Why We Are 50th

Income Disparity

Summary Points:

  1. US Income disparity is at record levels
  2. Income disparity isn’t inherently bad but the ramifications of the slowed velocity and centralization of money can hamstring consumption (which is bad).
  3. Changes to progressive taxation rates and other tax situations over the last 50 years have tracked income disparity results as one would expect. Correlation does not equal causation is still a defense, but probably not a good one.

mtf, feel free to edit/modify

Income inequality in the United States - Wikipedia.

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My outlook on it, while not very original at all, is multi-fold: fitness within a global market where the playing field isn’t even, heavy handed social welfare policies creating (or magnifying) a classist system, and education.

  1. US Fitness for a Global Market
    Over unionizing, strict labor policies, and some social welfare laws have decreased US ability to compete well in a global market. Manufacturing is nearly impossible in a global market with the inequalities that exist in other countries as it pertain to human right and labor laws/ethics.

  2. Heavy Handed Social Welfare Policies
    This this two part: internal and external causations of one overall outcome. 1. Internally as a nation companies are on the hook for abiding by rapidly increasing minimum wage standards. In Florida, we just voted through raising minimum wage to $15/hr. This is predicted to cause companies to get by with hiring less employees. So, for half it will help, for the other half they’ll possibly fall deeper into poverty through unemployment. Also, it’s debatable whether or not simply raising wages of low skill labor is effective in bettering someone’s life in than it is demotivating in acquiring other higher paying skills. I’m 50/50 on that last point, but none the less, those that get fired due to staff cuts certainly won’t have means to better oneself. Other social welfare programs could also be targeted as debate for effectiveness is improving the long term livelihood of those receiving. If social welfare programs are either not evolving continuously as efficacy is being analyzed or causing more folks to live comfortably (or adapt to be comfortable enough) on subsidized income, incentives for upward mobility into middle class can become minimal. Social welfare and viability of policies could be a whole new category of discussion.

Externally, many other high manufacturing countries in Asia aren’t providing many social welfare policies (at least relative to US standards). So, simply put, labor is cheaper and we have no way to substantively incentivize even our own companies from going overseas. Certainly, we’re on the right side of social welfare. But, many of the policies are of questionable efficacy.

In the end, antiquated, misguided, and/or ineffective social welfare programs are perhaps widening the gap within the income disparity issue. Those that can afford an education to learn skills can more easily maintain or grow their generational income level. Often those folks are from income stable families at a minimum. Those that can’t afford/have access to new skills or are disincentivized to break the cycle will remain in poverty.

  1. Education.
    Our education system is failing. Simply stated, we aren’t building a strong enough society to compete globally with the best and brightest. Often it’s poor communities that have poor education. More affluent areas have better access and more options. Obviously the more affluent have the better ability to maintain or grow while the impoverished areas fail and leave good minds behind and untapped in the market.

Points two and three start to paint a picture of a classist society. To brush another topic for discussion lightly, I would like to bring forward that the idea of the nation being racist to a large degree overshadows the pressing issue of it being a classist nation, which creates problems that can be misconstrued as racism. A system that holds poor people down (whether purposeful or not) and provides privilege with much easier routes to success or maintenance for the affluent can disproportionately effect minority communities.

Here is an article that hits most of the points regarding causes and solutions. Plus it includes snippets in the current status of US versus global income disparity:

Income Inequality Article

To zero in on one part small part your post – minimum wage and the potential unemployment it creates. (Min wage may be better as its own topic)

I hear this point frequently along with the example of McDonald’s cashiers who will be replaced by kiosks if they raise the minimum wage.

I believe the correct way to frame these points is:

  1. Is it really a downside if menial and unnecessary jobs are rendered obsolete? Isn’t reducing labor cost and increasing efficiency something we want to encourage in our society?

  2. Is saving these jobs at the cost of employing someone at poverty level wages better for anyone?

We are in a situation where the social safety nets can be more lucrative than employment. You can say the safety nets are too generous or you can say that the minimum wage is too low and be firmly in the realm of subjectivity. However we should be able to admit and commit that a standard overlap between employment and safety nets is not healthy to foster a productive society. That is step 1 to addressing this issue, the second is determining how we want to treat our poor, and the third is determining what we can afford or people will tolerate.

There is a big picture question that arises in looking at income disparity of what happens as human labor become less and less necessary as the abilities of mechanization or automation expand. I don’t think we should slow this trend in the name of preserving employment but instead learn to adapt the market and our society to reward productivity where it’s prudent and prevent suffering where we can afford it. That said, i don’t have a clue how to go about it.

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I would agree that it’s better to replace the menial job with a machine if it can be done and proves itself more efficient. I don’t agree that we should keep inefficiencies and pay more for them for the sake of employment. Keeping someone at McDonald’s as a career burger flipper on a “liveable” wage doesn’t encourage the individual to pick up a new skill and move forward. That comes off cold, but I don’t see a part time job as something intended for a career. I find it as a means of income during transition or growth.

On the other hand, people fall on hard times and the part time job is a needed mechanism to get by - even with the added “safety net” of government income supplement. But, as you’ve stated we need to figure out the right ingredient for welfare that helps, but doesn’t demotivate. Humans are tricky like that - we can adapt to some pretty brutal realities.

My main point with caution in raising minimum wage is, don’t make the “safety net” the standard. Raising minimum wage, at some point, can have the negative consequence of demotivating for many, rather than the relative qualifying few. At least with qualifying welfare dependents there is some control and level of effort required to gain that assistance and maintain it. I’d argue that sometimes it’s too easy to acquire, maintain, and abuse.