# Income Inequality Causes Social Unrest?

SixNein
Gold Member
Not so much as your "example" using 99% poverty and 1% rich. You've yet to address the "inequality" from a causal standpoint. e.g. Using my quote; inequality from because 86 million stop looking for work? Inequality because some don't want to spend the time, money, and effort to better themself with an education, incl. HS, college, trade school, etc.?
I don't think America's high inequality is a result of education; instead, I think it is a result of America's ability to create jobs. America's productivity, wages, and it's ability to create jobs seem to be disconnected. Even if the entire American population were to become highly educated, I think you'd just see more pigeons trying to cram into the same holes.

http://www.huffingtonpost.com/2012/01/31/wages-2011-record-corporate-profits_n_1244297.html

CAC1001
Strawman....

I think any monetary level of inequality can be stomached so long as the rest of society is seeing living conditions improve year-after-year. What causes revolutions is when one group lives off of the oppression of the rest of society.

mheslep
Gold Member
America clearly has the ability, historically, to create jobs. From '82 to '89 20 million jobs (208 thousand/month average, almost double last month's) were created with an economy a third the size of the current one (nominally) and ~70 million fewer people. The reason the nation is not doing so now must include the current governmental policy.

Mentor
Suppose 99% of Americans were living in utter poverty while 1% lived the lifestyle of kings.

Suppose still that your one of the 1%.

Is inequality a problem?
I'm sorry, I was unclear. Let me rephrase: Could you help me out by providing a logical reason based on a factual and relevant starting premise for why such a point should exist? I'm not going to use an ancient Egyptian social structure as a basis for making decisions regarding social structure today!

The issue is one of diminishing returns. If a poor person's income rises by 10%, it will affect their lives greatly. If a rich person's income rises by 100%, it will barely affect them at all. Thus, we could say that though the gap in their incomes increased, their "wealth" gap as a matter of living conditions decreased.
But thats just diminishing marginal utility of money- it was just as true in the 50s as it is today. Also- isn't that an argument for taxation and redistribution?

The contention is that the wealth gap in terms of lifestyle is less severe today than it was in the 50s but that seems to conflict both with the data (increasing income inequality is a stylized fact), and with my own anecdotal experience.

I agree that in SOME ways we are better off today than richer people in the 50s, but that doesn't tell us anything about the wealth gap in each era. Also, in some ways today we are worse off. If I had the chance to be a man with a physics phd in the 50s, I would take it in a heartbeat.

You seem to want to be making the argument 'as long as we are all getting better off with time, inequality is acceptable.' There is probably an argument to be made there, but its a fundamentally different argument than arguing the wealth gap has gotten less severe 'in terms of lifestyle.'

Flipping the issue over, we can say that over a relatively short timeframe (less than a generation), rising income inequality has not created/expanded a barrier to new technologies impacting the lives of all.
But inequality isn't just about new technology- look at things like retirement. It seems like most people in my grandparent's generation were able to retire at some point, and live if not well, than comfortably. Lots of people in my parents generation have had to put that on hold. I'm sure there are lots of people who, given the choice, would take retirement and no ipad to working another 5-10 years and having an ipad.

America clearly has the ability, historically, to create jobs. From '82 to '89 20 million jobs
I'm sure you can find similar creation of jobs during the Clinton presidency. The slump in job creation seems to have started during Bush.

The reason the nation is not doing so now must include the current governmental policy.
Or fed policy, or a different international climate, or completely different population demographics, or some combination of other conditions. There are lots and lots of things different today than in the 80s.

CAC1001
But thats just diminishing marginal utility of money- it was just as true in the 50s as it is today. Also- isn't that an argument for taxation and redistribution?
Just because a high-earning person doesn't need all of their income doesn't mean that the government has any right to tax it away to spend it on any number of various social programs that politicians conjure up (which may not even work or may make things worse, or could be just giveaways to certain special interests and meant to win votes).

The contention is that the wealth gap in terms of lifestyle is less severe today than it was in the 50s but that seems to conflict both with the data (increasing income inequality is a stylized fact), and with my own anecdotal experience.
I would argue that income inequality is meaningless with regards to the wealth gap in terms of lifestyle. If we go 100 years into the future and we find that even the poor have access to all of the healthcare that today is only available to the wealthy, then regardless of whether income inequality exists, in terms of living standards, the gap is going to be more narrow. Income inequality is just a statistic. It refers to the various income quintiles (it isn't representative of the actual people in those quintiles).

I agree that in SOME ways we are better off today than richer people in the 50s, but that doesn't tell us anything about the wealth gap in each era. Also, in some ways today we are worse off. If I had the chance to be a man with a physics phd in the 50s, I would take it in a heartbeat.
Generally, the farther back you go in history, you find a larger and larger difference in the standard of living between rich and poor. For example, go back to the 1900s and look at the differences in living standards. They were enormous. A rich person could live a very nice home (very nice even by modern standards), have fresh fruit and vegetables, meat, coffee, chocolate, cakes, pastries, leisure time, ability to take a bath if they so desired, music whenever they wanted it (they'd have servants or people hired to play it for them), and so forth. They were still "poor" in that there was no running water back then or electric light, but they got by with gas globe lighting and servants could pump water. Whereas the average person lived without running water, no electric light, bathing was unheard of, fresh fruit, meats, chocolates, coffee, music whenever they wanted it, etc...were all luxuries. Today, pretty much all of these things are available to the masses, and in new variations that were not available to the rich then. So in this sense, the wealth gap has narrowed greatly, as we are now all rich.

I wouldn't argue we are worse off in certain ways so much as certain professions are just worse off now then back then. Right now, we are in the midst of a bad economy (which happens every now and then) due to a major financial crisis that hit the economy.

But inequality isn't just about new technology- look at things like retirement. It seems like most people in my grandparent's generation were able to retire at some point, and live if not well, than comfortably. Lots of people in my parents generation have had to put that on hold. I'm sure there are lots of people who, given the choice, would take retirement and no ipad to working another 5-10 years and having an ipad.
Remember though that historically, most people couldn't retire because there was no Social Security or Medicare. And when Social Security was created, the lifespan of people wasn't much longer than the age you had to be to start receiving Social Security. The idea was that most people would die before they needed it, or die soon after. People of your parent's generation are living longer. Also, if the government hadn't started robbing Social Security, it would probably be a lot more financially sound. A lot of people unfortunately lost their retirement in this financial crisis as well.

For people to be able to retire, unless they are wealthy, they either need to work long enough at a company to receive a pension, which isn't as viable today, and if the firm goes under, the pension can too, or they need to rely on investments in the markets (definitely not a secure way), or they need to rely on the government safety nets (which the government has messed up).

I'm sure you can find similar creation of jobs during the Clinton presidency. The slump in job creation seems to have started during Bush.
The 80s, 90s, and 2000s all benefited from a generally healthy economic climate and bubbles, the problem is that the 2000s bubble really dealt a hard blow to the economy when it popped.

Mentor
But thats just diminishing marginal utility of money- it was just as true in the 50s as it is today. Also- isn't that an argument for taxation and redistribution?
No, it's an argument for why the small gains in $income for the poor are actually bigger in standard of living terms than the big$ gains of the rich. It means that the wealth distribution in pure \$s might be getting worse, but the standard of living gap is actually probably narrowing.

Taxation and redistribution can be justified on that basis (hurting one rich person a little helps a lot of poor people a lot -- so we should do it) if one takes a purely utilitarian (and short-sighted) approach to morality, but in the US we believe in individual rights.
The contention is that the wealth gap in terms of lifestyle is less severe today than it was in the 50s but that seems to conflict both with the data (increasing income inequality is a stylized fact)...
I'm not clear on what you mean by that. Are you saying the income data is adjusted to account for standard of living in a way that appropriately shapes the curve? It isn't - it is adjusted in a fixed constant. Ie, it says that something twice the price of something else is twice as good. Adjusting for value on a sliding scale would be extremely difficult.
I agree that in SOME ways we are better off today than richer people in the 50s, but that doesn't tell us anything about the wealth gap in each era.
Correct: It doesn't tell us how the wealth gap has changed. What it does is it invalidates the concept of a trackable wealth gap over time.
Also, in some ways today we are worse off. If I had the chance to be a man with a physics phd in the 50s, I would take it in a heartbeat.
Fair enough, but from talking to you for a while I get the feeling your feeling of worth is mostly wrapped up in you professional identity. That's great/not materialistic, but it doesn't have anything whatsoever to do with wealth.
You seem to want to be making the argument 'as long as we are all getting better off with time, inequality is acceptable.'
That is exactly my point, but looking back at the OP, there is a follow-up: the fact that most everyone is getting better off over time is probably the reason why social unrest is actually decreasing, contrary to the popular claim that it is increasing.

I don't want to go off topic, but there is another inequality issue related to the other two, which is: inequality is almost certainly a necessity of economic development. In other words, inequality causes everyone to be better off. This isn't necessarily easy to prove because there are so many examples that are so different from each other, but there are some telling examples, such as China, whose spectacular drop in poverty rate over the last 30 years or so has been accompanied by an increase in inequality. Correlation does not always equal causation, but I think in China's case there is a good argument to be made: Increased freedom causes increased inequality causes increased standard of living for virtually everyone.
But inequality isn't just about new technology- look at things like retirement. It seems like most people in my grandparent's generation were able to retire at some point, and live if not well, than comfortably. Lots of people in my parents generation have had to put that on hold. I'm sure there are lots of people who, given the choice, would take retirement and no ipad to working another 5-10 years and having an ipad.
Retirement funding is certainly a big problem, but I think you are reading it backwards: It is because of increased standard of living that retirement has gotten more expensive. Specifically, it is because people are healthier and living longer.

CAC1001
I don't want to go off topic, but there is another inequality issue related to the other two, which is: inequality is almost certainly a necessity of economic development. In other words, inequality causes everyone to be better off. This isn't necessarily easy to prove because there are so many examples that are so different from each other, but there are some telling examples, such as China, whose spectacular drop in poverty rate over the last 30 years or so has been accompanied by an increase in inequality. Correlation does not always equal causation, but I think in China's case there is a good argument to be made: Increased freedom causes increased inequality causes increased standard of living for virtually everyone.
IMO there's two types of inequality here, monetary and standard of living. Many confuse monetary inequality as also representing standard of living inequality, but it doesn't. Monetary inequality can grow while standard of living inequality decreases.

SixNein
Gold Member
I'm sorry, I was unclear. Let me rephrase: Could you help me out by providing a logical reason based on a factual and relevant starting premise for why such a point should exist? I'm not going to use an ancient Egyptian social structure as a basis for making decisions regarding social structure today!
I think the inequality we have today is a result of the lack of available jobs. We don't have enough job creation to create enough scarcity in the labor markets to get wages moving. The economy has been hemorrhaging job creation ability due to automation, globalization, and other factors. So the labor markets are ending up more and more saturated as more and more workers are being displaced. And quite frankly, automation is going to continue to climb up the corporate ladder and so is globalization.

See I don't think our inequality is structural. Education may help spread the saturation of the labor market, and it may help some, but I don't think it will solve the problem. In general, I think we have crossed an equilibrium were we simply don't need everyone in our economy. Technology is wiping out the need for a segment of the population.

mege
I think the inequality we have today is a result of the lack of available jobs. We don't have enough job creation to create enough scarcity in the labor markets to get wages moving. The economy has been hemorrhaging job creation ability due to automation, globalization, and other factors. So the labor markets are ending up more and more saturated as more and more workers are being displaced. And quite frankly, automation is going to continue to climb up the corporate ladder and so is globalization.

See I don't think our inequality is structural. Education may help spread the saturation of the labor market, and it may help some, but I don't think it will solve the problem. In general, I think we have crossed an equilibrium were we simply don't need everyone in our economy. Technology is wiping out the need for a segment of the population.
I think the recent economic crunch forced many companies to tigthen their belts when they were otherwise on 'cruise control' and able to support a lot of extra employees (layoffs cost cache). Companies have all realized that they CAN get along with less workers, especially considering the extra expenses that come along with workers. I think too long the US was escaping the shift to a 'worker lite' society, and now it's been forced upon us.

The government needs to lower the per-worker cost enough to allow for companies to higher more (but each individual probably will work slightly less). Hopefully the SCOTUS will strike down the ACA as a good start and it will spur some hiring since employers will know what to expect for costs better.

SixNein
Gold Member
I think the recent economic crunch forced many companies to tigthen their belts when they were otherwise on 'cruise control' and able to support a lot of extra employees (layoffs cost cache). Companies have all realized that they CAN get along with less workers, especially considering the extra expenses that come along with workers. I think too long the US was escaping the shift to a 'worker lite' society, and now it's been forced upon us.
I don't see a way to get out of this situation, and I expect it to become more pronounced as time goes forward. In my mind, the question is what to do with these people? How much inequality can people stand?

Sure, we could strip minimum wage laws, but I don't think this will solve anything. It'll increase corporate profits because the saturation will drive those prices down, but I don't expect more jobs to suddenly appear. We are in a situation were one group can produce for all. And the size of that group is likely to continue to shrink in the future.

I can't think of too many things that can't be automated.

Wrt the title question, I agree with what I take to be the OP's basic premise that income inequality per se isn't generally causally linked to social unrest; and I agree with the hypothesis that unemployment associated with the economic crisis, associated with questionable practices by the financial sector (associated with the perception that the government in some ways reinforced the questionable practices and has not only done little to prevent them, but has actually rewarded many who engaged in those practices) are the more significant precursors of the OWS phenomenon rather than income inequality.

The fact that a relatively small percentage of the population controls a relatively large percentage of the total wealth would seem to have little to do with the unemployment rate.

Mentor
I think the inequality we have today is a result of the lack of available jobs. We don't have enough job creation to create enough scarcity in the labor markets to get wages moving. The economy has been hemorrhaging job creation ability due to automation, globalization, and other factors. So the labor markets are ending up more and more saturated as more and more workers are being displaced. And quite frankly, automation is going to continue to climb up the corporate ladder and so is globalization.

See I don't think our inequality is structural. Education may help spread the saturation of the labor market, and it may help some, but I don't think it will solve the problem. In general, I think we have crossed an equilibrium were we simply don't need everyone in our economy. Technology is wiping out the need for a segment of the population.
I think that's an odd thing to say considering how low unemployment is/has been and given the inverse relationship between unemployment and inequality in the short term, but in either case you didn't even address my question much less answer it. I'm not sure why you even bothered to quote it! Since my question was designed to help answer yours, I must conclude yours was simply a red herring that you didn't really expect a serious answer to.

mheslep
Gold Member
I'm sure you can find similar creation of jobs during the Clinton presidency.
Agreed. Not as great, but yes.
The slump in job creation seems to have started during Bush.
Slower under Bush than the 80's late 90's, but still plenty to maintain a 4-6% unemployment rate with a growing labor force, unlike now.

Or fed policy, or a different international climate, or completely different population demographics, or some combination of other conditions. There are lots and lots of things different today than in the 80s.
Yes, agreed, government policy (including the Fed) is not the only factor, but IMO it is the most important reason for the current lousy jobs condition.

SixNein
Gold Member
I think that's an odd thing to say considering how low unemployment is/has been and given the inverse relationship between unemployment and inequality in the short term, but in either case you didn't even address my question much less answer it. I'm not sure why you even bothered to quote it! Since my question was designed to help answer yours, I must conclude yours was simply a red herring that you didn't really expect a serious answer to.
I must have taken your question the wrong way. I read it as if you were challenging the very idea of inequality.

I'm not sure that its odd per say. Technology and globalization are rendering quite a few skill sets worthless. So more and more people are competing for skill-less jobs, and its causing the labor market to be saturated. Either the economy has to create enough jobs to get those wages moving, or it has to create a wider diversity of jobs.

http://www.irle.berkeley.edu/events/spring08/feller/productivity_wages_graph.gif [Broken]

Technology is driving our productivity more than people.

Last edited by a moderator: