a technological age, where education becomes increasingly relevant towards the incomes we earn? The problem this graph represents to me is that despite wide access to education, our population rather widely turns its’ nose up to it.
You can tax those who become educated and earn well into oblivion if you like. Would it suddenly make the underclass better educated? More motivated to earn for itself?
I’d be interested in seeing how strongly income earned by the top 1% correlates to academic achievement versus how strongly it correlates to family inheritances. Obviously the two could be tough to separate since people who stand to get a substantial family inheritance also have access to top notch schools.
But, I guess you could take a look at people without substantial family wealth who do well in quality schools, see how much wealth they acquire, and compare that to the wealth acquired by trust funders who do as well as or worse in school.
I suspect without knowing that we’ll find that huge wealth acquisition is more strongly a function of existing family wealth and connections than it is of high academic achievement.
But what good is education if what corporations really need is phone banks in India to save salary outlay? How many more work visas do corporations want the federal government to grant so they can hire foreign lower paid,but well-educated, workers to come in and bail them out?
There is something sinister going on. I don’t have statistics,but I’m always reading that American workers are ‘too expensive’ to hire,unless it’s in some kind of management job.
It seems the most secure jobs are also the lower paying ones: health care( unless you sell drugs or insurance),fast food,retail and service.
Why do the majority of my extended family over in Illinois work at Wal-mart? Maybe they’re all just these stereotypic generic dummies the conservative chat blogs define in low paying jobs… Some of them lost their jobs and they found work where there was a job. $9 an hour with minimal benefits is as good as it gets.And Wal-mart is reported to be booming even in in these bad economic times. Again, it just doesn’t add up.
Doug –
Bill Gates would have an interesting affect on that curve, all by himself!
Oh, but it all does add up… most especially for that 0.01%
http://findarticles.com/p/articles/mi_qa3699/is_200701/ai_n19431320/pg_1?tag=artBody;col1
What good is education? Really Lou? I’m utterly shocked! You’re a teacher, no?
What good? Entrepreneurial inclinations rather than aspirations to fill the phone bank, or assembly line. We need to stop thinking of jobs, and start thinking of creating. We don’t need others to have jobs waiting for us to shuffle off to, unless we make that our way of thinking.
Doug, I’m with you to a point on #19 there. I am not sure that having an education is a lock in correlation to wealth, but I’m pretty sure that an absence of education is pretty well a lock in correlation to the lower part of the chart.
There are obviously exceptions. I can think of social workers with masters degrees making $30k/yr, and truck drivers with a GED making $100k/yr.
But I disagree on the wealth being a matter of family and other ‘life’s lottery’ considerations. Those examples above are some. But if it is all about family and connections, what are we doing funding public education anyway? Isn’t it just a dog & pony show, if that’s true?
I’ll admit I don’t have stats on this, but I get the feeling (perhaps misguided) that an awful lot of the nation’s wealth is locked up among people who never contributed much value through labor or creativity. The rest of us are fighting over what’s left, and our ability to obtain (or create) that remaining wealth is based in large part on our educations.
Mike,
Of course education is important,notwithstanding any point I was making above. In my mind, here is what how American public education would look in a more perfect future world..
Public Education is too locally controlled and too locally funded.Local government is always trying to cut expenditures and teachers salaries may be their largest single budget item.So the local education talk starts and ends with tax money,and we rarely discuss curricula in the public forum. A school board’s job is working for tax payers who elected them and they invariably want lower taxes. And as usual tax cuts are (deliberately) not connected to program cuts.Its always the same argument : cut taxes/cut waste…and it’s assumed waste is legendary.
What our public high school students need in my mind is a strong liberal arts education with a national and world outlook.. A general LA education patterns critical thinking for America,and this is the kind of basic education that will lead to innovation and job creation with new enterprises.No one can think creatively educationally without having both a national and global view. LA should include some exposure to performing arts and music.These students have always been some of my personal favorites. But there also should be alternative education for those who want to participate in an apprenticeship-work program training.
Many schools need significant federal or state financial aid to offer a comprehensive educational program in local schools, so the federal goverment must take a larger role in financing and oversight in my mind.Too many local leaders are stuck in time,and some would still use federal funding and cut programs and taxes,and nothing would change. But,imo, any program mandated by the government must be paid by who mandates it, state or federal government.
My teaching experience taught me that what teens value mostly is their free time is their buddies’ company..very few are renaissance thinkers,so they shouldnt be making out their own HS curriculum which was one of the trends public education went through.
Work becomes a big issue at 16..anything for a few bucks..the work experience is probably a positive,but the demands from academics is bad. But budgeting time is what adults also have to do.
I changed my mind about sports as I taught longer. Sports for teens, both boys and girls, is, over all, a very positive character-building experience,as is some after school work .So it’s a matter of dividing up time and defining priorities and that’s why the legal age is not until 18.
The negative about work is that it often gives teens a false impression of how easy money comes. Many working teens have more disposal income then they will ever have in their adult lives.No wonder TV ads are aimed at them. Any working teen should immediately start paying for his upkeep at home and many don’t.Let him spend some of his money on home electric bills.It’s for his own perspective mostly.
Doug –
Re: #25:
A lot of what is counted as ‘wealth’ to a person is in no way ‘locked up’ – it is simply a credit for their ownership of productive assets.
To use Bill Gates as an example again, he has wealth counted in the billions of dollars.
But his wealth is not ‘locked up’ – it’s not, for example, made up of hundred dollar bills stuffing his mattresses.
His wealth is his ownership interest in a highly valued and productive company, which employs many thousands of people around the world, and produces products that are highly valued and widely used.
His having a lot of wealth and disposable income doesn’t make anyone else worse off, that I can see.