Why is the American Middle Class So Poor?
To cement the fact that since the 1980s, the rich have been getting richer because the middle class is shrinking and the poor are getting poorer was the recent announcement that the American Middle Class, the bulwark of this Nation, is no longer the richest middle class in the world and has fallen way behind Europe; so has our poor. Why has more than their fair share of the growth gone to the wealthiest people in America? Is it because 38% of Americans who pay income taxes (that is 95% of the poorest people minus the famous 47% (most of who work or are retired or disabled) that don't pay income taxes) sit on their arses and contribute nothing to this nations productivity? Based on the popular rhetoric, the 47% obviously deserve nothing since they contribute nothing toward growth. (For those who missed, that is satire.)
Define "fair share", please, without interjecting personal opinions into it?
I am glad you asked, it needed defining.
If economic growth (GDP) increases 3% plus inflation, then the median income of each quintile except the bottom ought to increase by about 3% plus inflation as well. I say except the bottom 20% because that is the stratification that contains the largest number of minimum wage workers, retirees, disabled, unemployed, and yes, the welfare cheats as well. The first of the bottom 20% are caught politically and depend on Congress for raises as no company will give them one, and the next two (and similar) of those groups in the bottom quintile should grow by at least inflation but not necessarily at GDP (again determined by the vagaries of the stock market, Congress, union contracts, or other such entities that controls their retirement income) since they weren't productive in the growth itself other than creating demand.
It is demonstrable (in other hubs of mine) that this has not been the case since the 1980s and between 2007 and 2010, the middle class median income fell dramatically in the Great Recession and its aftermath while the long-term rich (meaning they were rich prior to 2004) only took a one year hit in 2009, I believe. (Just to be clear, I exclude those who got rich flipping, selling, brokering, mortgaging houses or got rich on paper because of the housing bubble who went bust when the bubble did.)Would you accept value, in terms of, say, 1950, of goods that can be bought rather than income?
If GDP has doubled since 1950 should we be able to have a car priced at double what we could have had in 1950? A home priced at double the cost of the 1950 one? Or should it be based on value, where the home doubles in size, regardless of cost? (Potential problem with value as people assign different values to things).
And at the very upper end, the very rich, how do you justify that as competition doubles and triples their salary doesn't (by your method)? (Population doubles, but the number of top CEO's remains fairly static).I think you are talking apples and oranges, @Wilderness. I am not sure how "value" or population plays into the question you asked me. Are you suggesting alternatives GDP to measure what is "fair"?
Yes. I look at the middle (or bottom) class that they have far, far more in the way of luxuries than they did when I grew up. Are they poor?
And the rich probably "deserve" more than a simple increase of GDP would indicate. When top salaries are tied directly to profits/stock price (whichever seems more important to the BOD) then the top earners would seem to earn their astronomical pay, regardless of what you think is "fair".
I read your post to be a condemnation of the rich, and our current capitalistic structure that seems rigged to make them richer - at the expense of everyone else. Did I get it right?
With that perspective I will jump in. Although Wilderness posed the most pertinent question for you first... what do you think is their "fair share?"
But I will follow by asking if you really meant to say what you said...
Removing the parenthesis that explain how you came up with the 38% figure, you sentence then reads:
" Is it because 38% of Americans who pay income taxes.......... sit on their arses and contribute nothing to this nations productivity?
That's not what you really meant is it? I know, I know, it's picky, but if you are going to slam someone, at least get the someone right.
Yes, the system is rigged. Success is rewarded. Risk taking is rewarded.
Yes, the system is rigged as I take your inference to be. There are too many tax breaks that benefit only the rich. What's so wrong with a luxury tax on those multimillion dollar yachts and super cars? Why shouldn't capital gains be taxed just like a wage earners paycheck, why do the rich get a lower rate just because their money doesn't come from an hourly wage? Why is it fair if a rich man's $5 million dollar tax payment was only 15% of the money he made that year, when Joe the Plumber's $3300 tax payment was 21% of his adjusted gross income? It is the percentages that matter, and not the actual dollars into the treasury - right?[satire?]
That was fun. To offer a second realistic comment on what I perceived to be your point... yes, monied interests, (rich people, rich companies, rich organizations), have bought favorable tax and business rulings - but that isn't the whole picture.
Is it fair to blame them, or should you be blaming the politicians they bought?
GAHave to head up to Virginia in a moment, @GA, but no, you didn't get it right. Between 1950 and 1980, when we had the same capitalistic structure, the benefits of growth were much more evenly distributed among the income groups. While the rich still got richer, just at a much slower rate. The rate was low enough to allow the middle class, in terms of numbers of them, to keep on expanding; such is not the case today.
I have nothing against the rich, I am one, barely; what I do condemn is having the game rigged against everybody else from attaining that goal and that is the way it is today. We need to go back to the way it was (a nice conservative idea) in the 1960s and 1970s; covering both Democratic and Republican administrations.A funny thing with going back is that it never quite looks the same. When the growth of the 50's and 60' was taking place there was a housing boom. We are decreasing the birth rate so the engine that created many of these jobs has subsided as well. Manufacturing was booming as well but much of that has been shipped offshore. Some manufacturing is returning but that is stymied by mechanization which cuts back on jobs as well. So what are we to do to increase income of the poor and middle class? Just take what we need from those who foresaw and directed their efforts accordingly? The disconnect between those that invest and risk against those that physically produce is what at the heart of the issue. Should there be such a disparity because capitalism makes it possible or is it capitalism lends itself to this divide because it wants to? Who could regulate or mediate such a thing. Since unions seem to be the dirty word to many in this situation who is to effect a change to get it back on track more equally? An interesting dilemma if ever there was one.
Correct me if I am wrong, @Rhamson, but seem to be saying with your birth rate comment that the population growth in the U..S. has gone negative, for you are absolutely right population growth is the engine for economic growth. Or, are you saying the decline in manufacturing jobs has led to a decline of overall job availability?
It is a combination of both but not in conjunction with each other. That is a startling thing as you would expect the decline in population growth to affect job availability. But the massive exodus of jobs due to NAFTA and now the TPP have steadily eroded the job market.
The problem is @Rhamson, the labor force has increased from 104.9 (64% of those eligible to work; like housewifes and housedads who choose not to work outside the home) million in 1979 to 155.5 (63%) million in 2013. Are these the numbers you are thinking of or have I missed the mark?
Those eligible to work, which is a proportion of population growth, has grown from 164.9 million to 245.7 million over the same period.Eligibility is a funny benchmark on which to base your numbers. One being that "eligibility" is a subjective term. To mix eligibility requires that all households who have two working spouses should be working while childcare and the types of jobs that would merely pay for the childcare is a wash. So if one chooses to have the other spouse work who can bring more income and save on the childcare is that computed into your calculations? How about those that are disabled but require government assistance to pay for their disability and having a job would greatly impact their benefits or losing their entire check to pay for the healthcare and also be a wash? The other thing to consider is what types of jobs are being considered available? Are they fast food as I know several people employed at two or three of these jobs to make at least a livable income? So many variables are not taken into an "eligible" label to determine how much of an increase of jobs there have been.
"Eligible" is my term for the Bureau of Labor Statistics "Civilian noninstitutional population: Persons 16 years of age and older residing in the 50 states and the District of Columbia, who are not inmates of institutions (e.g., penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces."; it is shorter to write, in my opinion.
From that population comes the "Civilian Labor Force" (which I called "labor force") is defined as "All persons in the civilian noninstitutional population classified as either employed or unemployed."
The calculations are simple and straight-forward and do not involve any of the complexities you brought up. Your point was that population and the workforce has declined over time (unless I misunderstood you), my point is that population and workforce has increased over time.Based on the information you have supplied and not withstanding the exceptions I mentioned you are correct. Oh if it were that simple. Let the bean counters take over and machinate the data so that we all fall into their columns of information. If we were to follow a strict regimen of data with no extenuating circumstances we could boil the whole problem down to one of work of die. Eligibility is the crux of the matter when calculating those that "choose" not to work. Even with the statistics you mention productivity is sky high while wages remain low as good paying jobs are at a premium. So if you want to spit out raw statistics without any analysis that takes into account all possibilities I guess you are right.
Am I to take it from your response @Rhamson that you are one who does not rely on empirical evidence to ascertain the truth of such statements as "the population of the United States is declining" or the "number of jobs are increasing in the United States"? If my assumption is correct, what is it then that you do rely on to back up those assertions?
No, just your data. Looking it up from several sources there is reported a decline in the birth rate attributed from the Great Recession and fertility numbers are on the decline as well as the general world population.
http://www.cbsnews.com/news/decline-in- … tes-slows/
http://www.usatoday.com/story/news/nati … e/1880231/
http://www.cdc.gov/nchs/data/databriefs/db123.htm
http://en.wikipedia.org/wiki/Population_decline
As far as jobs there are plenty but the ones that you can live off of are harder to find.
http://www.usatoday.com/story/money/bus … s/2613483/
I don't discount surveys and data but I don't totally rely on them to make an educated guess at what the heart of the issue is. The US is losing good paying jobs and to get to the next economic tier you have to spend a ton of money on education. That is not a sure thing as well. So if you wish to make me the fool somehow go ahead but relying on strictly your data I would say you win if that is what you are looking for.You have made two good points there. The first "there are plenty of jobs" is often ridiculed by pointing at the number of unemployed Americans, (although "plenty" is validly subjective), and the second, "but the ones that you can live off of are harder to find..." is often ignored in these type of conversations - even when the caveat "underemployed" is included in the rationalization.
I think the problem with discussions about minimum wage-type jobs is one of compassion. Folks value a good work ethic, and a person working a full-time, or even two part-time minimum wage jobs is certainly demonstrating a good work ethic. So compassion kicks in and folks say it isn't fair that someone holding a full-time job can't make enough to live on.
I feel that compassion too, but I also realize that minimum wage jobs are such because that is the value of the task(s) involved. Demanding an artificial value be assigned to them so they can support a family is not a realistic demand.
Need should be ab achievement motivator, not a yardstick.
GA+1 It is astounding how many people seem to think a job is worth whatever it costs to maintain a good lifestyle for the worker and his or her family.
It is also surprising how many employers think a job is worth how little you can get away with in paying for it.
Neither viewpoint gets at what a given job is worth which is what is the value added of that function the person to the bottom line. The trick, of course, is trying to figure that out which often can't be done. Consequently, if falls back on the law of supply and demand; and if the supply of labor far exceeds the demand for it,(which it normally does) then employers can, have, and will pay slave wages if they are allowed to.
That, of course, leads up to the two sides of our political debate; the Right side wants to allow the employers to do just that and the Left side does not.Applause. The mythical "living wage" then is no more than a myth when trying to argue that all jobs should be paid that. That the left continually tries to force employers to pay that mythical figure just indicates ignorance of how things work.
The next hurdle is to understand that if employers all paid what every job adds to the bottom line there would be no profits left. Salaries MUST be less than the profit from that job or the company is better off without it. That the left calls this "slave labor" just indicates ignorance on their part; without profits there ARE no jobs.@Wilderness, "bottom line" includes the firms internal rate of return (which includes profit expectations, among other things). Consequently, my comment stands as is
In smaller companies, maybe, but big corporations like Walmart literally have no excuse. In Walmart's case, if you were to have even their lowest employee make $10.10/hour (rather than the current ~$8.25) and pass all the costs to the consumer, it would increase the price of a few goods by about a cent.
You can't seriously say there's any reason not to have a wage hike in that kind of scenario--you're intentionally keeping people in abject poverty just so you'll save a few cents on a copy of Transformers 5.OMG! Another Walmart is Satan post. And all those 1.4 million (+/-) jobs they provide are just devil bait to trick us into letting them into our midst.
But why just Walmart? Why not use the same accusation against all those mom and pop businesses? After all, right is right, why should affordability have anything to do with it.
GADidja read my post? I said smaller businesses couldn't get away with paying higher wages, but big businesses like Walmart easily could. The point is that those huge companies are affluent enough to be able to treat their workers right, yet they don't. No living wage, benefits, or stock/investment/401k/whatever options for you (nevermind the fact that we'd never notice the difference in our wallets if we did offer those things)!
Yep, I read your post.
From it I got that because Walmart was big and successful they should do what you see as "only right," but a successful Mom and Pop doesn't have to do what is right because they don't have Walmart's bucks.
Isn't that the same as saying doing right depends on the size of your wallet. And isn't it the same as saying mom and pop's are paying slave wages? But it's OK for them to do it?
There have been plenty of evil Walmart/good Walmart threads already so I won't hijack this one just to begin another one. But I will say there have been plenty of reliable rebuttals to the "facts" as your linked article presented them. So, we all get to pick the version that suits our perspective.
GANot necessarily, because a mom-and-pop store really has no choice about what wages it can offer whereas Walmart does. The other big difference involved is what kind of work atmosphere both kinds of stores provide. I can attest to this, because I've worked for both Walmart and Riverside (which used to be a local grocery store chain).
At Riverside, business is usually pretty slow and steady, so even if your pay is low, so is your workload. I worked in the deli, so my job comprised of bringing out some meat or cheese, cutting and weighing for customers, washing a few dishes here and there, and setting up the display. It was very low-intensity work, and if it weren't for damn workplace politics and, well, the fact that the store went out of business due to the addition of a second Walmart and a Martin's (another grocery store chain) within walking distance, I'd probably still be there today. The pay sucked, but the work was easy, so I liked it.
At Walmart, it was a different story. There were no workplace politics, my co-workers were great, and I got to work in Electronics (movies, video games, and computers are my specialty!), but the workload suuuuucked. Even if there were four of us on the floor, there was always a backlog of crap that needed to be done (and RIGHT NOW), leaving almost no time for zoning and customer service (you know, kinda the most important things for a clerk to be doing?). I was doing a job that was much, much more stressful than when I worked at Riverside, yet my pay was almost identical ($8.65/hour vs. $8.90/hour, though keep in mind that my job at Riverside preceded my job at Walmart by about 8 years). And on those occasions at Walmart where I'd get called to run register up front, it somehow got even more stressful. Long lines of people with carts full of stuff, and Corporate demands that cashiers be able to scan and bag ~45-55 items per minute (which sounds easy on paper, but is RIDICULOUS in practice) means you're in for a bad time. And God help you if you take a minute or two to catch your breath.
That egregiously long-winded hogwash was necessary just so I could say this:
From my own experience, local/small businesses often can't really afford to pay high wages to their employees, but they're often low-intensity jobs that are more lenient towards the worker and encourage cautious, methodical performance.
Larger businesses like Walmart, on the other hand, tend to be high-intensity with little room for caution or methodical work (which many like to blame on managers, but it's actually mostly because a bunch of suits who've never worked on the sales floor in their lives push idiotic standards on the poor managers who have to adhere to them). Thus, a higher wage is not only logical because it can be afforded, but also because the workload is often far more egregious than in smaller stores.
Trust me, if there were still a Jubilee's or Riverside open around here, I would've chosen to work there over Walmart in a heartbeat--I mean, what kind of moron would willingly choose to do twice as much work for the same low wage?Wonderful response @Zwlkiiero. and I bet you gave better customer service at Riverside as well. In my company, with only a few exceptions, we start at $10 - $12/hr, depending on location, for entry level jobs. We don't have to (except in Douglas, WY where the oil boom is driving wages through the roof), but we choose to. We owners make less money, but we adjust our business model accordingly and the company makes a nice profit and we like doing the right thing.
Then why does my small business get away with paying starting wages 33% higher than Walmart and my partners and I still make a very nice salary as well as the company a profit when Gross Profits run around 40%. Go figure.
I think my response to your response to my response regarding the "Walmart is Satan" response answers your question in this response too.
Or at least that is my response.
GAhehehee!
(btw, regarding my CFO, we both seem to be able to separate our politics from our business activities although we both shake our heads wondering what planet the other came from.)
While WalMart may indeed be able to spread that cost out over millions of SKU's, what is to become of the small mom and pop store that sells specific things like camping gear, or fishing tackle in a small town? If they do not have millions of SKUs to spread the extra $2.00 an hour they will have to raise their prices giving even more business to the evil big box store... (who happen to employ millions in this country and who have kept it possible to the shrinking dollar to go as far as it still does for most of the middle class not to mention the hundreds of thousands of mangement level folks they employ and pay extremely well and who keep the economy going by buying home, cars and furniture, but, yes, screw them for all they have done).
@GA, I would offer that your perspective is backwards. Walmart needs those 1.4 million employees to put money in the shareholders pockets. Let's make sure we understand that Walmart is not being altruistic. There motive is solely to make money; unfortunately, the most efficient way to do that is offer the lowest wages and cheapest (price-quality) products that the market will bear.
They are amoral when it comes to employees and customers; each is merely a means to an end. They will give just enough to maximize profit. On the other hand, small to medium size companies are often just the opposite. My answer to @Zelkiiro regarding my company is not unique; in fact, at least in my observations, it is more the norm. I think it is safe to say that most large corporations are virtuous at making money, but not when it comes to the moral virtues, while small to medium sized companies may be a bit less virtuous at making money, but the trade-off is being much more morally virtuous.
I find it rather ironic that moral virtues are high on the Conservatives list of important things when it comes to individuals, but disappears when applied to groups of individuals which comprise a corporation.I don't think I have it backwards - I just disagree with the stated premise and posed a "why not sauce for the gander too" perspective.
I agree with your response. The anecdotal experiences in my lifetime agree with your thoughts too. So is the next appropriate question why is this so?
I venture that it has to do with the business structure. Small businesses, whether sole proprietors or S-corps, or whatever - small businesses is the point, typically have one, or maybe just a few owners that are typically hands on and more focused on making the business successful - with the profits following success.
On the other hand, large corps, again I venture, are already, (mostly), successful, and have a lot of shareholder owners that are such just for the profits - not to be the parent of a successful business. Hence, the duty of a corp to its shareholders is to maximize profits, not to be a moral entity. Of course there are exceptions. In the great Walmart debate folks like to point to Costco as a model to follow.
So is a large corporation wrong, (not doing what's right, by some folks standards), for following its implied, (and sometimes specifically stated), mandate? Is it really a virtues question?
To beat-up on corps like Walmart seem like, (to me), criticizing the car for a DWI offense instead of the driver. Generally speaking of course. Don't hit me with the Enron club.
GA
You are right, @GA, "Plenty" is a relative term. A few days ago, I heard that there are now, on average .38 (that is point 38) job openings for each person looking for one. (That, I believe, is actually almost getting to normal.) A year ago, it was .25 jobs for each person looking; and four years ago it was .025 jobs per person looking.
"I feel that compassion too, but I also realize that minimum wage jobs are such because that is the value of the task(s) involved. Demanding an artificial value be assigned to them so they can support a family is not a realistic demand."
I agree with this statement completely and wonder why is it that so many of these minimum jobs are fast becoming the norm. Is it that they are low skilled and therefore easily filled? That coupled with their abundance makes them notoriously subject to the low wage? There are many jobs out there for college educated people but with the cost of student loans stifling the aggregate wage you could earn is it cost prohibitive, especially when you don't know for sure you can get that job? Is it fair to make employers make up the difference by taking less in profits by paying people more? With the great exodus of manufacturing jobs to foreign labor markets that had skills that are now dormant are these people left out in the cold or just earn less at a fast food or retailer job? Some of the jobs are coming back but we now find that the robotic replacement is still putting these skilled laborers out of work. So what is the answer is the only question I ask and how do we get there without years or recessions and poverty?Your last question is the nut that no one can crack - yet.
And it might make a good forum topic by itself. Rather than having conflicting ideologies butting heads, maybe they could be discussing their views on solutions.
You start it and I will jump right in.
I will even give you a head start.
I do not think it is a jobs tax break/incentive solution.
I do not think it is more business deregulation solution - generally. (I am sure there may be specific deregulation issues worthy of consideration)
I do not think it is an increase in government welfare/safety net programs solution. (and certainly not MMT's JG, (Jobs Guarantee) idea)
I do think it is going to require some type of government/private sector program, (I can't believe I am thinking this), along the concept of FDR's CWA, (not CCC or WPA), program.
There, just start your thread with this response and I bet you could charge admission.
Hmm... never mind, If I can charge admission, I'll start the thread myself.
GA
Now, @Rhanson, I don't doubt the "lower birthrate" assertion; that has been true for a long time but that, in and of itself doesn't mean a declining population. It can and has been offset by a declining death rate and increasing average age of the population as well as an increase in the age of when people can still be effectively employed; I am almost 67 and don't plan to quit working at something productive until I drop dead.
The same is true of "jobs", there are simply more of them year after year, when you aren't in a Great Recession. However, when you Qualify it with "... ones that you can live off of ...", then you have a whole new ballgame and gets at the heart of my question.
Yes, I knew I did not get the intent of your statement about the 38% right - it was satire and I was playing.
But I do think I got it right that your inference was a condemnation of our current capitalistic system.
And since I have not put in the research that you have, (ie. your hubs on the topic), I am just "shooting from the hip" with reaction based on perceptions formed by past observations and discussions.
I think rhamson's response is leading in the right direction. I think the "old" middle class was composed of a majority of folks that produced something - either via physical labor, (factory and production workers), or management of physical labor and business activities, (managers, supervisors, foremen). The world is changing, The workforce needs have changed, (and continue to change), and our economy has changed.
This is not a new thing. History shows us it is a cycle seen many times before. Grunt labor to mechanically assisted labor to mechanically achieved labor. Each step reduces the needed number of workers. So the workforce changes directions, finds new needs, or shrinks - or all the above.
History also shows us corruption and money buying privilege has also been with us from the beginning. In human activity it is a constant - not cyclic.
What I think has changed is that this time the mechanical and technological changes of the cycle are more acute than any past changes.
Our economy has and is continuing to move away from a manufacturing and producing economy to a service economy. Less physical work and physical bodies are needed. Both reductions hit the middle class more than any other segment.
What to do, what to do....
GA
Of course I was being sarcastic again with the 38% comment. The point of that comment is that it isn't only the wealthy who create growth in this country, it is everybody who works and is productive. As such, anybody who contributes to growth ought to share in that growth roughly equally for if any one part fails to be productive, then there is no growth.
As to the value of the work that is performed, the theory is that wages and bonuses an employee receives is equal to the contribution they make to a firms success and the profit the firm makes is the reward for the owners investment. Now you know and I know that is only theory. The only employees who get paid their worth are generally those who fall to those who are mobile and can switch jobs if needed. For those who are locked into their jobs, they are often paid less than what they are worth while those the run the company use that money (at least in the last few decades) to pay themselves "rent" wages, which are wages over and above the wages that represent value they actually add to the company's bottom-line.
That is one example of how the game is rigged; being rewarded for success is not considered rigging the game by anyone I know, nor is being fairly rewarded for the risk you take. But discrimination, race or gender, is. Unfair labor practices are. Anti-competition practices are. I hope you really don't believe these and a myriad of other methods don't go on in this country in a very big way, especially as the regulations designed to prevent them are gutted or repealed.
As to who to blame, you blame both for their total lack of morals.
And about your satire, it all depends on what kind of country you want to live in. One that was somewhat equitable although highly racist in the 50's, 60s, and 70s or one more like the 1870s when there were no taxes, people lived in company towns, you had a small wealthy class, a small middle class and a huge lower class. The 1870s model is the logical end result of the tax system you seem to favor because mathematically, it can end up no other way under unregulated capitalism. You have, to a large degree the kind of flat tax system where the effective tax rate of everybody, except those near the poverty line, is around 17% when all is said and done; so what is happening, we are moving quickly to the 1870s scenario of a small upper class and a very large lower class with not much in the middle.Your response shows that we have different perspectives that probably preclude either of us agreeing with the other. Or else maybe we are in semi-agreement and just talking past each other because we see different culprits *shrug*
"...As such, anybody who contributes to growth ought to share in that growth roughly equally for if any one part fails to be productive, then there is no growth."
Roughly equal to whom? Their co-worker peers? The company owners?
For simplicity, let's use a company as an example; Owner risks life savings to start the venture. A key-employee in sales risks health and family harmony working a grueling schedule -18 hour days, to make the sales that make the company successful. A diligent salaried shipping dept. mgr. keeps the product flowing to the customers. Several packers earning above minimum wage do a good job preparing the product for shipping. And a minimum wage janitor keeps the trash cans empty and the floors swept.
Here's what I see as an equitable sharing of the rewards of contributing to the increased productivity, (financial success), of the company.
The janitor continues to earn his minimum wage - because that is all the job is worth, regardless of the success of the company.
The packers continue to earn their above minimum wage rate - because they are doing the job they were hired for and paid to do. They are paid above minimum wage because the owner sees the value of their job as being worth more than minimum wage. Although, a nice Christmas, or "I appreciate your good work" bonus would be beneficial to both the owner and the packers. This is not an unheard of practice.
The shipping mgr. would probably get a raise or a bonus. His job is the most crucial to the success of the company - of those discussed so far.
The sales guy would have earned a rewarding amount of commissions, and probably some new company perks - new office, car, trip, etc. etc. - but his commissions are his real reward because that is the way his productivity compensation was established between he and his employer.
The owner reaps the rest as his reward for the initial risk.
I would also include the caveat that a smart owner would "spread the wealth" a little to key employees because he is successful because of them.
That example seems like a fair, if simplistic, description of the components of a company/economy. Yet there is no "roughly equal" benefits of success.
How do you see that crew sharing equally the success of the company, the benefits of their productivity?
If an employee is "locked" into a position, wouldn't the reason for being locked in have a bearing on their compensation? And why do you state they automatically get paid less than what they are worth?
Of course my "rigged" was a tongue-in-cheek inference to geared-for.
"... But discrimination, race or gender, is. Unfair labor practices are. Anti-competition practices are."
Now where the hell did that enter the conversation as being part of the rigged system you spoke of? Are we to consider illegalities as "unfair rigging" now, or as the law-breaking acts they are?
"I hope you really don't believe these and a myriad of other methods don't go on in this country in a very big way, especially as the regulations designed to prevent them are gutted or repealed.
OK, just one soup per bowl please. You initially spoke of our system as being rigged for the rich, and now you are lumping illegal acts in with ones that you think are "just unfair."
As for the "gutted regulations".... ahem... wasn't that my point about bought politicians and purchased special favors?
"As to who to blame, you blame both for their total lack of morals. "
Was that a generic "you" or a me specifically "you?" And who is the both that I/we are blaming? If it is the monied interests and the bought politicians - I blame the bought politicians more.
"...or one more like the 1870s when there were no taxes,
Geez Louise! Now you want to bring the 1870s into the conversation? And how do you know what tax system I prefer? I also hope your "flat" reference was to flat as in one-size-fits-all, because if you are referring the the frequently proposed "Flat Tax" system, then you either misspoke, or are ill-informed.
Do you really consider our current capitalistic system as unregulated - as you stated, or just under regulated - in your view?
It is good talking with you again, but you really should be less jumpy with the assumptions about what I think or prefer. sometimes you get the bull, sometimes you get the horns.
GAEqual as in back to my original 3% growth translates into roughly 3% increase in median/mean income for the top four quintiles.
All of those other things you mention are theoretically taken care of by paying people a wage equal to their contribution to the company's success, no more, no less. Those who risk their life savings get a return on investment equal to the degree of risk assumed.
That is the way it is supposed to work in the perfect world. In the real world, those at the top get paid more than there contribution, those at the bottom get paid less than their contribution. Large corporations often receive a larger ROI than the risk assumed while small firms, like mine, receive smaller ROI's (at least for my partner's) than the risk they assumed.Twice as many cars are made, raising GDP by 3%.
Why are the janitors entitled to more pay for doing the same job they were doing? Because more cars are made?
Doesn't make sense to me.OK, so it is a difference in perspectives. My world does not see the logic of percentage of growth as having any bearing on "fairness" - relative to this topic.
But just for kicks... how do you determine the relative payoffs of those you mentioned? How do you peg their contribution? Their compensation? Surely you are not advocating an ROI pegged to GDP increase percentages? Risk your life savings or a company's future, or your reputation for 3%, (or whatever the percentage)?
If GDP is a negative, do wage earners, (those that don't lose their jobs), lose a percentage of their hourly wage? The owners will probably lose a portion of the value of their risked investment. Is it "fair" that they alone should suffer a loss?
A corp. will probably lose sales which in most cases will mean reduced profits, which also in most cases will mean a drop in stock price, which will also probably mean a loss of income to shareholders - so is it "only fair" that the wage earners of that corp. also lose a proportionate share of their hourly wage?
Bottom line, for "fairness," do wage earners take the same reduction hit that the risk takers suffer?
And why do you feel there should be ROI parity between large and small companies/corps?
GATo your Bottom Line question, just a quick glance at the results of the Great Recession of 2008 should answer that question; wage earners took orders of magnitude greater reductions than the risk takers suffered. A few hundred non-financial businesses went BK, yet over nine million Americans lost their jobs. The long-term wealthy took a one-year decline in their income while everybody else was stuck with a five-year decline.
When things go south in a business, the managers and owners take a hit in their income at worst, or see the growth slow down for awhile, but the general labor force sees a total loss of their income as they are laid off; yeah, I would say they lose more than a proportionate share of their hourly wage, assuming you consider 100% a lot.
If GDP goes negative, you betcha wage earners take a big hit, median income declines as they get laid off. Wage earners get a 100% loss while owners and managers may only get 50%.
Nope, ROI and GDP are disconnected. But tell me why this example should be the case. Assume the following:
GDP = $1 trillion
Total Payroll = GDI = $1 trillion broken out as follows:
- Top 20% = $700 billion
- 2nd 20% = $125 billion
- 3rd 20% = $75 billion
- 4th 20% = $60 billion
- Bottom 20% = $40 billion
Now if GDP grew at 3% or $30 billion, then payroll probably grew around 3% as well since GDP = GDI (Gross Domestic Income). That means payroll grew $30 billion as well.
What I am suggesting is that total payroll, at the end of the day and assuming the bottom 20% gets a 3% growth as well (to keep the math simple) should look like this:
Total Payroll = GDI = $1 trillion + $.03 trillion = $1.03 trillion broken out as follows:
- Top 20% = $700 billion + $21 billion = $721 billion
- 2nd 20% = $125 billion + $3.75 billion = $128.8 billion
- 3rd 20% = $75 billion + $2.25 billion = $77.25 billion
- 4th 20% = $60 billion + $1.8 billion = $61.8 billion
- Bottom 20% = $40 billion + $1.2 billion = $41.2 billion
What you suggest would be just fine and perfectly fair is as follows:
Total Payroll = GDI = $1 trillion + $.03 trillion = $1.03 trillion broken out as follows:
- Top 20% = $700 billion + $30 billion = $730 billion
- 2nd 20% = $125 billion
- 3rd 20% = $75 billion
- 4th 20% = $60 billion
- Bottom 20% = $40 billion
Somehow, that doesn't seem "fair" to me; it may to you, but it doesn't to me.You certainly provide a lot to chew on... and I hope you won't think my editing is to obscure your context.
These were relative to my response about a negative GDP... (I think)
".....results of the Great Recession of 2008 should answer that question; wage earners took orders of magnitude greater reductions than the risk takers suffered.
.........the long-term wealthy took a one-year decline in their income while everybody else was stuck with a five-year decline.
......the managers and owners take a hit in their income at worst, or see the growth slow down for awhile, but the general labor force sees a total loss of their income as they are laid off;
.....you betcha wage earners take a big hit, median income declines as they get laid off. Wage earners get a 100% loss while owners and managers may only get 50%.
Of course it may just be me, but it does appear you have a bias against folks with money or businesses.
Is it the long term wealthy's fault that their financial situation allows them to rebound quicker? Obviously I don't think so.
An owner provides multiple jobs, pick a number 1o 1000. If he loses the business, all the jobs are lost too. If he takes a "hit" to income, (profit), is it hard to understand he cannot afford to pay for all those same jobs now? Are the lay-offs his fault?
It sounds like you think if a janitor, or a manager lose their jobs - then the job providers should lose theirs too. What is that, an eye for an eye? Justice?
"If GDP goes negative, you betcha wage earners take a big hit, median income declines as they get laid off. Wage earners get a 100% loss while owners and managers may only get 50%"
Damn, life just isn't fair is it. Without applying any tint of malfeasance in your explanation, it sounds like you are lamenting that a manager that has worked for years to improve their job skills and lot in life, (or the owner that risks their life's investment - yes, I know that is simplistic) doesn't suffer the same financial effects on their life as your fifth quintile, (the janitors and minimum wagers)
To your example, and I think the folks in my first example will fit your quintiles nicely for this illustration;:
"What you suggest would be just fine and perfectly fair is as follows: "*that means me
"Total Payroll = GDI = $1 trillion + $.03 trillion = $1.03 trillion broken out as follows:
- Top 20% = $700 billion + $30 billion = $730 billion
- 2nd 20% = $125 billion
- 3rd 20% = $75 billion
- 4th 20% = $60 billion
- Bottom 20% = $40 billion"
From the bottom 20%; The janitor in my example
These would be entry-level, or minimum wage earners - people without valuable or improved job skills - generally, (of course there will be exceptions), doing jobs that only provide minimum wage-type value. Without an improvement that makes their labor more valuable, worth more, why should it be considered unfair if they do not receive an income increase comparable to the coming examples that do offer more value?
The 4th level 20% - the product packers
These folks are above the bottom 20%, they have more valuable job skills, and they earn more. Although they may, (and frequently do), receive something more - even if it is a token amount or perk, if they have provided no additional value, or have not improved their job skills, (if they do they will migrate up to the next higher quintile potential - to manager or supervisor), why do you think them to be entitled to an increase in income? They are being paid for what they hired to do. If they do nothing to improve their value, (yes, their work is valuable, and they are hired, agreed to, and are being paid that value), is "just because it's only fair" a valid reason to insist on parity?
3rd, 2nd, and top, again generally speaking, are where the job skills or personal abilities are more valuable, where their efforts have more of an impact on the company's success or failure, and where the people in them are more financially stable. I think they would see a piece of that 3% increase. So - you can see where I am going with this. While I agree there are inequities - some through corrupt influence, (I am back to the purchased politicians), but most are just because, "that's life." It's not unfair. It just is.
And that is where our perspectives differ - you appear to think share and share alike is the only fair way to look at things, the only fair method of compensation. Obviously I don't. I think value is the fair way to determine compensation. So if GDP increase 3%, yet an earner's value has stayed the same, their contribution has stayed the same - it appears you think it is only fair they get the same 3% increase just because they are still there.
Of course I realize you are speaking to the macro level, and my example and explanations are of a micro level - but I think that realistically both should be a reflection of the other - so I am talking about the same apples you are.
On the other hand... if you wanted to direct your observations and evaluations and sense of "fairness" at specific guilty parties, (plenty of targets in the financial markets and rich-people circles), and not at the general groupings of "The Rich" or "Big Business" - then you will hear quite a different tune from me.
But as for an equal distribution of a percentage "Just because it is fair" - that is not something I think is "fair."
GA
I have read this stream and have enjoyed the give and take very much. I would offer one concern that I did not see addressed...I have heard from several places that 10,000 baby boomers are retiring every day for the next 10-15 years. My first thought on this was the utter colapse of the SSI system. There were 64 Americans working for every 1 who got a check when SSI started, this number is closer to 3/1 now. My other thought was that 300,000 jobs should be opening up each month for the conceivable future and that alone should cause an incredible decline in both the unemployment rate and the long term, no longer reported, unemployment rate. Seems to me any President in office should in the very near future, appear to be a genious when it comes to job growth. It can't be that all these open jobs are being eliminated through attrition can it?
As these are retirees that are leaving the work force, retirees who historically are not in a buying mode of their life (they often times have their homes paid for or their finances structured to where a mortgage is about all they have, not a lot of lavish buying going on) it is young people taking those jobs (the same jobs that don't seem to show up on any new job reports mind you) who are buying first homes, better cars, financing everything they get. This should be showing up in economic growth reports but it is not...
My point is that this will not be job creation but job replacement but either way it should reduce these numbers in unemployment and increase economic growth regardless of who is in the White House. It should also start a new migration of economic mobility as people start careers.
Could this ebb and flow of life cycles now produce a new 1950's style movement of both income and mobility?10,000 a day is a huge number and a heck of a lot of financial change...
I believe we will continue to see the top money makers increase the gap but I also believe that comparatively, we will see a second 1950's style economic boom and I hope we do as 1/5th of the nation will be of SSI age by 2050. The size og the gap isn't as important so long as those in the middle are gaining ground as well in my mind.That seems a logical progression, but my first thoughts are that I don't think the logic works in this case.
Following your premise that the baby boomers are leaving the workforce; think of the point from which they are leaving - probably from the middle to upper rungs of the career ladder. And these jobs are probably much more likely to be filled by their juniors moving up, if they are filled at all. Think of why companies have early retirement plans...
Leaving whatever new jobs available being those at the bottom - entry level, or even minimum wage level. Not the impact to the shrinking middle class My Esoteric spoke of.
Plus, the baby boomer retirement wave would have started around 2001 - 2005, and the jobs picture is what it is, Sooooo....
GA@Average American. I am guessing you saw that headline from Newsmax. The problem is, that is the only place they mention it. If you read the article, they contradict it as does the Pew Research study it was based on; http://www.pewresearch.org/daily-number … rs-retire/
What is true is 10,000 BBs will reach retirement age a day, but only about 40% of those may actually retire; the rest either don't want to (like me) or can't afford to.
As to economic mobility, that depends on opportunity, and in your scenario, that is certainly possible but it all depends if the benefits of economic growth are distributed to those who created it or kept by those who control the power and wealth.
GA wrote: "This is not a new thing. History shows us it is a cycle seen many times before. Grunt labor to mechanically assisted labor to mechanically achieved labor. Each step reduces the needed number of workers. So the workforce changes directions, finds new needs, or shrinks - or all the above."
I don't think there is a historical precedent for what we are (beginning) to see today. In the past, there has always been a shortage of labor, even as the industrial revolution changed the makeup of that labor. That is no longer true today, at least in advanced economies.
Once that demand for labor is gone, it renders our current method of distributing wealth unfair. And that method is capitalism, the give and take between ownership and labor. The bottom is falling out, and it's bringing the wages of the middle class down with it. Without a sufficient demand for labor, capitalism devolves into a system of "sultans and fanners."
Europe's middle class is overtaking ours because Europeans are not so caught up in the mentality that considers every interference by government to be creeping socialism, and hence a bad thing. It's going to take some government interference, probably a lot of it, to keep any semblance of a middle class intact, because there isn't much of a mechanism built into capitalism that will do it anymore.Today must be my "shooting from the hip" day, since I don't think the above quote is correct, but without knowing how you mean it it to apply, I can't be sure.
Always a shortage of labor... During wartime yes, the labor was occupied elsewhere. During economic boom times, yes, plenty of jobs to go around...
But what about the times of; depression, recession, "normal" gradual economic growth - where is the labor shortage there?
Wasn't the Industrial Revolution an economic boom time for jobs, (putting aside the discussion of the "Robber Baron" inequities)? so of course there would have been a labor shortage. And yes I certainly agree that time frame changed the makeup of labor.
Or are you saying there was always a shortage of qualified labor?
How does advanced economics change the labor discussion?
As for the historical precedent part - well, as proof of the cyclic nature of the problem I still think if you look at America's economic history - the proof is in the pudding - labor shortages during boom times, labor surplus during the busts.
But if you are speaking of the severity of the challenge to the labor situation, I agree. I don't think the American worker has ever been faced with a future jobs prospect that we have agreed looks to be likely. Just less need for labor... period.
GA@GA, I would offer that during the bust period, the reason there is a labor surplus is because there was a job deficit caused by the bust..
On the other hand, I might argue that during the Industrial Revolution there was a surplus of labor. I say that for two reasons. 1) that was the period of urbanization, when everyone was leaving the farm and moving to the city and 2) firms weren't competing for labor, they were able to name their own subsistence wages.Ok, so "shortage" means different things?
And to your latter... there was no shortage because folks were flocking to the jobs? Well, normally it is rude, but I really don't mean it to be... it's just the simplest response... Duh!
I hope you noticed that I did offer the caveat that the "Robber Baron" practices were a different topic from the "shortage" discussion. Even though you seem to want to combine them to add to the negativity of the situation as you stated it originally.
GANo, I caught the Robber Baron exception, but they weren't the only ones who were guilty of the abuse of labor in those days. Having said that, even though few in number, they monopolized various major industries and therefore controlled a sizable portion of the labor force. But even without them, manufacturing was having its heyday making money hand-over-fist because they could and did pay labor next to nothing.
The middleclass has raised the underclass percentage to 47% more or less from 37% more or less before Globle Capitalism. Before Unregulated Capitalism was allowed to go globle there was a middle class in America. That was when most anything worth having, was made in America not China
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