Joined: 28 Dec 2005
|Posted: Sun Mar 27, 2016 6:40 pm Post subject: Inequality - Super Rich - Upward Mobility
After the 1970s, when the Information Revolution accelerated, demand for high-skilled labor increased and supply of low-skilled labor increased.
New firms like Microsoft, which produced several billionaire and 10,000 millionaire employees, created upper income mobility, while tens of millions of low-skilled immigrants with little wealth, and their children, also moved-up in the U.S., compared to their countries (while displacing low-skilled domestic workers).
What to do about wealth and income inequality? Raise the minimum wage, reduce regulations, and lower middle class taxes, to spur small business start-ups and expansions, create jobs, raise demand, create more taxpayers, and reduce government spending on the poor. And, allow more Microsofts to be created to generate even more tax revenue. There aren’t enough low-skilled workers earning $30 an hour in compensation after 20 years of work.
The super rich invest a tremendous amount of money. That helps explain why Corporate America is the envy of the world. The best and brightest, of the world, want to work and live here. Taking their money and giving it to politicians would be a big mistake.
U.S. per capita income with a higher Gini coefficient is over $10,000 a year higher than the large European countries. I find it amazing some people want to adopt the European model of disincentives to work, less consumption, a lower standard of living, and fewer opportunities for upward income mobility. It’s better to promote growth and tax it to raise both the rich and poor.
As JFK said before the Democratic Party became socialist: “A rising tide lifts all boats.”
There has been tremendous upward income mobility in the Information and Biotech Revolutions, where the U.S. not only leads the world, it leads the rest of the world combined (in both revenue and profit), along with the tremendous upward income mobility of dirt poor immigrants. Of course, the comparison to just after WW II, when the U.S. dominated the global economy and there was much less competition skews the results. You can say there was much more upper income mobility in China too.
You’re making an assumption government is better at allocating capital than the super rich. There’s plenty of evidence that shows the super rich gets much more “bang for the buck” than government. And, therefore, for society.
The existence of a Bill Gates helped create thousands of millionaires at Microsoft, multiplier effects, and tax revenue. The existence of a Jamie Dimon helped create and expand many businesses and homeowners, which also generated multiplier effects and tax revenue.
Why limit the value anyone creates and contributes to society? More super rich will raise the poor.
So, to reduce inequality, "we need to tax upper income Americans and spend on lower income Americans." Yet, we spent trillions of dollars on poverty and it didn’t reduce poverty. We squandered too much money.
We need an extensive overhaul of government spending, taxation, and regulations, because of high federal debt and the growing Baby-Boom retirement, along with slow economic growth and budget deficits. I’m sure, government policies can be much more pro-growth, which we need desperately.
Perhaps, the “War on Poverty” reduced “deep poverty.” However, it didn’t reduce poverty. Chart:
You mean vertical mobility is limited in socialist European countries, sorry, you’re talking nonsense.
In the U.S., there has been tremendous booms in the Information and Biotech revolutions, other valuable services, and high-tech manufacturing.
U.S. consumption is 70% of GDP (compared to 60% of much smaller GDPs in Western European countries). So, there’s more U.S. employment in retail.
Most Western Europeans aspire to an overpaid, easy, and static government job, where it’s almost impossible to get laid off.
However, in the real economy, Americans live much better and contribute much more value to the global economy.
A hundred years ago, immigrants to America had roughly the same skills as the domestic population.
Since the 1970s, immigrants to America were generally much lower skilled than the domestic population.
Consequently, since they worked harder and were more desperate for jobs, than many lower skilled Americans, they drove down lower skilled wages and displaced many Americans.
So, the boom in high wages in some segments and depressed wages in other segments from immigration created more income inequality, although inequality in consumption is much less.
Also, I may add, the U.S. offshored older industries with declining prices, imported those goods at lower prices and higher profits, and shifted limited resources into newer industries with market power. The U.S. economy has been able to expand even with huge annual trade deficits (which subtract from GDP growth).
Rising riches: 1 in 5 in U.S. reaches affluence
December 6, 2013
“New research suggests that affluent Americans are more numerous than government data depict, encompassing 21% of working-age adults for at least a year by the time they turn 60. That proportion has more than doubled since 1979.
Sometimes referred to by marketers as the “mass affluent,” the new rich make up roughly 25 million U.S. households and account for nearly 40% of total U.S. consumer spending.
In 2012, the top 20% of U.S. households took home a record 51% of the nation’s income. The median income of this group is more than $150,000.”
Growth in the
of Families by Income,
“The proportion of families living in affluent neighborhoods doubled from 7 percent in 1970 to 14 percent in 2007.
Likewise, the proportion of families in poor neighborhoods doubled from 8 percent to 17 percent over the same period.”
In 1970, the proportion of Americans in the “affluent” and “upper income” classes, and also in the “low income” and “poor” classes were relatively small, while the proportion of Americans in the “high middle income” and “low middle income” classes were very large.
If you break down those six classes into three classes, the high and low classes grew and the middle class shrunk. Those three categories are almost equal in size today.
In 1970, both the high and low classes were about 18% each, while the middle class was over 60%. In 2007, both the high and low classes were about 30% each, while the middle class was over 40%.
Many middle class Americans moved into the higher classes, while many immigrants from dirt poor countries moved to the U.S. and into the lower classes.
Despite conventional wisdom, there has been tremendous upward income mobility in the U.S..