Posts Tagged ‘income’
“And these children that you spit on / “As they try to change their worlds / Are immune to your consultations. / They’re quite aware of what they’re going through.”*…
From our friends at The Pudding— specifically, from Alvin Chang— a thorough (and illuminating and bracing) look at how the conditions in which our young are raised have everything to do with how their lives unfold…
In this story, we’ll follow hundreds of teenagers for the next 24 years, when they’ll be in their late-30s. They’re among the thousands of kids who are part of the National Longitudinal Survey of Youth. This means researchers have followed them since their teenage years to the present day – and beyond.
As Matt Muir observes in his invaluable Web Curios…
… Very North America-centric in terms of the data it’s drawing on, but wherever you are in the world the themes that it speaks to will apply – drawing on data about the life experiences of young people tracked by US statisticians….
As you scroll you see visual representations of the proportion of kids in each agegroup coterie who will experience ‘significant’ life events, from crime to poverty and beyond, and how those life events will go on to impact their academic prospects and, eventually, their life prospects – none of this should be surprising, but it’s a hugely-effective way of communicating the long-term impacts of relatively small differences in early-stage life across a demographic swathe…
Data visualization at its best and most compelling: “This Is a Teenager,” from @alv9n in @puddingviz via @Matt_Muir.
* David Bowie, “Changes”
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As we analyze adolescence, we might recall that it was on this date in 1961 that the Cleftones, a group of teens who had formed a vocal group a 3 years earlier in high school, released “Heart and Soul” (a rearrangement of the 1938 standard); it reached #18 on the pop chart and #10 on the R&B chart and was later used in the 1973 movie American Graffiti.
Then fifteen-year-old Duane Hitchings, who went on to win a Grammy award for his work on the Flashdance soundtrack in 1984, played keyboards on the track– his first professional gig. In an interview with Rock United, he recalls that the recording session was cut short when singer Pat Spann, who was dating drummer Panama Francis, was caught in a compromising position with the guitarist. “That ended the session. So the last track we recorded was the record.”
“Where wealth accumulates, men decay”*
One long, brutal game of musical chairs…
It’s easy to place the blame for America’s economic woes on the 0.1 percent. They hoard a disproportionate amount of wealth and are taking an increasingly and unacceptably large part of the country’s economic growth. To quote Bernie Sanders, the “billionaire class” is thriving while many more people are struggling. Or to channel Elizabeth Warren, the top 0.1 percent holds a similar amount of wealth as the bottom 90 percent — a staggering figure.
There’s a space between that 0.1 percent and the 90 percent that’s often overlooked: the 9.9 percent that resides between them. They’re the group in focus in a new book by philosopher Matthew Stewart, The 9.9 percent: The New Aristocracy That Is Entrenching Inequality and Warping Our Culture.
There are some defining characteristics of today’s American upper-middle class, per Stewart’s telling. They are hyper-focused on getting their kids into great schools and themselves into great jobs, at which they’re willing to work super-long hours. They want to live in great neighborhoods, even if that means keeping others out, and will pay what it takes to ensure their families’ fitness and health. They believe in meritocracy, that they’ve gained their positions in society by talent and hard work. They believe in markets. They’re rich, but they don’t feel like it — they’re always looking at someone else who’s richer.
They’re also terrified. While this 9.9 percent drives inequality — they want to lock in their positions for themselves and their families — they’re also driven by inequality. They recognize that American society is increasingly one of have-nots, and they’re determined not to be one of them…
America’s upper-middle class works more, optimizes their kids, and is miserable: “The problem with America’s semi-rich“– Emily Stewart (@EmilyStewartM) talks with Matthew Stewart.
* Oliver Goldsmith
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As we rethink requisites, we might recall that it was on this date in 1851 that Richard Bentley, a London publisher, released The Whale, by Herman Melville in a printing of 500 copies. About a month later it was published (in a slighted different version) in the U.S. under its better-known title, Moby Dick.
“A fair day’s-wage for a fair day’s work: it is as just a demand as governed men ever made of governing.”*…
As low-wage employers struggle to find workers, it seems as that labor– which has been left behind over the last several decades, as the economic benefits of growth have flowed to executives and owners– may be about to have its day. But will it? And what might that mean?
In her first statement as Treasury Secretary, Janet Yellen said that the United States faced “an economic crisis that has been building for fifty years.” The formulation is intriguing but enigmatic. The last half century is piled so high with economic wreckage that it is not obvious how to name the long crisis, much less how to pull the fragments together into a narrative. One place to start is with the distribution of national income between labor and capital (or, looked at another way, between the wage share and the profit share of national income). About fifty years ago, the share of income going to labor began to decline, forming a statistical record of the epochal collapse of working class power. Episodes of high employment in the 1990s and the late 2010s did not reverse the long-term pattern. Even today, with a combination of easy money and fiscal stimulus unprecedented since World War II, it is unclear what it would take to reverse the trend in distribution.
Few would seriously dispute that hawkish Federal Reserve policies have played a direct role in the decline of the labor share since the 1970s. This is the starting point for thinking about monetary policy and the income distribution, but many questions remain. Today’s expansionary program extends beyond monetary policy to include fiscal stimulus and even industrial policy, but the first sign of an elite rethinking was the Fed’s dovish turn around 2016. (The Fed chair then was Yellen, whose current tenure as Treasury Secretary has been marked by close coordination with her successor, Jerome Powell.) In a fundamental sense, the entire Biden program hangs on the Fed: low interest rates made possible a reevaluation of the cost of massive government debt, which has in turn opened new horizons for a would-be activist government.
If the age of inequality was the product of a hawkish Fed, could a dovish central bank reverse the damage? Today, there is more reason to speak of a “pro-labor turn” than perhaps at any time over the last half century. But history is not so easily reversed. The new policy regime is not a simple course correction to decades of misguided neoliberalism. There is evidence that the current experiment was made possible by a recognition that workers had suffered a secular defeat—specifically, that they had lost the ability to increase or even defend their share of the national income. What would happen if labor became stronger?…
Tim Barker (@_TimBarker) explores: “Preferred Shares,” in Phenomenal World (@WorldPhenomenal).
On a related note: “The economics of dollar stores.”
[Image above: source]
* Thomas Carlyle
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As we re-slice the pie, we might send acquisitive birthday greetings to Claude-Frédéric Bastiat; he was born on this date in 1801 (though some sources give tomorrow as his birthday). An economist and writer, he was a prominent member of the French Liberal School. As an advocate of classical economics and the views of Adam Smith, his advocacy for free markets influenced the Austrian School; indeed, Joseph Schumpeter called him “the most brilliant economic journalist who ever lived”… which is to say that Bastiat was a father of the neo-liberal economic movement that’s been central to creating the situation we’re in.
“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning”*…
In the past few decades, the Gini coefficient—a standard measure of income distribution across population segments—increased within most high-income economies. The United States remains the most unequal high-income economy in the world. The disparity reflects a surge in incomes for the richest population segments, along with sluggish or even falling incomes for the poorest, especially during bad economic times.
At the same time, the middle class is shrinking. The percent of Americans in the middle class has dropped since the 1970s, from 61 percent in 1971 to 51 percent in 2019. Some have moved up the income ladder, but an increasing number are also moving down. The middle class has also shrunk considerably in countries like Germany, Canada, and Sweden, but other advanced economies have generally experienced more modest declines.
From the introduction to the Petersen Institute for International Economics report “How to Fix Economic Inequality?”
Founded by Pete Petersen (Lehman Brothers Chair, Nixon’s Secretary of Commerce, and co-founder, with Trump supporter Stephen Scharzman, of investment giant Blackstone), and overseen by trustees who include Larry Summers, Alan Greenspan, and George Schultz, PIIE is hardly a “progressive” think tank. But they are worried: quite apart from its obvious humanitarian toll, inequality at the scales that have emerged is highly unlikely to be sustainable (even at the human cost that we’ve so far been willing to pay). Put more bluntly, it is ever more likely to torpedo the domestic (and large hunks of the global) economy and indeed to threaten the stability of democratic society.
Other sources suggest that they have very good reason for concern:
• Even as the stock market hits new highs, 26 million Americans are suffering food insecurity (See also: “The boom in US GDP does not match what’s happening to Americans’ wallets.”
• The distribution of assets in the US (and other developed economies, but most egregiously in the U.S.) is even more skewed than income: see data in the PIIE report and “The Asset Economy.”
• And lest we think that this issue is confined to the U.S., social democracies throughout the developed world are feeling the same pressures (albeit mostly less dramatically).
FWIW, your correspondent doesn’t have terrifically strong confidence in the remedies mooted in the PIIE report. Even as the authors recognize that the issues are deeply structural, they confine themselves to recommending (what seem to your correspondent) relatively timid and incremental steps– which, even if taken (and most require legislative or regulatory action) are more likely to slow the polarization underway than to reverse it.
But they are worth contemplating, if only to provoke us to more fundamental measures (e.g., here). And in any case, it’s telling– and one can only hope, encouraging– that determined champions of the very neoliberal economics that have gotten us here recognize, at least, that unless we change course, we’re speeding into a dead end.
* Warren Buffett
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As we agree that fair’s fair, we might recall that it was on this date in 2001 that Enron, once #7 in the Fortune 500, declared bankruptcy. Six months earlier, it’s stock had traded as high as $90; it closed November 30th at 26 cents, wiping out billions in wealth (a appreciable part of it disappearing from employees’ pension plans). At the time, Enron had $63.4 billion in assets, earning it the honor of being the nation’s largest bankruptcy to that date. (It would be surpassed by the WorldCom bankruptcy a year later.)
Jeff Skilling, Enron’s CEO served 11 years in prison on several counts of fraud; Andy Fastow, Enron’s CFO, would served about 5 years. Chairman Ken Lay was also found guilty, but died before his sentencing. Enron’s accounting firm, Arthur Andersen (at the time a leader among the “Big 5”), which at least “missed” the egregious fraudulent practices in their audits of Enron, was effectively forced to dissolve after the scandal.
“Oh, I am fortune’s fool!”*…
The distribution of wealth follows a well-known pattern sometimes called an 80:20 rule: 80 percent of the wealth is owned by 20 percent of the people. Indeed, a report last year concluded that just eight men had a total wealth equivalent to that of the world’s poorest 3.8 billion people.
This seems to occur in all societies at all scales. It is a well-studied pattern called a power law that crops up in a wide range of social phenomena. But the distribution of wealth is among the most controversial because of the issues it raises about fairness and merit. Why should so few people have so much wealth?
The conventional answer is that we live in a meritocracy in which people are rewarded for their talent, intelligence, effort, and so on. Over time, many people think, this translates into the wealth distribution that we observe, although a healthy dose of luck can play a role.
But there is a problem with this idea: while wealth distribution follows a power law, the distribution of human skills generally follows a normal distribution that is symmetric about an average value. For example, intelligence, as measured by IQ tests, follows this pattern. Average IQ is 100, but nobody has an IQ of 1,000 or 10,000.
The same is true of effort, as measured by hours worked. Some people work more hours than average and some work less, but nobody works a billion times more hours than anybody else.
And yet when it comes to the rewards for this work, some people do have billions of times more wealth than other people. What’s more, numerous studies have shown that the wealthiest people are generally not the most talented by other measures.
What factors, then, determine how individuals become wealthy? Could it be that chance plays a bigger role than anybody expected? And how can these factors, whatever they are, be exploited to make the world a better and fairer place?…
A new computer model of wealth creation confirms that the most successful people are not the most talented, just the luckiest. Learn more at: “If you’re so smart, why aren’t you rich? Turns out it’s just chance.“
* Shakespeare, Romeo and Juliet
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As we muse on merit, we might send carefully-calculated birthday greetings to a forbearer of the researchers who did the work recounted above, Sir Roy George Douglas Allen; he was born on this date in 1906. A mathematician and statistician turned economist, he was a leader in the field of mathematical economics, writing a number of influential texts including Mathematical Analysis for Economists, Statistics for Economists, and Mathematical Economics.
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