# Income Inequality Causes Social Unrest?

Mentor
Copied from the OWS May Day protest thread...

This is a very common argument on here and I've seen it in other contexts as well. Usually it is in the context of a larger discussion about income inequality, but it is treated as a self-evident, throw-away claim that doesn't ever get discussed/substantiated on its own. So I'm starting a thread to discuss it on its own:
While I certainly don't condone the violence and vandalism, this points out why the growing income inequality in the US is a bad thing. If the income inequality continues to grow and we don't do anything about it, history tells us how it will end - with violence.
Russ said:
Often said, but I don't think it is true under several different ways of looking at the issue:

1. Is violent unrest in the US historically high right now?

2. Is violent unrest in the US higher than in European countries with lower inequality?

3. Are there any modern examples of the described phenomena or do we have to go far back to completely different times to find them?
1. It appears that violent unrest in the US is growing, does it not? I think that's what started the thread.
Vague claims are notoriously difficult to vet, but pending your clarification of timeframe, I'll give it a shot. Income inequality stats are tough to find for after 2005, but here's a close proxy, ending in 2009 or 2010: http://en.wikipedia.org/wiki/File:IncomeInequality7.svg

Notice how income inequality tracks with economic growth, with a major peak in 2000 at the height of the dot-com boom, then a pretty significant drop followed by a gradual rebound up to a new peak in 2007 or 2008 that was only slightly above the one in 2000. As of the last data, we're below the most recent peak and previous peak.

So now the violence increase. Well, near as I can tell, this violence is pretty minor in historical terms. It is nothing like the 1992 LA race riots, for example. Heck, it barely measures-up to a good college sports championship riot. But let's assume it is significant. OWS is only a year-old and is borne of the current economic crisis, which includes very unusually high unemployment and a drop in income inequality. Seems to me like the unemployment would probably have more to do with it than a delayed-reaction to income inequality's peak 4 years ago.

Moreover, the 2000s sharp rise in income inequality is pretty big historically speaking. I don't recall any increase in unrest associated with it (but I do remember people being thrilled by the ultra-low unemployment that went with it), but perhaps you can refresh my memory.
2. I'm not sure, but there is certainly more violent crime in the US than in Europe.
Yes, but that has nothing to do with civil unrest. But when it comes to civil unrest, the OWS protests pale in comparison with economic unrest in places like France and Greece.
3. The Russian revolution was driven by economic inequality and was only 100 years ago. Isn't this modern?
Um...not really, no. Even if we set aside the fact that the Russian Revolution overthrew a dictator, not a democracy, following centuries of despotic repression and a tulmultuous insustrialization period, none of which apply to the US today, income inequality in the US is still today below what it was in the decades following the Russian revolution, which was also before the Great Depression and before the US implemented its cradle-to-grave social welfare programs. If the US was ever going to have a Marxist revolution, that was the time. But income inequality dropped substantially leading into the depression (when the wealth of the rich vanished in the stock market crash), yet a massive social change was still seen as necessary. So my hypothesis is that the depression and its associated high unemployment had more to do with the social change than income inequality, which dropped dramatically right before the social change was implemented.

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Gold Member
...

So my hypotesis is that the depression and its associated high unemployment had more to do with the social change than income inequality...

I agree with this part. I watched Lifestyles of the Rich and Famous growing up and never felt animosity towards the wealthy. Income inequality is irrelevant, as long as the middle class is happy. Mess with us though, and we start siding with freaks. And the freaks will **** you up. Seen it. Had to be escorted around an incident by a hooker friend of mine about 10 years ago.

Porsche said:
Don't worry Om. I'll protect you. But don't look, it's ugly.

Staff Emeritus
You can look at murder rate vs. gini on gapminder. What you will find is a lot of random motion, but only two cases where they track each other closely: Colombia and Russia.

John Creighto
The original post doesn't prove income inequality is irrelevant; instead it in only suggests that it isnt a significant factor at this time and unemployment is a bigger issue. I can buy that. I dispute the statistics linked in the original post but I am not going to try and contest them at this point but may give it a shot on the weekend.

Less and less people are able to support a family on one income. At least that is the impression. Are people delusional or are the statistics most often presented misleading. I suspect some head butting to follow. All, I can say is that less and less people are buying into the legitimacy of the system and if this is a small amount of unrest in historical terms, then feel free to bury your head in the sand. Youll either be right or wrong but let me say the consequences of being wrong are significant.

Well, in spirit I dont like the precautionary principle, I do know that revolution has been quite a natural phenomenon through history. All I can hope if or when the next one comes that it will be with the minimum of pain and for the best outcome.

Staff Emeritus
Gold Member
I think a bigger cause/predictor of unrest is the (perceived) inability to move up the income ladder. This recession has moved a lot of people down that ladder, and many are afraid they won't be able to get back to where they were.

I don't blame them for thinking that. If you're less than 10 years from retirement age and unemployed, things must look pretty grim.

Staff Emeritus
I would have thought it obvious that the extent to which income inequality causes social unrest is dependent on:
• The ratio of poor:middle:rich
• What level of poverty the poorest experience
• The actual or perceived manner in which those with money accumulated it
To expand a bit on those further: income equality between upper and middle class and middle and lower class hardly matters if the vast majority of people are middle class. The second point ties into this a bit with what being poor means in actual terms rather than relative i.e. poor = no new laptop every 6 months vs poor = no food or shelter. Lastly if it is perceived that those who are rich gained it in unfair or immoral ways i.e. an authoritarian aristocracy then the chances of social unrest are increased.

Mentor
The original post doesn't prove income inequality is irrelevant; instead it in only suggests that it isnt a significant factor at this time and unemployment is a bigger issue.
Yes, but to put a finer point on it, I think income inequality is a red herring. Whether promoted misleadingly for propaganda purposes, or just misunderstood unintentionally, I think a lot of people just aren't aware of the facts of the issue. So when something bad happens economically (a recession), people latch on to income inequality to complain about, even if it is misdirected anger.
Less and less people are able to support a family on one income. At least that is the impression.
You're right - it is a fact. But it is a fact that cuts both ways: many people are less able to live on a single income because they are living higher lifestyles, buying bigger houses and bigger cars than they used to. So it isn't clear to me if that is a naked negative fact or mostly just a bipriduct of lifestyle choices and not a negative at all.
All, I can say is that less and less people are buying into the legitimacy of the system and if this is a small amount of unrest in historical terms, then feel free to bury your head in the sand.
Well facts are facts. Either this amount of unrest is significant historically or it isn't. I say it isn't, by direct comparison with the level of unrest at other times.

Mentor
Ryan, these all sound logical, but they only are logical if the factual starting premise is accurate and it isn't. They are all based on the same lie that politicians on the left have been feeding us for years: 'The rich get richer while the poor get poorer'. More specifically:
I would have thought it obvious that the extent to which income inequality causes social unrest is dependent on:
*The ratio of poor:middle:rich
As we discussed in other threads, Eurpoean countries define the classes based on income inequality, a position that American leftists tend to support, but which makes no logical sense. The result is that in a time such as the '90s when income inequality grew quickly everywhere, poverty rates rose despite the people who were being defined as "poor" seeing relatively large income increases and extremely low unemployment. So when people here 'the rich get richer and the poor get poorer' it is true based on popular definitions, but it doesn't correspond to how most of us actually think on a personal level. Most people really don't think that getting a 10% pay raise while their neighber got a 20% pay raise makes them poorer. When they hear 'the rich get richer while the poor get poorer', they think their neighbor saw a 10% pay increase while they saw a 10% decrease. We've seen time and time again on PF that this propaganda works so well that a good fraction of people simply aren't aware of the actual facts.

Thus people are using a twisted, artificial fact to prove a falshood - even without knowing it.
*What level of poverty the poorest experience
Sure -- but as I showed, that's an inverse relationship with income inequality, not a direct one. So when a recession starts and the poor really are getting poorer, people start focusing on income inequality. I agree that that's what happened here, but it is still misguided if the assumed other half of the coin (the rich get richer) is wrong.
*The actual or perceived manner in which those with money accumulated it
Sure, but again if the rich are losing money, not accumulating it, one would think the result would be less unrest if the corellation were direct. Instead, in both the short (intra-economic cycle) and long (cycle to cycle) term, the corellation is inverted: income inequality rises as poverty and unemployment drop (across the board incomes rise).

I will concede perhaps that some of this is a delayed reaction to what was happening 5 years ago, but few people were complaining about how rich the rich were getting when they themselves were also seeing large raises. There's a hypocrisy in that.

Staff Emeritus
More specifically: As we discussed in other threads, Eurpoean countries define the classes based on income inequality
Actually it's a bit more complicated than that. It isn't just income or assets but family, education, background, type of employment, use of language etc. It's far more informal today than it used to be but there's a difference between being rich and being upper class for example.

EDIT: Caveat being that this depends on country, Europe is quite diverse.

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Jimmy Snyder
There has always been income inequality and there has always been social unrest. Perfect correlation.

Mentor
Actually it's a bit more complicated than that. It isn't just income or assets but family, education, background, type of employment, use of language etc. It's far more informal today than it used to be but there's a difference between being rich and being upper class for example.

EDIT: Caveat being that this depends on country, Europe is quite diverse.
I think we both may have made a bit of a mess there: Afaik, "poor" has a specific (but inconsistent) definition everywhere while middle class and rich are utterly undefined.

And yes it is probably true that there are nation specific definitions in Europe, but because of the existence of the EU there is also a need for an international standard: the OECD. I'll have to dig up the other thread to be sure, but it was my understanding most adhered to that definition.

Staff Emeritus
I think we both may have made a bit of a mess there: Afaik, "poor" has a specific (but inconsistent) definition everywhere while middle class and rich are utterly undefined.

And yes it is probably true that there are nation specific definitions in Europe, but because of the existence of the EU there is also a need for an international standard: the OECD. I'll have to dig up the other thread to be sure, but it was my understanding most adhered to that definition.
Hmm in the UK I would be surprised if any official standards were used outside of academia and some politics. In our media (news and entertainment), politics and every day language our definitions of what class you fall into strongly relies on your social status of which money is only a part. For example: a multimillionaire is upper middle class if they are of a background without peerage/gentry and upper class if those are present.

It's not a formal social structure but it is used prolifically in every day and political conversation. This wiki article isn't amazing but it outlines it fairly well
http://en.wikipedia.org/wiki/Social...gdom#Informal_classifications_and_stereotypes

The main take home point here is that what we're talking about in these conversations is class struggle which is quite beyond just income. Even if rhetoric would seem to suggest otherwise.

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Mentor
There has always been income inequality and there has always been social unrest. Perfect correlation.
I assume that was meant to be tongue-in-cheek to highlight the propaganda tactic, which makes it a pretty good point:

Any statement statement of fact can be made sufficiently vague as to simultaneously be both true and false. The beauty of this tactic is that the speaker can convey a falsehood without actually lying. The speaker instead tricks the listener into generating the lie themselves. The difficulty, though, is in trying to be concise without being specific. In my opinion, 'inequality breeds unrest' and its cousin 'the rich get richer while the poor get poorer' cross that fuzzy line between implied lie and actual lie, but either way the intent is deception.

I'll be more specific and perhaps redundant since others have made similar statements: On average, people are poorer now than they were 5 years ago and they're mad about it and they blame various manifestations/incarnations/implications of The Rich. Among those is the incorrect belief that they are poorer because the rich are richer.

Now as per Ryan's point, that doesn't necessarily mean it isn't still [partially] The Rich's fault we're in the mess we're in today, even if it is not well reflected in income statistics. But that's a whole 'nother can of worms, since there is a lot of fault to go around. Certainly, many of The Rich who work on Wall Street bear a significant fraction of the blame since many made bad investment decisions and profited from them, at least in the short term. But equating "bad" with "illegal" or "unethical" is a stretch, particularly since a much, much larger number of people made basically the same bad decisions for similar selfish/short-sighted reasons: those are the millions of people who accepted ill-advised loans to buy houses they couldn't afford. The difference is that while the poor person's share of the responsibility is mostly personal/individual (affecting only themselves directly, but millions very indirectly), the Rich Banker's responsibility is systemic (affecting thousands directly and millions indirectly).

Still, whether the point is an impersonal corellation (the rich get richer while the poor get poorer) or a personal blame (we're in this mess because the rich screwed-up -- while profiting from it), both forumlations are at best highly misleading and overly simplistic.

However, while the conceptualization of the economic conditions that are said to cause unrest are both wrong and wildly different from historical examples, what does remain constant over time is that propaganda is key. Ultimately it doesn't matter what is true: what matters is what you can make people believe is true. And in the class war, the Left is winning that propaganda battle.

Mentor
Hmm in the UK I would be surprised if any official standards were used outside of academia and some politics. In our media (news and entertainment), politics and every day language our definitions of what class you fall into strongly relies on your social status of which money is only a part. For example: a multimillionaire is upper middle class if they are of a background without peerage/gentry and upper class if those are present.

It's not a formal social structure but it is used prolifically in every day and political conversation. This wiki article isn't amazing but it outlines it fairly well
http://en.wikipedia.org/wiki/Social...gdom#Informal_classifications_and_stereotypes

The main take home point here is that what we're talking about in these conversations is class struggle which is quite beyond just income. Even if rhetoric would seem to suggest otherwise.
Hmm...well, good point though I think the conclusion is backwards because of your UK perspective: Since the US doesn't have aristocracy, class is strictly an economic issue. Even still, in the UK is there much real non-economic class struggle? I've never noticed the issue being brought up wrt the current economic situation...though news from the UK has been thin since you' come through without too much pain.

Staff Emeritus
russ said:
Are there any modern examples of the described phenomena or do we have to go far back to completely different times to find them?
Since the current income and wealth gaps are historically high, you do have to go back to completely different times to find analogs. You certainly won't see it by going back to the 1950s. Those gaps were at historical lows (and the top marginal tax rate, over 90%, was near its historical high) throughout the 1950s.

To see a comparable gap you have to go back to the Gilded Age or the Roaring 20s. There was violence then, much more so than the current tepid OWS stuff, even with May 1. The Wobblies were pretty dang violent, and so were the thugs hired to keep the nascent unions at bay. The US managed to avoid the more severe, sometimes revolutionary, problems that occurred elsewhere by reforming itself. My thoughts on FDR: While none of his efforts "cured" the depression (it took WWII to make that happen), his efforts did keep us from going down a road nobody would want to be on.

Mentor
Since the current income and wealth gaps are historically high, you do have to go back to completely different times to find analogs. You certainly won't see it by going back to the 1950s. Those gaps were at historical lows (and the top marginal tax rate, over 90%, was near its historical high) throughout the 1950s.

To see a comparable gap you have to go back to the Gilded Age or the Roaring 20s. There was violence then, much more so than the current tepid OWS stuff, even with May 1. The Wobblies were pretty dang violent, and so were the thugs hired to keep the nascent unions at bay. The US managed to avoid the more severe, sometimes revolutionary, problems that occurred elsewhere by reforming itself. My thoughts on FDR: While none of his efforts "cured" the depression (it took WWII to make that happen), his efforts did keep us from going down a road nobody would want to be on.
Good point; I'd focused on one half of the issue (the violence) when looking back and not looked at the other (the inequality) in the same way. And you're correct: once you get past the steep rise in the '90s, with its peak in 2000, you have to go back 80 years to see similar inequality levels in the US. Still, OWS is pretty single-minded in its 1% vs 99% message - even if that masks the real problems - whereas when you look back at the depression and earlier, there were a bunch of real problems related to industrialization's growing pains.

So I think it would be a vast oversimplification to say that the social unrest of the '30s was primarily due to income inequality... or perhaps we have to flip it: Life was truly awful for the new city-dwelling factory-working class in the '20s. So at the time, you might accurately say, inequality meant poor living conditions for some and good living conditions for others. Today, however, inequality means good living conditions for some and great living conditions for others. So the reason why the social unrest was vastly worse back then than today isn't because of what is the same (high inequality), it is because of what is different: worse living conditions.

Gold Member
Yes, income inequality is one cause of social unrest. The U. S. maldistribution of wealth, in which an enormous segment of the population struggles while the fortunate few ride the gravy train, is a world-class recipe for social unrest. Income inequality in the United States is higher than in any other advanced industrial democracy and is nearly the same as that in Ghana, Nicaragua, and Turkmenistan. The concentration of wealth in the hands of a few has been called “unsustainable” and “incompatible with real democracy”. It divides us from one another in nearly every aspect of our lives. I agree that this great imbalance is dangerous to our national interest and must be readjusted.

Another cause of social unrest is high long-term unemployment. When a person is out of work for over one year she begins to lose her self-esteem and is often discriminated against by potential employers. This is highly demoralizing. Highly educated workers forced into taking menial jobs are really stagnant human capital and represent stagnant social mobility. The American promise of equality of opportunity seems just a dream to those underemployed.

But there is a long list of additional factors in the U. S. today that contribute to instability. One is the resentment and mistrust between the “haves and have nots”. The percentage of families in “poverty” today is higher than ever. The search for scapegoats is a common reaction to systemic problems in a society. Some even begin to blame certain religious groups, immigrants, or other nationalities.

There is a huge imbalance in political power today where rich individuals and corporations support the reelections of congressmen who vote for laws favorable to those special interests, resulting in “the rich get richer…” There is a sense throughout our country that our lawmaking system is completely dysfunctional. One political party proposes a measure “in the national interest” and the opposing party refuses to even consider agreeing to it. This becomes a deadlock where nothing gets done-right or wrong. And many believe lawmakers are only voting to satisfy their rich benefactors. This political deadlock causes the people to have feelings of frustration, depression, helplessness, and even anger. Demagogues feel rewarded when they discredit those clamoring for reform, causing further divisions in our society. This great maldistribution of wealth undermines our democracy.

It seems a mistake, however, to equate social unrest with violence because it is quite possible have social unrest without violence.

Mentor
The U. S. maldistribution of wealth, in which an enormous segment of the population struggles...
False premises lead to erroneous conclusions.

The percentage of families in “poverty” today is higher than ever.
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_poverty_rate_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.

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Another cause of social unrest is high long-term unemployment. When a person is out of work for over one year she begins to lose her self-esteem and is often discriminated against by potential employers. This is highly demoralizing. Highly educated workers forced into taking menial jobs are really stagnant human capital and represent stagnant social mobility. The American promise of equality of opportunity seems just a dream to those underemployed.

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

Gold Member
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. http://global.nationalreview.com/images/cartoon_120211_A.jpg [Broken] Murray: WSJ said: ...The prerequisite for any eventual policy solution consists of a simple cultural change: It must once again be taken for granted that a male in the prime of life who isn't even looking for work is behaving badly. There can be exceptions for those who are genuinely unable to work or are house husbands. But reasonably healthy working-age males who aren't working or even looking for work, who live off their girlfriends, families or the state, must once again be openly regarded by their fellow citizens as lazy, irresponsible and unmanly. Whatever their social class, they are, for want of a better word, bums. To bring about this cultural change, we must change the language that we use whenever the topic of feckless men comes up. Don't call them "demoralized." Call them whatever derogatory word you prefer. Equally important: Start treating the men who aren't feckless with respect. Recognize that the guy who works on your lawn every week is morally superior in this regard to your neighbor's college-educated son who won't take a "demeaning" job. Be willing to say so... Last edited by a moderator: Gold Member 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: 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. 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”. I make$25,000 a year.

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

am I getting poorer?

Mentor
Yes.

Gold Member
So now the violence increase. Well, near as I can tell, this violence is pretty minor in historical terms. It is nothing like the 1992 LA race riots, for example. Heck, it barely measures-up to a good college sports championship riot.

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

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/2009/mar/11/mental-health-inequality
http://www.euro.who.int/__data/assets/pdf_file/0012/100821/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.

So inequality seems to be a factor in social unrest.

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feathermoon
Ryan, these all sound logical, but they only are logical if the factual starting premise is accurate and it isn't. They are all based on the same lie that politicians on the left have been feeding us for years: 'The rich get richer while the poor get poorer'. More specifically: As we discussed in other threads, Eurpoean countries define the classes based on income inequality, a position that American leftists tend to support, but which makes no logical sense. The result is that in a time such as the '90s when income inequality grew quickly everywhere, poverty rates rose despite the people who were being defined as "poor" seeing relatively large income increases and extremely low unemployment. So when people here 'the rich get richer and the poor get poorer' it is true based on popular definitions, but it doesn't correspond to how most of us actually think on a personal level. Most people really don't think that getting a 10% pay raise while their neighber got a 20% pay raise makes them poorer. When they hear 'the rich get richer while the poor get poorer', they think their neighbor saw a 10% pay increase while they saw a 10% decrease. We've seen time and time again on PF that this propaganda works so well that a good fraction of people simply aren't aware of the actual facts.

I will concede perhaps that some of this is a delayed reaction to what was happening 5 years ago, but few people were complaining about how rich the rich were getting when they themselves were also seeing large raises. There's a hypocrisy in that.

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.

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Mentor
One could compare homicide rates to income inequality.
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.

Gold Member
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.

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

Suppose we have a major city with high inequality. Because of the inequality, crime rates increase in the city (http://siteresources.worldbank.org/DEC/Resources/Crime%26Inequality.pdf); [Broken] 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/graduates/gpem/jm/pdf/paper/JMP%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.

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EWH
Here is the income distribution 2001-2008, IRS figures

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.)

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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.

Gold Member
Suppose we have a major city with high inequality. Because of the inequality, crime rates increase in the city (http://siteresources.worldbank.org/DEC/Resources/Crime%26Inequality.pdf); [Broken] 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/graduates/gpem/jm/pdf/paper/JMP%20Tesei.pdf [Broken]). 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.
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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

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Gold Member
Inequality is part of life.

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

Since the current income and wealth gaps are historically high, you do have to go back to completely different times to find analogs. You certainly won't see it by going back to the 1950s. Those gaps were at historical lows (and the top marginal tax rate, over 90%, was near its historical high) throughout the 1950s.

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.

To see a comparable gap you have to go back to the Gilded Age or the Roaring 20s. There was violence then, much more so than the current tepid OWS stuff, even with May 1. The Wobblies were pretty dang violent, and so were the thugs hired to keep the nascent unions at bay. The US managed to avoid the more severe, sometimes revolutionary, problems that occurred elsewhere by reforming itself. My thoughts on FDR: While none of his efforts "cured" the depression (it took WWII to make that happen), his efforts did keep us from going down a road nobody would want to be on.

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.

Yes, income inequality is one cause of social unrest. The U. S. maldistribution of wealth, in which an enormous segment of the population struggles while the fortunate few ride the gravy train, is a world-class recipe for social unrest.

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.

Income inequality in the United States is higher than in any other advanced industrial democracy and is nearly the same as that in Ghana, Nicaragua, and Turkmenistan.

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

The concentration of wealth in the hands of a few has been called “unsustainable” and “incompatible with real democracy”. It divides us from one another in nearly every aspect of our lives. I agree that this great imbalance is dangerous to our national interest and must be readjusted.

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 more so 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...).

Another cause of social unrest is high long-term unemployment. When a person is out of work for over one year she begins to lose her self-esteem and is often discriminated against by potential employers. This is highly demoralizing. Highly educated workers forced into taking menial jobs are really stagnant human capital and represent stagnant social mobility. The American promise of equality of opportunity seems just a dream to those underemployed.

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.

But there is a long list of additional factors in the U. S. today that contribute to instability. One is the resentment and mistrust between the “haves and have nots”. The percentage of families in “poverty” today is higher than ever. The search for scapegoats is a common reaction to systemic problems in a society. Some even begin to blame certain religious groups, immigrants, or other nationalities.

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.

ParticleGrl
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.

Do you have any data to back this up? Or is it just a gut feeling?