Let me get this straight. I lose my job. I get unemployment compensation--which is nowhere close to the income I earned from the job I lost. As a result of not getting a lot in the way of unemployment compensation I have to dip into my savings and, eventually, into my retirement savings. Oh, and by the way, I have also lost any matching money my former employer's match for contributions to my retirement savings. When I finally get a new job, it pays less than my former job with less benefits.
Looked at closer, there is no doubt that employer-funded health care and FICA payments are income to me, at least in a way. But it is income I may never collect because it is based on age-eligibility. Yet that is counted as income this year not because it is in my pocket but because it is paid in my name.
Tell me there is not just a smidgen of warping of the real situation of particularly the middle class here.
Even with dramatic cuts I don't think the 1 percent go to bed every night wondering if they will be able to afford retirement.
Looked at closer, there is no doubt that employer-funded health care and FICA payments are income to me, at least in a way. But it is income I may never collect because it is based on age-eligibility. Yet that is counted as income this year not because it is in my pocket but because it is paid in my name.
Tell me there is not just a smidgen of warping of the real situation of particularly the middle class here.
Even with dramatic cuts I don't think the 1 percent go to bed every night wondering if they will be able to afford retirement.
2
So inequality was decreased by the Great Recession! This must be music to Barack Obama's ears (and those of the Democrat Party). Clearly the magic solution they've been looking for to reduce inequality has been right in front of them all along: All they need to do is engineer a Second Great Recession. All that Democrats need to do is continue growing Big Government and their current Socialist Anti-Business Policies. I figure in 5 - 10 more years we can just about equalize everybody!
I'll just make two points about the calculations and their interpretations.
First, the people who are marginally in the one percent -- near the income cut off point -- change every year. Then there is the cutoff through death and retirement -- the 1% being more elderly than the average earner. An accounting based on a changing population is questionable at best.
Second, the wealthy and very high income earners have gained from asset capitalization more than others because they have more assets that increase in value as interest rates fall. -- bond and stocks Without marking to market -- an impossible task -- the top 1% in either wealth or income cannot be compared with other groups for annual gains because their tax strategies differ.
What this boils down to is that if we took one group at random -- for example, people with law degrees and who passed the bar in New York -- and were to compare income changes by year, we would see an asset accumulation and income increase to the last year of their careers, followed by a decrease in income. If the ages were evenly distributed with 40 years of work before retirement, 2.5% would retire and have an income drop every year. The top 1% of income earners is a very fluid population.
First, the people who are marginally in the one percent -- near the income cut off point -- change every year. Then there is the cutoff through death and retirement -- the 1% being more elderly than the average earner. An accounting based on a changing population is questionable at best.
Second, the wealthy and very high income earners have gained from asset capitalization more than others because they have more assets that increase in value as interest rates fall. -- bond and stocks Without marking to market -- an impossible task -- the top 1% in either wealth or income cannot be compared with other groups for annual gains because their tax strategies differ.
What this boils down to is that if we took one group at random -- for example, people with law degrees and who passed the bar in New York -- and were to compare income changes by year, we would see an asset accumulation and income increase to the last year of their careers, followed by a decrease in income. If the ages were evenly distributed with 40 years of work before retirement, 2.5% would retire and have an income drop every year. The top 1% of income earners is a very fluid population.
2
The problem with this income analysis is that it did not mention non-discretionary unearned income (namely, interest, dividends and rental income). The Federal Consumer Finance Surveys always shows that these forms of income are highly concentrated at the top. Using capital gains as a proxy for capital ownership is flawed because capital gains is a discretionary; it is only generated when property is sold (and even then it may not be taxed due to things like swap agreements).
1
One of the greatest source of income for the poor and middle class is the increase in house equity and house value. It is in part because it tends to accumulate value over over time. While some may not cash in on the benefits till the house is sold many can use the house as collateral for cheap loans.
The noted source of income in the analysis does not include increases in house value and I do not believe increases in portfolio value - only the income from capital gains from assets in the portfolio that were sold.
The great Recession greatly reduced home ownership and home equity of the poor and middle class and made it more difficult to buy homes at a time when house prices were artificially low, and made borrowing without assets very expensive. The rich and the banks had no problem scooping up these assets are extremely low costs and have had considerable capital accumulation from these assets even though they would not show up as income as the income is not calculated till they are cashed in.
The poor and middle class who now rent will eventually have to pay a premium to do so, and instead of making a profit off the house will be paying a premium to the landlord who not only makes the profit off the rent but makes a profit off the increased value.
The cost of living for the poor goes way up when they have to pay a high premium for not having assets. Payroll loans credit card loans and consumer finance loans, and renting vs owning can greatly increase the cost of living.
The noted source of income in the analysis does not include increases in house value and I do not believe increases in portfolio value - only the income from capital gains from assets in the portfolio that were sold.
The great Recession greatly reduced home ownership and home equity of the poor and middle class and made it more difficult to buy homes at a time when house prices were artificially low, and made borrowing without assets very expensive. The rich and the banks had no problem scooping up these assets are extremely low costs and have had considerable capital accumulation from these assets even though they would not show up as income as the income is not calculated till they are cashed in.
The poor and middle class who now rent will eventually have to pay a premium to do so, and instead of making a profit off the house will be paying a premium to the landlord who not only makes the profit off the rent but makes a profit off the increased value.
The cost of living for the poor goes way up when they have to pay a high premium for not having assets. Payroll loans credit card loans and consumer finance loans, and renting vs owning can greatly increase the cost of living.
2
"What is a fortune? The savings of many in the hands of a few." The capital gains income of those who own a lot of stock often comes from selling stock to millions of middle-class savers. When a wealthy person sells stock to institutions like pensions and mutual funds to pay $140 million for a Van Gogh painting, he pays for it with the invested savings of thousands or millions of people... people who may or may not be able to sell their stock at higher prices when they retire. As 401k participants continue to automatically buy stocks each week or month, smart long-term owners of stock diversify. The stock market, the pride of our economy since 1982, is arguably the engine of the growth of inequality since then.
1
If we average 2012 and 2013, then real incomes of the top 1% were $1,217,002 in those two years compared with $1,369,780 way back in 2000. To talk only about "shares of gains" in the up years while ignoring the down years (2001-2002 and 2008-2009) is much worse than misleading. These income tax data are being so abused by both political parties that it's time to stop playing games with percentages just demand "show me the numbers."
2
Rose's selective presentation of data suffers from what I cal the Grouch Marx problem: who are you gonna believe, Rose or your lying eyes.
1
Many thanks for the link to the Upshot column and for clarifying the definition of "income". I will quibble with using how the "share" of income changed as a meaningful measurement, but will leave that discussion to those whose knowledge of and interest in economics is greater than mine.
This article mentions the book "The Other America," by the socialist visionary Michael Harrington. In this book, he identifies four types of people in poverty, one of which is those who chose to live in poverty. Those who chose to be impoverished, who do nothing to improve themselves should not expect any help from the government. Nor should the government offer them help. Government help should go to those who deserve it, who have done all they can to lift themselves from poverty, but due to no fault of their own cannot seem to do it. A fool proof test needs to be devised to determine once and for all who are deserving and who are not, to determine who has chosen to be poor and who has not.
2
Bless your heart, Southern Boy. Giving help only to the "deserving poor" has been shown to be ineffective, costly and worst of all, highly dependent on the eye of the beholder. A rational civil society generally intends to eliminate poverty for the primary benefit of society, rather than the individual. It costs more to maintain people in prisons and in homeless shelters than it does to provide housing, work and education programs and effective mental health care. In fact, it would most likely be less costly to simply make sure every person in the US had a minimum income, universal access to health care from birth and paid education through post high school than it is to insist on complicated means-tested anti poverty programs that eliminate by design those they are intended to help. Economics has no soul, only data.
6
@Lynda: Your proposal undermines the work ethic. If everything to someone, then there is no incentive to work.
@ Southern Boy
Well, I guess I would answer that giving "tax incentives" to automobile companies to locate plants in your town undermines their incentive to produce quality vehicles that earn profits ethic.
Seriously, for most anti-poverty programs we are talking about people who cannot actually work for many, many reasons including the lack of jobs in their community, the lack of transport to those jobs from the available housing, the lack of child care, mental and physical health, age, disabilities, addictions, lack of training for needed skills, etc. Providing those items which allow people to find and keep jobs is not cost free. Thus the economic statement it may be cheaper to provide minimum subsidies than means-tested programs that eliminate those who need the help while spending millions to means- test. No moral observation, just math.
There is, by the way, little objective evidence that people who can work choose not to work because they lack a "work ethic". Useful productive work in a safe environment is generally held to contribute to self respect and happiness, two items which are priceless.
Well, I guess I would answer that giving "tax incentives" to automobile companies to locate plants in your town undermines their incentive to produce quality vehicles that earn profits ethic.
Seriously, for most anti-poverty programs we are talking about people who cannot actually work for many, many reasons including the lack of jobs in their community, the lack of transport to those jobs from the available housing, the lack of child care, mental and physical health, age, disabilities, addictions, lack of training for needed skills, etc. Providing those items which allow people to find and keep jobs is not cost free. Thus the economic statement it may be cheaper to provide minimum subsidies than means-tested programs that eliminate those who need the help while spending millions to means- test. No moral observation, just math.
There is, by the way, little objective evidence that people who can work choose not to work because they lack a "work ethic". Useful productive work in a safe environment is generally held to contribute to self respect and happiness, two items which are priceless.
4
What is an "earner" and what is a "household" for these measurements?
Two earners or one?
Two earners or one?
3
When housing, stock market, etc are on the rise - They- "the wealthy" do extremely well. In turn, when same forces cause wage contraction, job loss, economic realignment it greatly affects people who are wage earners and you don't see as great of a bounce back. This downturn is so much different than previous ones -- you have global economics driving a deflationary spiral that have cause the Federal Reserve to flood the economy with money. The macro-economic result is those who have access (good credit and assets) get access to extremely cheap money. The normal result would be rational exuberance because of this cheap money but it is not being displayed in an across the board manner. A case in point, is how Apple borrowed as a back door way to work around paying taxes to bring foreign profits how and I am sure there are plenty of other examples. As long as managerial class make 500+ more than average worker in wages and tax structure benefits the rich. Inequality will continue and there is no reason why it will change.