Income Inequality Causes Social Unrest?

russ_watters

False premises lead to erroneous conclusions.

Also false.

These are what I'm talking about when I say that left propaganda has done a fabulous job of convincing people of supposed economic realities that are factually wrong. So what's true is this:

Absent intra-cycle fluctuations in which every income segment sees drops and the occasional big cycle swamping the previous (ie, what we are seeing now), incomes for every income segment have been increasing for many decades and the poverty rate decreased accordingly. However, since income gains in the lower end are slower than the others, it has been about 40 years since we've seen a sustained, long-term drop. Ie, in 1959, poverty was 22%, by 1970, it was 12% and since then it has been oscillating up and down with the cycles, between 11% and 16%. http://en.wikipedia.org/wiki/File:US...e_timeline.gif

Note that the US definition of poverty and its poverty line are based on individual standard of living and on an increasing scale, so while we can say that the poverty rate has stagnated for 40 years, we can also say that the standard of living at the poverty line has increased.

mege

So where have those high-skill jobs gone and why are they being replaced (at least in theory) by low-skill/low-pay jobs?

mheslep

Brooking's has had a well regarded study out for some time showing that if a US resident meets the following conditions the odds of joining the middle class are greater than 75% , i.e. mean income $50K/year.
1. Graduate high school (or get the GED?)
2. Get married
3. Don't have children before you get married.
(BTW, re an earlier post, one of many differences between US society and czarist Russia was that no matter what actions he took Ivan the Serf was not going to join any higher classes, ever).

This suggests to a great extent growing income inequality is a result of the change in culture or collapse in institutions that previously mandated these tenets. Charles Murray's recent book, "Coming Apart", attaches a narrative (on my list). In part he claims that the residents of blue collar and wealthier neighborhoods made many of the same personal mistakes in the past decades, but the the consequences for the former have been severe, with no slack to recover. Hence the latter can afford to hang out an OWS site for weeks and get arrested a few times and afterword go to work for a nice foundation somewhere. Not so the former.



Murray:

Bobbywhy

I did make an incorrect statement: “The percentage of families in “poverty” today is higher than ever.” and thanks to Russ for pointing it out. From the graphs in the link he provided that show poverty in the U. S. it’s easy to see that the percentage of our population in poverty is now 14.3% and has remained basically the same for decades. However, the same graph also shows that the number of Americans in poverty is now at an all-time high…43.6 Million. Therefore, to re-write the statement correctly: “The number of families in “poverty” is higher than ever.” By the way, I would say that 43.6 million does qualify as an “enormous segment of the population.”


It is a mistake to conflate social commentary with “left propaganda”. That is a false assertion. What’s true is this: The challenges that our society faces are not “left or right”. While it is true that the “left” and “right” generally differ on what caused our problems and also disagree on how to resolve them, objective observations about social conditions are not “left or right”.

Alfi

I make $25,000 a year.

Ten years ago I made 40,000 doing the same job.


am I getting poorer?

russ_watters

Yes.

SixNein

One could compare homicide rates to income inequality. For example, have a peek at:
http://psych.mcmaster.ca/dalywilson/iiahr2001.pdf

In addition, there is also some correlation between health an inequality. Of partiuclar concern in this context, the mental health of people is affected by inequality. And education is also a factor.

http://www.guardian.co.uk/society/20...lth-inequality
http://www.euro.who.int/__data/asset...821/E92227.pdf


But as far as riots go... I think it would depend on how accepting the people are of authority. If the authorities say that inequality is right, do they challenge this view?

In addition, there is evidence to indicate that people in higher inequality societies trust each other less than ones with more equal societies.

http://umd.academia.edu/EricUslaner/...ust_in_America

So inequality seems to be a factor in social unrest.

feathermoon

Maybe only a small hypocrisy--the concern isn't always that the raises are disparate, but that when the raises stop, or people start losing their job, who is in a better position to cope?

You can't completely shoot down the inequality argument: while the poor got their 10% raises and the rich got their 20%, inflation neutralized y%, healthcare costs rising account for x%, and bad financial decisions account for z%, and suddenly the poorer may 'earn' less then they did 50 years ago. 'The poor have more material possessions, amenities these days' (though even this is questionable if you consider that each person will own less land, less of a percentage of what commodities exist--can you compare the value of a plasma screen in 2010 to a horse 1860?).

A rich man does not need to accrue more money to be 'richer'. His comparative wealth grows even if he loses money, if everyone else loses much more.

russ_watters

Sure, but that would have nothing to do with this thread, since homicide is not political unrest.

John Creighto

I was hoping to put together some kind of analysis but haven't got to it yet. So for now let me briefly quote something and we can decide what to make of it later.

"The 1960Today series of articles have focused on comparing CPI inflation adjusted 1960 costs to today's costs. The CPI only covers "consumer" products and services. It does not cover the state, local or the Federal government taxes and fees. It also my understanding that does not include expenses such as college and health care costs. As the numbers have shown, these are significant omissions."
http://www.clearpictureonline.com/1960-Summary.html

There's more to the article which I'd like to address later but haven't thought enough about what all the numbers mean which are presented in the article. However, if someone wishes to say that the cost of living has went up relative to (for instance median) wages the article is worth pondering.

Bobbywhy

Although the analysis of CPI/inflation would be illuminating it seems to me that there already is general agreement here that in the U. S. there is a large income inequality. The thread title implies that, anyway. The issue appears to me to be about the impact of that inequaility on our society.

SixNein

Suppose we have a major city with high inequality. Because of the inequality, crime rates increase in the city (http://siteresources.worldbank.org/D...equality.pdf); as a result, the police may profile those on the lower end of the inequality spectrum, and they may ratchet up their force in an attempt to quell the crime. Suppose again that the city is racially fragmented. The inequality of the city magnifies trust issues in minorities. (http://www.econ.upf.edu/eng/graduate...MP%20Tesei.pdf). One incident occurs where the police over-react with force to a person from one of the minorities, and it gets caught on film.


The 1992 riots were triggered by and large over such an incident.

Point being, I think its reasonable to suggest that inequality can attribute to unrest.

EWH

I have calculated the income distribution myself from the detailed IRS statistics. Last time I posted it in a similar thread, no one bothered to look at it, but here it is again anyway. It covers 2001-2008 for 25 categories of income from <$1000 to >$10M, (plus negative income). It not only has the actual numbers, but also has cumulative percentages of returns falling into each category, calculated both from the top and from the bottom, the mean income for each category, and the inflation-adjusted mean for each category. (Those with negative income are not counted in the percentages. The figures are adjusted gross income (AGI), which does not subtract personal exemptions or deductions from the gross income.)

The most comprehensible table for looking at inequality gives: (share of total income) / (share of returns), but it can't easily be compared between different years since it is not possible to adjust the category boundaries themselves for inflation.

One thing I have found which is interesting (but not included in the spreadsheet) is that when a fair approximation of all taxes including payroll, state income, and sales taxes is calculated and added to actual federal income taxes paid, and the total is expressed as a percentage of income above $15,000 (or any higher amount - to represent an estimate of the minimum needed for basic subsistence), every higher income bracket pays a lower percentage of disposable income in taxes than all lower income brackets. That is, the overall tax structure is regressive. Even for a subsistence allowance of $8000, the effective tax rate falls up until the $200K+ brackets, then remains steady within 5% in higher brackets.

Edit: Just to give an example of the degree of inequality in the income data: 3% of the returns ($200K+) have over 28% of the total income for 2008 (9x more than an equal share). At the bottom, 28% of the returns (under $17K) have 4% of the total income (1/7 of an equal share). (Equal share = $57,700 per return, counting negative income returns.)

Attached Files

Income historical-a.xls (48.5 KB, 8 views)

ThinkToday

Inequality is part of life. Contrary to what schools tried to teach my kids with games where everybody wins, that's just crap. Life is about choices and competition. Effort in education, life, and work should be rewarded. Likewise, our rewards are also based on our choices. We can choose a career that is enjoyable or financially rewarding, and for some, it can be the same.

For example, my child wants to be a writer, even though he has the IQ to do very well in a paying technical field like engineering. If a writer makes it big, they do well, but the average income of all writers is less than engineers. The following quotes are all according to www.bls.gov . For writers, “In May 2008, writers and authors had average yearly wages of $64,560. Editors made an average of $57,180.” And of those writers, “More than one-third was self-employed“, ouch for job security. For the EE, “In May 2008, the average yearly wages of electrical engineers were $85,350. Electronics engineers earned an average of $88,670.” Interesting the EE has issues with jobs “Jobs for electrical engineers are expected to experience little or no change through 2018. There will be a need for more electronic devices like giant electric power generators or wireless phone transmitters, but electrical engineers will face competition from companies based in other countries.” Oh, and we physicists, “In May 2008, physicists had an average yearly wage of $106,440.” Our outlook is, “Employment of physicists is expected to grow faster than the average for all occupations through 2018. The limited amount of money to do research means that physicists will have to compete for research jobs. But there will continue to be a need for people with physics knowledge to work with computers and in other sciences.” For the Civil Engineer, “Civil engineers had average yearly wages of $78,560 in May 2008.” The CE outlook is, “It is expected that civil engineer jobs will increase much faster than the average for all occupations through 2018. More civil engineers will be needed to design and build things as the population grows. For example, they will need to fix and replace buildings and roads as they continue to become old, unsafe, and worn out.” Perhaps a doctor, “The median yearly wages of general practitioners were $186,044 in 2008. Specialists usually made more, about $339,738 per year.” The outlook for an MD, “The number of jobs for physicians is expected to grow much faster than the average for all occupations through the year 2018. This is partly because new machines and tools are letting doctors treat more health problems. It is also partly because the population is growing and getting older, so they will need more health care. Job opportunities for doctors are expected to be good, especially in rural and low-income areas. Some of these areas do not have enough doctors.”

So, you want to have your fun now. How about being a Disc Jockey? “Earnings are higher in large cities than in small ones. In May 2008, the average hourly wages of radio and television announcers—some of whom were disc jockeys—were $19.43.” That’s $40,414/yr. The outlook is “There is a lot of competition for these jobs. It is easier to get jobs at small radio stations, especially if you finish an internship or work at a school's radio station.” Or, maybe a Designer, “In 2008, earnings of designers varied widely. For example, the average yearly wages of floral designers were $24,510 in May 2008. The average yearly wages of interior designers were more than double that amount, $51,020. Graphic designers, the largest design occupation, earned $46,750 per year on average as of May 2008.” The outlook for them is “Most designers are expected to face tough competition for jobs because many talented people are attracted to a career in design. However, job opportunities should be good for floral designers as many people leave the occupation due to low pay.” Perhaps the life of an auto mechanic, “In May 2008, the average yearly wages of all automotive service technicians and mechanics were $37,540.” The outlook is, “Employment of automotive service technicians and mechanics is expected to grow slower than the average for all occupations through the year 2018. The closing of many automobile dealerships will lead to fewer job openings in dealer service centers. However, job opportunities are expected to be very good for people who complete a training program and receive a certification. People who are good at figuring out problems should have the best chances. Their training should include basic electronics skills. People without formal automotive training will likely have to compete for beginner jobs.Most people who enter this field can expect steady work. This is because changes in the economy have little effect on the amount of work.”

So…. Why post all this? Choices matter in life, play, education, vocation, etc., and don’t complain about inequality if you chose poorly. My hat is off to anyone that works hard at any occupation, except OWS. Income inequity has and always will exist. What we can choose to do is drag everyone down to the lowest level to have equality or allow people to pull themselves up to whatever level of achievement they desire to obtain the level of “equality” they’re willing to work for.

mheslep

There are many other factors that will correlate as well, and might just as well be considered causal: culture, government transfer payments, lousy/corrupt big city governments, poor public education, on and on

SixNein

At what point would you say we have too much inequality?

CAC1001

IMO, wealth gaps, in terms of the actual goods and services available to the masses, are at the lowest point they've ever been. The wealth gap in this sense was much higher in the 1950s then it is now. But this is because people are forgetting a few things:

1) Even if there are larger gaps in monetary wealth between wealthy and middle-income today as opposed to the 1950s, society as a whole is still a lot richer today than back then. So even though we may today be more unequally rich (at least monetarily) than we were in the past, we are still a lot richer today, as a whole, then in the past.

2) The other thing people forget is that there really is no such thing as a "distribution of income" or a "distribution of wealth." Income inequality is a partisan tool used to stir up populist rage, because it implies that there is a fixed supply of income that is then distributed among society by some central authority, and the wealthy have rigged the system to hog more of the income for themselves. But that's not how a free-market economy works. Income is what you make in exchange for the goods/services/labor you offer on the market. There is no central income authority. Same with wealth. There isn't some fixed pie of wealth.

It's like saying that there's a "fat distribution" and that the poor are getting oppressed because obesity is a major problem among the poor, and therefore the wealthier portion of society must somehow be making the "fat distribution" be concentrated among the poorest people in society. Now, statistically, is there a "fat distribution" in society? I'm sure there is. If you add up the total weight of people in America, and then divide it up into income and wealth quintiles, you'd probably find that the fat is mostly distributed among poorer people. But obviously there is no fixed supply of fat that gets distributed among the people of society!

3) Income and wealth quintiles do not represent fixed classes of people. A comparison could be a statistic representing the "fastest 5%" of cars on the highways at any given time in the nation. 24/7, there is a fastest 5% of cars. And this fastest 5% may make up more or less of the total amount of speed of the cars on the highways, depending on the time of day. Does this mean this fastest 5% is some fixed "class" of cars? No way. The actual cars making it up changes constantly throughout the day.

If you mean the spending of WWII cured the depression, I would disagree there. I'd argue it was the combination of the infrastructure built up from the New Deal, the development of the Interstate Highway System, the defense budget (which was directly tied to the development of many of the technologies that led to the computer and electronics revolution, for example everything from the transistor to the C++ programming language, to the beginnings of the Internet to the GPS system are tied to money for research for defense-related purposes---some of the first computers were built for military purposes), and the fact that WWII built up a bunch of industrial capacity in America while the rest of the civilized world was bombed out and rebuilding afterwards, making the U.S. THE dominant economic power on the planet at the time.

Economic inequality will cause social unrest if a class of wealthy are living off the backs of the poor and brutally oppressing them, ala Russia before the revolution. Economic inequality as the United States has is quite normal in a market capitalist economy. In any society, you are going to have economic inequality, but the question is, is it an economic inequality in which everyone continues to become richer, even though society remains unequally rich.

The United States is a lot richer than Ghana, Nicaragua, or Turkmenistan. Those countries are unequally poor. The U.S. is unequally very rich.

People with an agenda will call it unsustainable or incompatible with real democracy. Also, what is meant by a "real democracy?" A democratic system is supposed to protect the majority from the minority but also the minority from the majority. Concentration of wealth in the hands of a few has always existed and always will. It doesn't divide us from one another, if anything one could argue that it has helped connect us moreso than ever before. A lot of those fortunes that exist today were created by the development (of the private-sector) of all the new communication technologies that we have today (cellphones, the World Wide Web, Twitter, etc...).

Recessions, depressions, booms, busts, etc...are always going to occur. Long-term unemployment is definitely a problem, but the United States will recover from it eventually unless we follow some really crazy policies. The last economic crisis really dealt a blow to the economy, so it will take some time.

The United States is not Germany in the 1930s, in which the economy was literally devastated. But also, there's a difference between what is measured as "poverty" and real poverty. Real poverty versus people who struggle financially, but otherwise still live in a heated/cooled home or apartment, have access to clean water, electricity, computer, Internet, television, fresh food, etc...that's not real poverty. Now homeless sleeping under a bridge is real poverty.