Guest post: Who Are the 1%?
Update: Mike Konczal also takes a look at this question in Who are the one percent and what do they do for a living.
Update 2: Another source for historical trends on inequality is at The Center for Budget and Policy Priorities
Update 2: Another source for historical trends on inequality is at The Center for Budget and Policy Priorities
by Taryn Hart
Taryn Hart publishes at her blog Plutocracy files and has interviewed John Quiggen, Bill Black, Larry Mishal to name three economists
Guest post: Who Are the 1%?
A week or so back, Dan from Angry Bear passed along this Boston Globe article. On its face, the article bemoans rising inequality through a comparison of two Massachusetts neighborhoods: Sherborn, the State’s wealthiest neighborhood and Springfield, a former working-class neighborhood that now resembles a globalized ghost town. Although the article quotes a Sherborn resident disavowing his status as a one percenter, the piece clearly implies that the upscale Sherbornites are one percenters.
However, as Dan correctly pointed out, Sherbonites are not the one percent: The median income of Sherborn is $190,000 per year; not peanuts, I know, but the lowest paid one percenters make $500,000 per year (even using a significantly narrower definition of income, one percenters make in excess of $330,000 per year). Moreover, the biggest gains over the past thirty–odd years have gone to the top .1%.
When Occupy Wall Street identifies its opposition as the 1%, it’s not talking about people who live in posh neighborhoods with great schools; it’s talking about people who can hire teams of lobbyists who live in posh neighborhoods with great schools. As Gordon Gekko put it:
I’m not talking a $400,000 a year working Wall Street stiff flying first class and being comfortable, I’m talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player, or nothing.
And keep in mind, that’s 1980s dollars. Given the scandalous increases that have gone to the top 1% since then, the amount required to be a player these days is several times that amount. And the problem with that kind of concentration of wealth is that it inevitably undermines the incentive for collective action required for social well being.
As Matt Taibbi has pointed out in response to the one-percenter meme that those who are so poor they don’t pay federal income tax have “no skin in the game,” concentration of wealth creates perverse incentives that ensure most of the mega rich are terrible citizens:
The very rich on today’s Wall Street are now so rich that they buy their own social infrastructure. They hire private security, they live in gated mansions on islands and other tax havens, and most notably, they buy their own justice and their own government.
* * *
Most of us 99-percenters couldn’t even let our dogs leave a dump on the sidewalk without feeling ashamed before our neighbors….
But our Too-Big-To-Fail banks unhesitatingly take billions in bailout money and then turn right around and finance the export of jobs to new locations in China and India. They defraud the pension funds of state workers into buying billions of their crap mortgage assets. They take zero-interest loans from the state and then lend that same money back to us at interest. Or, like Chase, they bribe the politicians serving countries and states and cities and even school boards to take on crippling debt deals.
Nobody with real skin in the game, who had any kind of stake in our collective future, would do any of those things.
Nobel Prize-winning economist Joseph Stiglitz made the same point in May of 2011 (well before Occupy Wall Street), in a must-read Vanity Fair piece entitled, “Of the 1%, by the 1%, for the 1%”:
[A] modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology…. America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.
None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided. The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had.
Be clear: This is who Occupy Wall Street is talking about – the small class of people who have amassed so much wealth that they have no need for the social infrastructure that is the life blood of the 99% (even the 99 percenters who live in swank neighborhoods like Sherborn, Massachusets).
And suggesting that Sherborn is the 1% and Springfield is the 99% – when they’re both the 99% – seems designed to falsely frame the problem of inequality as the poor (Springfield) versus the well-to-do (Sherborn). Of course, in the realm of those set on denying or deflecting inequality concerns, improperly defining the opponents of the 99% is fairly mild. (See discussions of income-inequality deniers here and here). However, this particular sleight of hand has made more than one appearance of late and therefore, is worth reviewing a bit more closely.
David Brooks recently distinguished what he termed “Blue Inequality” of the mega rich from “Red Inequality,” which Brooks claims results from an education gap and is “much more important.” According to Brooks: “The zooming wealth of the top 1 percent is a problem, but it’s not nearly as big a problem as the tens of millions of Americans who have dropped out of high school or college….”
As Dean Baker immediately pointed out, Brooks’s Blue Inequality/Red Inequality thesis is absolutely unsupported by the data:
David Brooks Complains That He Can’t Get Access to Inequality Data
Actually he didn’t complain about his lack of access to data, but he probably should have given the column he wrote today.
Let me just pause for a moment to say: Snap! Good on Dean Baker for pointing out that Brooks’s argument flat-out ignores well-known inequality data. Alright, back to Baker:
Brooks purports to lecture the Occupy Wall Street crew about how they are focused on the wrong inequality.
He tells them that that there are two inequalities in the U.S. On the one hand we have the CEOs, the Goldman Sachs crew, the lobbyists and the other members of the one percent who have done incredibly well in the last three decades. Brooks calls this the “blue inequality”….
Brooks tells us that this is less of a big deal than the red inequality, which he defines as the gap between college educated workers and those without a college degree….
This is where Brooks lack of access to data is so important….
[S]ince the 90s, the wages of workers with high school degrees have not departed much from the wages of workers with just college degrees, the vast majority of the economy‘s gains have gone to the top 1 percent.
Despite the blatant lack of empirical support and Dean Baker’s decisive take down, Megan McArdle dutifully picked up on the trope. And, of course, the Boston Globe piece highlights the education gap between the residents of Springfield and Sherborn and implies the gap between two communities is the result of the “one percent phenomenon.” However, these arguments – and, more often, implications – are clearly undercut by the data.
The mega rich Occupy Wall Street opposes do not live in “neighborhoods,” not even well-to-do neighborhoods like Sherborn. The top 1% – and probably more accurately the top .1% – live in gated mansions with private security. As Joseph Stiglitz and Matt Taibbi have pointed out, the mega rich have reached a level of wealth that completely insulates them from society. So, don’t be fooled: Occupy Wall Street is not opposed to the affluent. Residents of Sherborn and similar affluent communities – like all citizens who still have a stake in our country’s well being – are part of the 99%.
In 1965, the top 1% owned 31% of the nation’s combined wealth. Today that figure is 33%. Basically no gain whatsoever.
That fact is impossible to reconcile with the idea that their real incomes have risen dramatically like you claim.
What really happened is that when Reagan lowered the top individual tax rate from 70% to 28%, the wealthy shifted to claiming their “incomes” under on their personal returns rather than their as businesses income, which previously had been taxed at a 30% lower rate, but was now being taxed at a 10% higher rate.
What you’re whailing about is an accounting quirk.
In 1965, the top 1% owned 31% of the nation’s combined wealth. Today that figure is 33%. Basically no gain whatsoever.
That fact is impossible to reconcile with the idea that their real incomes have risen dramatically like you claim.
What really happened is that when Reagan lowered the top individual tax rate from 70% to 28%, the wealthy shifted to claiming their incomes under on their personal returns rather than as businesses income, which previously had been taxed at a 30% lower rate (~40% corporate tax), but was now being taxed at a 10% higher rate.
What you and the rest of the OWS whackos are whailing about is an accounting quirk.
In 1965, the top 1% owned 31% of the nation’s combined wealth. Today that figure is 33%. Basically no gain whatsoever.
That fact is impossible to reconcile with the idea that their real incomes have risen dramatically like you claim.
What really happened is that when Reagan lowered the top individual tax rate from 70% to 28%, the wealthy shifted to claiming their incomes on their personal returns rather than as businesses income, which previously had been taxed at a 30% lower rate (~40% corporate tax), but was now being taxed at a 10% higher rate.
What you and the rest of the OWS whackos are whailing about is an accounting quirk.
“Whailing” should be “wailing.” FYI. NO
And yet in 1976 the wealth for the 1% was at it’s lowest of 19.9%. Been going up ever since, just like income share. Just like the 99% shares have been going down.
There is a book call “Dominion of Memories: Jefferson, Madison, and the Decline of Virginia” about ante-bellum Virginia and how the planter elite, basically living in self-sufficent villages their lslave providing all their needs, had no incentive to encourage economic progress and public improvement in Virginia. They particularly despised paying for public schools for the poor and middling whites, especially those in the western counties, as well as any public infrastructure improvements. Our current plutocrats seem bent on doing this on a global scale.
Kpresidente demonstrates the sleight of hand conservatives/libertarian new feudalists will evade facts, even when it creates a contradiction. As proper Randite, I expect he finds it a feature if all all wealth and income to go to the supermen and woment at the top. the rest of us (very contrary to Adam Smith’s view that all members of society contribute or have the potential to contribute to the commonwealth), but feels constrained by political conventions to deny the facts of this redistribution. http://cbo.gov/ftpdocs/124xx/doc12485/10-25-HouseholdIncome.pdf
On the subject, Chrysta Freeland has also written on the super elite’s disengagement from the societies that they ostensibly call their countries. http://blogs.reuters.com/chrystia-freeland/2011/01/26/the-working-rich-and-the-rest-of-us/
kpresidente
now go back and read the article. then go up and down in the world and you may begin to understand what she is talking about.
fixating on a “statistic” whether it is “true” or not, is the sign of an idiot.
If Marie Antoinette hadn’t existed, we would have had to invent her to describe the 1%.
just to help you out a bit.
it would not matter if it was 31% or 95% or 2%.. those numbers don’t mean a damn thing to you or anybody else… and it doesn’t matter how it is “accounted” for.
what matters is that we have a class of people in this country with so much “wealth” that they effectively own the country… determine what our government does and does not do. and it turns out… contrary to my expectation, actually… that what they “do” is bad. bad for the country, bad for the people, bad for the future, and ultimately bad for themselves.
the problem is what can we do about it. i am not optimistic. it took the guillotine, it took Sherman in Georgia, hell, it took the Egyptians five thousand years to cure themselves of the evil of excess wealth… and at that it took Caesar.
actually, i am not sure Sherman did it.
it seems that the evils of great wealth were replaced in the South by the evils of carpetbagging…
if anything cured the Old South it was Johnson spending federal money there in return for something that looked like civil rights and democracy.
note the “if anything.” i don’t know how the South is run today… but from a distance it looks like the old aristocracy is back in a new form… the form which Taryn is calling our attention to here.
Trying to find the total income earned by the top 1%, but no luck. Also a breakout of the sources of that income. Anyone know where teh figure is in total dollars?
Found it
http://www.taxfoundation.org/news/show/250.html
Folks; it all starts at the bottom — which I doubt many of you educated progressives understand because you don’t live anywhere near the bottom. A first baseman who earns enough in 10 years to buy a stadium ($245 million) is not conspiring to oppress anybody. He — like Wall Street — is the systematic, perfectly predictable beneficiary, of no pressure on the bottom to counteract the perfectly normal (as in they are doing exactly what they are supposed to do) pressure from the top.
Lacking a bargaining and political organizing structure, the bottom American 90% (not European) get what Parkinson’s law would predict: pressure expands to fill the empty space available. (The 90% to 97-99% have kept up with overall income gains since 1968 — maybe they should have expanded their share in a higher tech economy. ) If you squeeze a toothpaste tube at the bottom it all comes out the top. Not rocket science certainly; and perfectly predicable. If only you well educated and mostly well heeled progressives would stop worrying about what the bankers are doing and what Republicans are saying and concentrate on selling to the American public the only proven way for the majority to bargain in the labor market and make their weight felt in the political forum against the modern 1% — sector wide labor contracts — the problems you ineffectually moan long and loud about would roll themselves up.
When our best known progressives (Krugman, Delong, Baker, AB) fence with Republican stupidities (plural) they are playing patty-cake. 1% of the public reads books — God knows how what portion of that 1% follow the dismal science — and if everybody did they wouldn’t know who to believe anyway. You are like medical doctors arguing with shamans in front of primitive village — only in this case the village isn’t even showing up.
Get out the message that LBJ’s minimum wage was almost $420/wk ($1.60/hr adjusted) and — DOUBLE THE AVERAGE INCOME LATER — the median wage may hover round $520/wk ($26,363 — as reported by Harold Myerson).
http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=160.00&year1=1968&year2=2011
http://www.prospect.org/article/what-americans-make
Then tell them the only way out. Supermarket and airline employees would kill for legally mandated, sector-wide collective bargaining — but who is going to tell them? If you (literal) doctors of economics wont tell the patients what is wrong and what the only effective treatment is who is going to?
Folks; it all starts at the bottom — which I doubt many of you educated progressives understand because you don’t live anywhere near the bottom. A first baseman who earns enough in 10 years to buy a stadium ($245 million) is not conspiring to oppress anybody. He — like Wall Street — is the systematic, perfectly predictable beneficiary, of no pressure on the bottom to counteract the perfectly normal (as in they are doing exactly what they are supposed to do) pressure from the top.
Lacking a bargaining and political organizing structure, the bottom American 90% (not European) get what Parkinson’s law would predict: pressure expands to fill the empty space available. (The 90% to 97-99% have kept up with overall income gains since 1968 — maybe they should have expanded their share in a higher tech economy. ) If you squeeze a toothpaste tube at the bottom it all comes out the top. Not rocket science certainly; and perfectly predicable. If only you well educated and mostly well heeled progressives would stop worrying about what the bankers are doing and what Republicans are saying and concentrate on selling to the American public the only proven way for the majority to bargain in the labor market and make their weight felt in the political forum against the modern 1% — sector wide labor contracts — the problems you ineffectually moan long and loud about would roll themselves up.
When our best known progressives (Krugman, Delong, Baker, AB) fence with Republican stupidities (plural) they are playing patty-cake. 1% of the public reads books — God knows how what portion of that 1% follow the dismal science — and if everybody did they wouldn’t know who to believe anyway. You are like medical doctors arguing with shamans in front of primitive village — only in this case the village isn’t even showing up.
Get out the message that LBJ’s minimum wage was almost $420/wk ($1.60/hr adjusted) and — DOUBLE THE AVERAGE INCOME LATER — the median wage may hover round $520/wk ($26,363 — as reported by Harold Myerson).
data.bls.gov/
http://www.prospect.org/article/what-americans-make
Then tell them the only way out. Supermarket and airline employees would kill for legally mandated, sector-wide collective bargaining — but who is going to tell them? If you (literal) doctors of economics wont tell the patients what is wrong and what the only effective treatment is who is going to?
Do you have a cite for that? Here’s the Pikety and Saez data and it doesn’t square with your claims re: the 1960s – http://elsa.berkeley.edu/~saez/piketty-saezAEAPP06.pdf
The usual data sources are: 1) CBO and 2) Pikety and Saez data
Daniel,
“And yet in 1976 the wealth for the 1% was at it’s lowest of 19.9%. Been going up ever since, just like income share.”
Why jusy start at 1976? If start a couple of years earlier or later then you statement is not true. Why not start in 1929? A clear and signifigant decrease in wealth has occured among the top 1%.
Why not start in 1986 the next peak since 1960, also displays a major decrease in wealth of not only the top 1%, but almost every bracket….well…until you get to the middle class where there was a signifigant increase.
Sounds to me your pushing talking points!
Pluto,
The Saez research is based on income. Many do not beleive that strictly looking at income is a good representative of disparity between upper brackets and lower brackets. There is tax policy changes involved, innovations in technology, productivity, and trade while all at the same time size of the economy is fluctuating. Overall wealth measurement, in terms of overall financial and non financial assets, seems a much better approach.
I understand that for political reasons it is important for some to push “income inequality,” because it makes a series of old-hat talking points work, but the question is, what really is the reality?
That fact is impossible to reconcile with the idea that their real incomes have risen dramatically like you claim.
Actually, there are lots of ways to reconcile the two, speaking as the accountant here.
Daniel,
“And yet in 1976 the wealth for the 1% was at it’s lowest of 19.9%. Been going up ever since, just like income share.”
Why just start at 1976? If you start a couple of years earlier or later then your statement is not true. Why not start in 1929? A clear and significant decrease in wealth has occured among the top 1%.
Why not start in 1986 the next peak after 1960, it also displays a major decrease in wealth of not only the top 1%, but almost every bracket….well…until you get to the middle class where there was a significant increase.
Sounds to me your pushing talking points!
Folks; it all starts at the bottom — which I doubt many of you educated progressives understand because you don’t live anywhere near the bottom. A first baseman who earns enough in 10 years to buy a stadium ($245 million) is not conspiring to oppress anybody. He — like Wall Street — is the systematic, perfectly predictable beneficiary, of no pressure on the bottom to counteract the perfectly normal (as in they are doing exactly what they are supposed to do) pressure from the top.
Lacking a bargaining and political organizing structure, the bottom American 90% (not European) get what Parkinson’s law would predict: pressure expands to fill the empty space available. (The 90% to 97-99% have kept up with overall income gains since 1968 — maybe they should have expanded their share in a higher tech economy. ) If you squeeze a toothpaste tube at the bottom it all comes out the top. Not rocket science certainly; and perfectly predicable. If only you well educated and mostly well heeled progressives would stop worrying about what the bankers are doing and what Republicans are saying and concentrate on selling to the American public the only proven way for the majority to bargain in the labor market and make their weight felt in the political forum against the modern 1% — sector wide labor contracts — the problems you ineffectually moan long and loud about would roll themselves up.
When our best known progressives (Krugman, Delong, Baker, AB) fence with Republican stupidities (plural) they are playing patty-cake. 1% of the public reads books — God knows how what portion of that 1% follow the dismal science — and if everybody did they wouldn’t know who to believe anyway. You are like medical doctors arguing with shamans in front of primitive village — only in this case the village isn’t even showing up.
Get out the message that LBJ’s minimum wage was almost $420/wk ($1.60/hr adjusted) and — DOUBLE THE AVERAGE INCOME LATER — the median wage may hover round $520/wk ($26,363/yr — as reported by Harold Myerson).
http://data.bls.gov/cgi-bin/cpicalc.pl
http://www.prospect.org/article/what-americans-make
Then tell them the only way out. Supermarket and airline employees would kill for legally mandated, sector-wide collective bargaining — but who is going to tell them? If you (literal) doctors of economics wont tell the patients what is wrong and what the only effective treatment is who is going to?
1976, nice year. Does that do it for you?
How about because as noted it was the low point in the entire series as found here: http://www2.ucsc.edu/whorulesamerica/power/wealth.html table 3.
As noted, 1976 was the low point also for income share to the top 1%. It is the year that represents the pinnacle of the nations attempt at bettering economic equality with the implimentation of the New Deal and the progressive income tax tables.
Regarding: Why not start in 1929? A clear and significant decrease in wealth has occured among the top 1%.
I did start with 1929 and 1976 is it. The low point of the trend. At no time since has either the 1% or the 99% come close to this low point as to their respective shares. Trend line is down to 1976 and up from there regarding the 1%.
And just for your info so that you may better appreciate the factors that have worked to reverse the trend from 1929 to 1976, is 1974. The year that productivity rise separated from wage increases. One more, 1996, the year that personal consumption crossed over the share of income to the 99%; a reversal of a trend that had been in place since 1945. Also the same year the share of income to the top 1% crossed over 15%, the same 15% it crossed over going in the opposite direction in 1941. The same 15% it rose above during the recession of the late 30’s after it had been declining during the recovery before Roosevelt decided to tighten the belt.
Posted 12/27.07: http://www.angrybearblog.com/2007/12/its-big-one-honey-i-know-it.html
But, then your question/response was just some good old rib busting, right?
One correction, my post was 12/12/07.
Daniel,
No…you picked 1976 because it is the only data set that can be used to make the arguement of wealth inequality increaseing among the top 1%. Your attempting to give 1976 significance, as if 1976 is a model year that makes the arguement that the increase in wealth inequality since 1976 is a bad thing, when in fact 1976 was horrible economically for the United States, and makes perfect sense that the share of wealth increased among the top 1% afterward.
Besides, the share of wealth increase since 1976 has only been a approx. net 5% pts among the top 1% over the last 30 years. We are not talking about a major crisis here, because the fluccuations in income among the top 1% are very closely matched by the fluctuations among all the other brackets.
This whole thing is a Ruse!
Also, your attempting to sell the idea that
Daniel,
No…you picked 1976 because it is the only data set that can be used to make the arguement of wealth inequality increaseing among the top 1%. Your attempting to give 1976 significance, as if 1976 is a model year that makes the arguement that the increase in wealth inequality since 1976 is a bad thing, when in fact 1976 was horrible economically for the United States, and makes perfect sense that the share of wealth increased among the top 1% afterward.
Besides, the share of wealth increase since 1976 has only been a approx. net 5% pts among the top 1% over the last 30 years. We are not talking about a major crisis here, because the fluccuations in income among the top 1% are very closely matched by the fluctuations among all the other brackets.
This whole thing is a Ruse!
How do you have sector wide labor agreements when you have an economy that can not create enough jobs to put everybody to work? The minimum wage is not a conspiracy to hold down the lower brackets, it is a protection mechanism for both the employer and the employee.
What will be the result of a major increase in the minimum wage? It will be the same result as sector wide labor agreements, and that is higher prices. Competition is the only way to regulate, and income means nothing. It does nobody any good to make more money if the cost of living increased at the same slope.
By the nature of your argument, we are not and have not had a current or even a past recession. After all, it’s just a matter of where you start and end for comparison. And it makes perfect sense that the economy increased from 12/07 because that was a bad year. Also, the marking of 12/07 is a date in time at which growth immediately went into negative territory, no trend of slowing prior to that. This is what you are suggesting, correct?
Post the link to your data. As I see it, using the following from the WSJ:
According to his analysis, the top 1% held 34.6% of all national wealth in 2007. By Dec. 31, 2009, they held 35.6%. http://blogs.wsj.com/wealth/2010/04/30/top-1-increased-their-share-of-wealth-in-financial-crisis/
30 years pre 2009 puts us at 1979 and the data I’m using places the share at 20.5% for the 1%. That is a far cry from 5 full percentage points difference.
As to not a major crisis, this is why it a major crisis:
The reason is that the wealthy benefited disproportionately from the rebound in financial markets. Their wealth generally is mostly in stocks and businesses, the values of which have surged since the depths of the crisis.
Real estate, which accounts for the bulk of household wealth for the nonrich, hasn’t recovered. From 2007 through the end of 2009, owner-occupied homes fell 26% in value, while other real estate also fell 26%. Yet stocks fell only 24%, while other financial securities shed 14%.
“What will be the result of a major increase in the minimum wage? It will be the same result as sector wide labor agreements, and that is higher prices.”
“It does nobody any good to make more money if the cost of living increased at the same slope.”
Will you please clarify the seeming dissonance between these two thoughts?
Otter, read the following:
http://www.angrybearblog.com/2011/05/monetary-policy-im-sorry-its-just-not.html
as to why this is a “major crisis”.
Poppies,
If you increase the cost to do business, that cost is transferred to customers and employees.
If 15-20% of overall income has shifted from the bottom 90% to the top 3% — overwhelmingly to the top 1% — how are we to undo that without raising 90% of labor’s prices?
Jumping to a federal minimum wage to $15 would add about 3% direct inflation – easily computed: 70 million (half the workforce – at very most; many positions not hourly or salaried) X $3.25 average raise (close enough) X 2000 hours (work year) + 3.5 million* more half raises for those at or below the minimum (in 2009) X $3.25 X 2000 hours = $477.75 billion altogether — out of a GDP of $14 trillion = 3.4% direct inflation.
And half the country gets an almost painless — for everybody else — raise.
PS. Those 101 supply and demand charts economists use to “prove” jobs will be lost if the price of labor goes up never seem to show what portion of the supply price is labor — typically about 10%; a whopping 33% for fast food (as many workers in some McDonalds as in some Targets I sometimes think) — meaning that doubling the wage scale would only add 10% to the price. Okay, okay; everybody cannot do that at once but the point is the charts are baloney at the most basic level.
* http://www.bls.gov/cps/minwage2009tbls.htm
If the price of one product goes up enough to cost jobs, then, money shifts to another product to which labor shifts also. Ultimately, the market levels everything out. Labor can charge too much — true — but labor can also charge too little — then some labor (at the very top of the bargaining chain) gets to charge too much ($245 million for paying first base). That is our squeeze a toothpaste tube on the bottom — equal pressure in the middle — it all comes out the top-economy.
If 15-20% of overall income has shifted from the bottom 90% to the top 3% — overwhelmingly to the top 1% — how are we to undo that without raising 90% of labor’s prices?
Jumping to a federal minimum wage to $15 would add about 3% direct inflation – easily computed: 70 million (half the workforce – at very most; many positions not hourly or salaried) X $3.25 average raise (close enough) X 2000 hours (work year) + 3.5 million* more half raises for those at or below the minimum (in 2009) X $3.25 X 2000 hours = $477.75 billion altogether — out of a GDP of $14 trillion = 3.4% direct inflation.
And half the country gets an almost painless — for everybody else — raise.
PS. Those 101 supply and demand charts economists use to “prove” jobs will be lost if the price of labor goes up never seem to show what portion of the supply price is labor — typically about 10%; a whopping 33% for fast food (as many workers in some McDonalds as in some Targets I sometimes think) — meaning that doubling the wage scale would only add 10% to the price. Okay, okay; everybody cannot do that at once but the point is the charts are baloney at the most basic level.
* http://www.bls.gov/cps/minwage2009tbls.htm
If the price of one product goes up enough to cost jobs, then, money shifts to another product to which labor shifts also. Ultimately, the market levels everything out. Labor can charge too much — true — but labor can also charge too little — then some labor (at the very top of the bargaining chain) gets to charge too much ($245 million for paying first base). That is our squeeze a toothpaste tube on the bottom — equal pressure in the middle — it all comes out the top-economy.
If 15-20% of overall income has shifted from the bottom 90% to the top 3% — overwhelmingly to the top 1% — how are we to undo that without raising 90% of labor’s prices?
Jumping to a federal minimum wage to $15 would add about 3% direct inflation – easily computed: 70 million (half the workforce – at very most; many positions not hourly or salaried) X $3.25 average raise (close enough) X 2000 hours (work year) + 3.5 million* more half raises for those at or below the minimum (in 2009) X $3.25 X 2000 hours = $477.75 billion altogether — out of a GDP of $14 trillion = 3.4% direct inflation.
* http://www.bls.gov/cps/minwage2009tbls.htm
And half the country gets an almost painless — for everybody else — raise.
PS. Those 101 supply and demand charts economists use to “prove” jobs will be lost if the price of labor goes up never seem to show what portion of the supply price is labor — typically about 10%; a whopping 33% for fast food (as many workers in some McDonalds as in some Targets I sometimes think) — meaning that doubling the wage scale would only add 10% to the price. Okay, okay; everybody cannot do that at once but the point is the charts are baloney at the most basic level.
If the price of one product goes up enough to cost jobs, then, money shifts to another product to which labor shifts also. Ultimately, the market levels everything out. Labor can charge too much — true — but labor can also charge too little — then some labor (at the very top of the bargaining chain) gets to charge too much ($245 million for paying first base). That is our squeeze a toothpaste tube on the bottom — equal pressure in the middle — it all comes out the top-economy.
Daniel,
Of course the share of wealth increased during the recessions. You are assuming that the wealth of the top 1% went up, instead of the wealth of all the brackets decreasing. Wealth is the measurement of all Financial and Non-Financial assets, and the wealthy own a alrge number of non finacial assets that are not affected by economic downturns. Why is it the fault of the wealthy that non-wealthy people do not build Bond and CD ladders, or have money invested in long term blue chip stocks, or bought gold when it was cheap, or take risks in downturn markets?
What is the problem with this? Why is this a bad thing? There is no such thing as “Poor or Non-Rich” without the top 1%. I keep senseing an underlieing hand wave at the notion that they earned it, or that somehow they are theives?
Now you are just being insulting or intentionally obstinate. I’m not assuming anything and you have yet to post the data set that you are using. Nor, I will assume you have read the links including the last one.
Let me try this: What’s a problem? Why is what a bad thing?
What kind of competition do you actually see? And what of the cost of extracting maoney out of the productive economy, currently rather significant? And define the jobs so far created. I see no one dissing competition…I see a lot currently that is pretty far from what most think is competition.
Ah, okay, thanks, I thought you were implying support for forced wage increases as an easier method to achieve the “goals” of ddrew2u.
Otter:
Quite honestly, the income inequity between common hourly labor and upper management has grown significantly over the last 30 years. As far as productivity, it has been heavily skewed to Capital over Labor since the eighties. I do not know who the many are; but it is evident, 80 percent of the taxpaying population has seen a decrease in wealth and also income. To ignore this is “silly.”
A better way to explain this would be to say; the 1 percenters have experienced no decrease in wealth, the 20 percenters have seen a growth, and the balance of the population has lost wealth.
http://www.results.org/issues/us_poverty_campaigns/economic_opportunity_for_all/the_wealth_gap/
http://www2.ucsc.edu/whorulesamerica/power/wealth.html
poppies,
If 15-20% of overall income has shifted from the bottom 90% to the top 3% — overwhelmingly to the top 1% — how are we to undo that without raising 90% of labor’s prices?
Jumping to a federal minimum wage to $15 would add about 3% direct inflation – easily computed: 70 million (half the workforce – at very most; many positions not hourly or salaried) X $3.25 average raise (close enough) X 2000 hours (work year) + 3.5 million* more half raises for those at or below the minimum (in 2009) X $3.25 X 2000 hours = $477.75 billion altogether — out of a GDP of $14 trillion = 3.4% direct inflation.
* http://www.bls.gov/cps/minwage2009tbls.htm
And half the country gets an almost painless — for everybody else — raise.
PS. Those 101 supply and demand charts economists use to “prove” jobs will be lost if the price of labor goes up never seem to show what portion of the supply price is labor — typically about 10%; a whopping 33% for fast food (as many workers in some McDonalds as in some Targets I sometimes think) — meaning that doubling the wage scale would only add 10% to the price. Okay, okay; everybody cannot do that at once but the point is the charts are baloney at the most basic level.
If the price of one product goes up enough to cost jobs, then, money shifts to another product to which labor shifts also. Ultimately, the market levels everything out. Labor can charge too much — true — but labor can also charge too little — then some labor (at the very top of the bargaining chain) gets to charge too much ($245 million for paying first base). That is our squeeze a toothpaste tube on the bottom — equal pressure in the middle — it all comes out the top-economy.
poppies,
“Forced” by employees collectively bargaining as one unit — not one employee who has no personal power to withhold all labor for the employer — or “forced” by the minimum wage — it still has to be judged by whether the employer and employee both got the most they could reasonably get out of each other.
I looked at those, but tose seem to just show the % groupings, and not tha base data.
otter
only if you insist upon defining poverty as “less than the rich.” there are better measures of poverty… look at the quality of life. and look at what it would take to improve it. as for did the rich “earn” their money. i am sure they all think they did. and some of them did, even by my standards. but there is a perception, at least, that much of what you call “earning” the rest of us WOULD call “stealing” or at least sharp trading… some, no doubt difficult, activity that results in one person getting “richer” without actually increasing the amount of wealth.
as for why the poor don’t own stocks and bonds and gold… well, it has something to do with making enough money to eat in the first place, and that does have something to do with the power facts in the labor market.
there is no “natural” reason why a guy who loads trucks for a living is “worth less” than a guy who designs software, much less a guy who trades stocks. and be careful when you answer this, i am well aware of the “economic” reasons for the differences in “pay.” i am trying to direct your attention to another thought.
and no I don’t think the answer is to “soak the rich.”
ddrew2u, introducing further distortions to correct initial distortions has a way of introducing unintended consequences. A hampered market can’t “level everything” particularly effectively. It would be much better to take on the problem at its source, namely corporate governance.
just an extra reference:
A Guide to Statistics on Historical Trends in Income Inequality