Income Inequality Causes Social Unrest?

[CAC1001]

Do you have any data to back this up? Or is it just a gut feeling?

Look at the goods and services the average person today has compared to the average person in the 1950s. The average person is far wealthier today then the average person back then. In this sense, the wealth gap is a lot narrower. For comparison, look at the wealth gap, goods and services-wise, in the 19th century. Then, even if the monetary wealth gap was smaller, the richest people, aside from their mansions and yachts, did not have a standard of living much higher than the average person today in terms of the goods and services available. While the average person back then was literally poverty-stricken. There was an enormous gap back then in that sense. Becoming rich could really change your life around. Today, even if there is a large monetary wealth gap, it is a wealth gap in which we are unequally rich. Becoming rich today can change a person's life, sure, but not in the same way as back then. You just go from being rich to super-rich (by global and historical standards).

I think maybe you are misunderstanding my point some? The more goods and services that become available, the narrower the gap between "the rich" and "the poor" will get. Let's say fifty years from now, they create the technology to grow people brand new organs from scratch. So you need a new eye or a new heart? They can just grow you a new one. Only the problem is that this medical care costs a LOT and is thus only available to the wealthy. Okay, let's say it advances another thirty years, so that eighty years from now, the technology becomes cheap enough that they can grow almost anyone a new organ from scratch. Are there still, monetarily, going to be "rich" and "poor?" Sure. But the actual wealth gap, in terms of goods and services, will be even narrower then (average people then will have access to a whole slew of other goods and services that even the rich today do not have). This is the story of market capitalism. Goods and services that start out as luxuries of the rich then become commoditized as the technology advances. For example, the automobile. Or air conditioners. Or being able to watch movies at home (VCR-->DVD player-->downloadable movies-->etc...). Or braces for someone's teeth or laser eye surgery.

Goods and services are the actual wealth of society, not the money that represents it. So the more goods and services available to the masses, the richer they become and the closer the wealth gap narrows.

 

[ParticleGrl]

Look at the goods and services the average person today has compared to the average person in the 1950s.

This tells us nothing about the wealth gap between rich and poor in the 50s.

Then, even if the monetary wealth gap was smaller, the richest people, aside from their mansions and yachts, did not have a standard of living much higher than the average person today in terms of the goods and services available.

To talk about the wealth gap in the 50s being larger than the wealth gap today, you need to compare rich and average in the 50s to rich/average today. You seem to say "average people today have access to things only the rich had in the past" that might be true- but the wealth gap isn't about comparing rich people in the 50s to average earners today. Its about comparing rich people in the 50s to average earners in the 50s vs. rich people today vs average earners today.

 

[russ_watters]

This tells us nothing about the wealth gap between rich and poor in the 50s.

The answer to your previous question is no, it probably isn't possible to easily quantify it. The closest we could probably get is with market penetration of certain products, such as air conditioning, computers, and cell phones - things that didn't exist for the general public 50 years ago but now even most poor own.

The issue is one of diminishing returns. If a poor person's income rises by 10%, it will affect their lives greatly. If a rich person's income rises by 100%, it will barely affect them at all. Thus, we could say that though the gap in their incomes increased, their "wealth" gap as a matter of living conditions decreased.

This issue is a pretty well accepted fact - and often stated - when you go back hundreds of years. People say things like 'the poor today live better than a medival king' and it should be pretty obvious that it is true. It is harder to see on a shorter timeframe, but should still exist.

ou seem to say "average people today have access to things only the rich had in the past" that might be true- but the wealth gap isn't about comparing rich people in the 50s to average earners today. Its about comparing rich people in the 50s to average earners in the 50s vs. rich people today vs average earners today.

What do rich people have access to that everyone else doesn't, that significantly affects their lives? Cell phones? Measles vaccines? Flipping the issue over, we can say that over a relatively short timeframe (less than a generation), rising income inequality has not created/expanded a barrier to new technologies impacting the lives of all. More to the point: if Bill Gates (Steve Jobs!) doesn't have a cancer vaccine, how much better off is he than me, really?

 

[ThinkToday]

At what point would you say we have too much inequality?

I went to a private college in a very poor state. Many of the students I went to school with were locals that didn't have the money, but with student aid, scholarships, and loans, they were able to attend. They worked at the college, at local eateries, as tutors, etc. to pay what they could. They had “skin in the game”, and they studied like it. There was an equality of opportunity, and that's enough. We can't guarantee success; that is up to the individual.

When there is significant inequality in opportunity, something needs to be done. That doesn't mean the poor get a free ride. You no doubt know the old saying "To whom much is given much is expected". I think most people would tag that as being directed toward the 1%, however, I think it equal applies to the 99%. If we (tax payers) assist in paying for the education of the poor, we have every right to set expectations for performance and conduct. In a financial sense we (the tax payers) are acting (paying) the role of a parent. A parent would "lay down the law" to their kids to get good grades and stay out of trouble if they want the parent to continue to pay their way. I know mine did. I have told my kids the college costs for schools they are looking at run $30k-50k/yr each, and for at least three years both of them will be in college at the same time. I'm not rich, but I make too much to get any significant aid. The total to keep the two of them in college will be $60k-100k/yr, and that is one hell of a bill I have to pay without help. My kids understand the expectations I have for taking on that much debt. With graduate school possible too, I could be in hoc for more than $500k, and I will be paying off college costs for many many years. So, the poor have to have "skin in the game" too, otherwise it’s not fair to those of us that do. As many of my old college friends know, when it's our own money, we tend to work a little harder.

So here’s your equality….. we all get the opportunity to bleed equally to educate ourselves and our children.

 

[ThinkToday]

Its about comparing rich people in the 50s to average earners in the 50s vs. rich people today vs average earners today.

IMO, the question is the reason behind the difference. If more are rich because of their own work, saving, investment, business (family or their own), etc., it's an earned difference, and people shouldn't hold it against them. Even inheritance assets were earned by someone in the family to be passed on to progeny to make their life better, just as I hope to do for my kids.

If more are poor we need to look at the “why”. From http://family.jrank.org/pages/1574/Single-Parent-Families-Demographic-Trends.html , “The United States has the highest percentage of single-parent families (34% in 1998) among developed countries, followed by Canada (22%), Australia (20%), and Denmark (19%). There was a dramatic increase in single-parent families in the United States in the last three decades of the twentieth century; only 13 percent of families were headed by a single parent in 1970. Over one-fourth of children in the United States lived with a single parent in 1996, double the proportion in 1970. Approximately 84 percent of these families are headed by women. Of all single-parent families, the most common are those headed by divorced or separated mothers (58%) followed by never-married mothers (24%). Other family heads include widows (7%), divorced and separated fathers (8.4%), never-married fathers (1.5%), and widowers (0.9%). There is racial variation in the proportion of families headed by a single parent: 22 percent for white, 57 percent for black, and 33 percent for Hispanic families." IMO, we have too many families with one person doing the work of two. That means less time and resources for children with a single parent.

Then there is education. According to the http://www.bls.gov/emp/ep_chart_001.htm , the variation between education and pay is huge. According to http://www.edweek.org/ew/issues/dropouts/ ; “According to the U.S. Census Bureau’s American Community Survey, the population of U.S. 18- through 24-year-olds not enrolled in school and without a high school diploma or General Educational Development, or GED, credential was 16.4 percent in 2009.” A sad fact is the degree means less than it once did, since the real education obtained is less than the past. "Americans barely reach the international literacy average set by advanced democracies, according to a report issued by the Educational Testing Service after looking at the International Adult Literacy Survey (IALS). Unlike the math and science surveys, the IALS was given to a cross section of adults aged 16 to 65. Despite the high expenditures on education in the United States—and the large numbers of students enrolled in colleges and universities—the United States ranked 12th on the test ." http://www.hoover.org/publications/hoover-digest/article/6325 .

So, it's not as simple as who has "more" and is that "fair". People need to stop worrying about redistributing wealth via welfare, etc., and work on redistributing responsibility, accountability, and providing for opportunity. It's like a bad tasting medicine for force your kids to take because is what's good for them. IMO, fixing the mindset, conduct, and root issues will go a long way toward fixing the problem.

 

[SixNein]

I went to a private college in a very poor state. Many of the students I went to school with were locals that didn't have the money, but with student aid, scholarships, and loans, they were able to attend. They worked at the college, at local eateries, as tutors, etc. to pay what they could. They had “skin in the game”, and they studied like it. There was an equality of opportunity, and that's enough. We can't guarantee success; that is up to the individual.

When there is significant inequality in opportunity, something needs to be done. That doesn't mean the poor get a free ride. You no doubt know the old saying "To whom much is given much is expected". I think most people would tag that as being directed toward the 1%, however, I think it equal applies to the 99%. If we (tax payers) assist in paying for the education of the poor, we have every right to set expectations for performance and conduct. In a financial sense we (the tax payers) are acting (paying) the role of a parent. A parent would "lay down the law" to their kids to get good grades and stay out of trouble if they want the parent to continue to pay their way. I know mine did. I have told my kids the college costs for schools they are looking at run $30k-50k/yr each, and for at least three years both of them will be in college at the same time. I'm not rich, but I make too much to get any significant aid. The total to keep the two of them in college will be $60k-100k/yr, and that is one hell of a bill I have to pay without help. My kids understand the expectations I have for taking on that much debt. With graduate school possible too, I could be in hoc for more than $500k, and I will be paying off college costs for many many years. So, the poor have to have "skin in the game" too, otherwise it’s not fair to those of us that do. As many of my old college friends know, when it's our own money, we tend to work a little harder.

So here’s your equality….. we all get the opportunity to bleed equally to educate ourselves and our children.

Average wages declined over the last decade for those with college degrees.

http://blogs.wsj.com/economics/2011/09/19/only-advanced-degree-holders-see-wage-gains/

At the same time, the cost of education has been increasing. Student loan debt today is huge. And most students will have to pay it off themselves.

 

[russ_watters]

Cherry-picking one-cycle stats is intentionally misleading.

 

[SixNein]

Cherry-picking one-cycle stats is intentionally misleading.

We could exaggerate the data more by considering:

Today's the day that the student debt clock crosses the $1-trillion-dollar mark.

http://www.cbsnews.com/8301-505145_162-57429655/student-debt-clock-strikes-$1-trillion/

Then... add interest.

 

[ThinkToday]

Average wages declined over the last decade for those with college degrees.

http://blogs.wsj.com/economics/2011/09/19/only-advanced-degree-holders-see-wage-gains/

At the same time, the cost of education has been increasing. Student loan debt today is huge. And most students will have to pay it off themselves.

Yes, misleading. You are comparing a % change and not raw dollars. A person with a BS degree earns on average 2.33 times what a person with no HS degree makes.

Unemployment rate Education attained Median weekly earnings
in 2011 (Percent) in 2011 (Dollars)

2.5% Doctoral degree $1,551
2.4 Professional degree 1,665
3.6 Master's degree 1,263
4.9 Bachelor's degree 1,053
6.8 Associate degree 768
8.7 Some college, no degree 719
9.4 High-school diploma 638
14.1 Less than a high school diploma 451

7.6 All Workers 797


Note: Data are for persons age 25 and over. Earnings are for full-time wage and salary workers.

Source: Bureau of Labor Statistics, Current Population Survey.

BLS has some data on the employment status of the civilian noninstitutional population 25 years and over
by educational attainment, sex, race, and Hispanic origin online.

The Census Bureau also has some data on the educational attainment online.

BTW, I borrowed 100% of my grad school funds and paid them off in three years. I chose a degree that pays well, and I made the largest payments I could afford and bought nothing I didn't need.

 

[russ_watters]

At what point would you say we have too much inequality?

I don't know. Could you help me out by providing a logical reason for why such a point should exist? Once I know what I'm looking for, then I can determine where I think it should be.

 

[SixNein]

Yes, misleading. You are comparing a % change and not raw dollars. A person with a BS degree earns on average 2.33 times what a person with no HS degree makes.

And wages are falling faster for the BS. And at the same time, costs are going up.

 

[SixNein]

I don't know. Could you help me out by providing a logical reason for why such a point should exist? Once I know what I'm looking for, then I can determine where I think it should be.

Suppose 99% of Americans were living in utter poverty while 1% lived the lifestyle of kings.

Suppose still that your one of the 1%.

Is inequality a problem?

 

[ThinkToday]

Suppose 99% of Americans were living in utter poverty while 1% lived the lifestyle of kings.

Suppose still that your one of the 1%.

Is inequality a problem?

Lets see, "Last year there were 86 million people who didn't have a job and weren't consistently looking for one, according to Labor Department data." http://money.cnn.com/2012/05/03/news/economy/unemployment-rate/index.htm

86 MILLION weren't consistently looking So, do you think 86 million people have the right to live off the income the rest of us generate WORKING?

 

[SixNein]

Lets see, "Last year there were 86 million people who didn't have a job and weren't consistently looking for one, according to Labor Department data." http://money.cnn.com/2012/05/03/news/economy/unemployment-rate/index.htm

86 MILLION weren't consistently looking So, do you think 86 million people have the right to live off the income the rest of us generate WORKING?

Strawman...

I'm simply asking about how much inequality can be stomached.

 

[ThinkToday]

Strawman...

I'm simply asking about how much inequality can be stomached.

Not so much as your "example" using 99% poverty and 1% rich. You've yet to address the "inequality" from a causal standpoint. e.g. Using my quote; inequality from because 86 million stop looking for work? Inequality because some don't want to spend the time, money, and effort to better themself with an education, incl. HS, college, trade school, etc.?

 

[SixNein]

Not so much as your "example" using 99% poverty and 1% rich. You've yet to address the "inequality" from a causal standpoint. e.g. Using my quote; inequality from because 86 million stop looking for work? Inequality because some don't want to spend the time, money, and effort to better themself with an education, incl. HS, college, trade school, etc.?

I don't think America's high inequality is a result of education; instead, I think it is a result of America's ability to create jobs. America's productivity, wages, and it's ability to create jobs seem to be disconnected. Even if the entire American population were to become highly educated, I think you'd just see more pigeons trying to cram into the same holes.

http://www.huffingtonpost.com/2012/01/31/wages-2011-record-corporate-profits_n_1244297.html

 

[CAC1001]

Strawman...

I'm simply asking about how much inequality can be stomached.

I think any monetary level of inequality can be stomached so long as the rest of society is seeing living conditions improve year-after-year. What causes revolutions is when one group lives off of the oppression of the rest of society.

 

[mheslep]

America clearly has the ability, historically, to create jobs. From '82 to '89 20 million jobs (208 thousand/month average, almost double last month's) were created with an economy a third the size of the current one (nominally) and ~70 million fewer people. The reason the nation is not doing so now must include the current governmental policy.

 

[russ_watters]

Suppose 99% of Americans were living in utter poverty while 1% lived the lifestyle of kings.

Suppose still that your one of the 1%.

Is inequality a problem?

I'm sorry, I was unclear. Let me rephrase: Could you help me out by providing a logical reason based on a factual and relevant starting premise for why such a point should exist? I'm not going to use an ancient Egyptian social structure as a basis for making decisions regarding social structure today!

 

[ParticleGrl]

The issue is one of diminishing returns. If a poor person's income rises by 10%, it will affect their lives greatly. If a rich person's income rises by 100%, it will barely affect them at all. Thus, we could say that though the gap in their incomes increased, their "wealth" gap as a matter of living conditions decreased.

But that's just diminishing marginal utility of money- it was just as true in the 50s as it is today. Also- isn't that an argument for taxation and redistribution?

The contention is that the wealth gap in terms of lifestyle is less severe today than it was in the 50s but that seems to conflict both with the data (increasing income inequality is a stylized fact), and with my own anecdotal experience.

I agree that in SOME ways we are better off today than richer people in the 50s, but that doesn't tell us anything about the wealth gap in each era. Also, in some ways today we are worse off. If I had the chance to be a man with a physics phd in the 50s, I would take it in a heartbeat.

You seem to want to be making the argument 'as long as we are all getting better off with time, inequality is acceptable.' There is probably an argument to be made there, but its a fundamentally different argument than arguing the wealth gap has gotten less severe 'in terms of lifestyle.'

Flipping the issue over, we can say that over a relatively short timeframe (less than a generation), rising income inequality has not created/expanded a barrier to new technologies impacting the lives of all.

But inequality isn't just about new technology- look at things like retirement. It seems like most people in my grandparent's generation were able to retire at some point, and live if not well, than comfortably. Lots of people in my parents generation have had to put that on hold. I'm sure there are lots of people who, given the choice, would take retirement and no ipad to working another 5-10 years and having an ipad.

 

[ParticleGrl]

America clearly has the ability, historically, to create jobs. From '82 to '89 20 million jobs

I'm sure you can find similar creation of jobs during the Clinton presidency. The slump in job creation seems to have started during Bush.

The reason the nation is not doing so now must include the current governmental policy.

Or fed policy, or a different international climate, or completely different population demographics, or some combination of other conditions. There are lots and lots of things different today than in the 80s.

 

[CAC1001]

But that's just diminishing marginal utility of money- it was just as true in the 50s as it is today. Also- isn't that an argument for taxation and redistribution?

Just because a high-earning person doesn't need all of their income doesn't mean that the government has any right to tax it away to spend it on any number of various social programs that politicians conjure up (which may not even work or may make things worse, or could be just giveaways to certain special interests and meant to win votes).

The contention is that the wealth gap in terms of lifestyle is less severe today than it was in the 50s but that seems to conflict both with the data (increasing income inequality is a stylized fact), and with my own anecdotal experience.

I would argue that income inequality is meaningless with regards to the wealth gap in terms of lifestyle. If we go 100 years into the future and we find that even the poor have access to all of the healthcare that today is only available to the wealthy, then regardless of whether income inequality exists, in terms of living standards, the gap is going to be more narrow. Income inequality is just a statistic. It refers to the various income quintiles (it isn't representative of the actual people in those quintiles).

I agree that in SOME ways we are better off today than richer people in the 50s, but that doesn't tell us anything about the wealth gap in each era. Also, in some ways today we are worse off. If I had the chance to be a man with a physics phd in the 50s, I would take it in a heartbeat.

Generally, the farther back you go in history, you find a larger and larger difference in the standard of living between rich and poor. For example, go back to the 1900s and look at the differences in living standards. They were enormous. A rich person could live a very nice home (very nice even by modern standards), have fresh fruit and vegetables, meat, coffee, chocolate, cakes, pastries, leisure time, ability to take a bath if they so desired, music whenever they wanted it (they'd have servants or people hired to play it for them), and so forth. They were still "poor" in that there was no running water back then or electric light, but they got by with gas globe lighting and servants could pump water. Whereas the average person lived without running water, no electric light, bathing was unheard of, fresh fruit, meats, chocolates, coffee, music whenever they wanted it, etc...were all luxuries. Today, pretty much all of these things are available to the masses, and in new variations that were not available to the rich then. So in this sense, the wealth gap has narrowed greatly, as we are now all rich.

I wouldn't argue we are worse off in certain ways so much as certain professions are just worse off now then back then. Right now, we are in the midst of a bad economy (which happens every now and then) due to a major financial crisis that hit the economy.

But inequality isn't just about new technology- look at things like retirement. It seems like most people in my grandparent's generation were able to retire at some point, and live if not well, than comfortably. Lots of people in my parents generation have had to put that on hold. I'm sure there are lots of people who, given the choice, would take retirement and no ipad to working another 5-10 years and having an ipad.

Remember though that historically, most people couldn't retire because there was no Social Security or Medicare. And when Social Security was created, the lifespan of people wasn't much longer than the age you had to be to start receiving Social Security. The idea was that most people would die before they needed it, or die soon after. People of your parent's generation are living longer. Also, if the government hadn't started robbing Social Security, it would probably be a lot more financially sound. A lot of people unfortunately lost their retirement in this financial crisis as well.

For people to be able to retire, unless they are wealthy, they either need to work long enough at a company to receive a pension, which isn't as viable today, and if the firm goes under, the pension can too, or they need to rely on investments in the markets (definitely not a secure way), or they need to rely on the government safety nets (which the government has messed up).

I'm sure you can find similar creation of jobs during the Clinton presidency. The slump in job creation seems to have started during Bush.

The 80s, 90s, and 2000s all benefited from a generally healthy economic climate and bubbles, the problem is that the 2000s bubble really dealt a hard blow to the economy when it popped.

 

[russ_watters]

But that's just diminishing marginal utility of money- it was just as true in the 50s as it is today. Also- isn't that an argument for taxation and redistribution?

No, it's an argument for why the small gains in $ income for the poor are actually bigger in standard of living terms than the big $ gains of the rich. It means that the wealth distribution in pure $s might be getting worse, but the standard of living gap is actually probably narrowing.

Taxation and redistribution can be justified on that basis (hurting one rich person a little helps a lot of poor people a lot -- so we should do it) if one takes a purely utilitarian (and short-sighted) approach to morality, but in the US we believe in individual rights.

The contention is that the wealth gap in terms of lifestyle is less severe today than it was in the 50s but that seems to conflict both with the data (increasing income inequality is a stylized fact)...

I'm not clear on what you mean by that. Are you saying the income data is adjusted to account for standard of living in a way that appropriately shapes the curve? It isn't - it is adjusted in a fixed constant. Ie, it says that something twice the price of something else is twice as good. Adjusting for value on a sliding scale would be extremely difficult.

I agree that in SOME ways we are better off today than richer people in the 50s, but that doesn't tell us anything about the wealth gap in each era.

Correct: It doesn't tell us how the wealth gap has changed. What it does is it invalidates the concept of a trackable wealth gap over time.

Also, in some ways today we are worse off. If I had the chance to be a man with a physics phd in the 50s, I would take it in a heartbeat.

Fair enough, but from talking to you for a while I get the feeling your feeling of worth is mostly wrapped up in you professional identity. That's great/not materialistic, but it doesn't have anything whatsoever to do with wealth.

You seem to want to be making the argument 'as long as we are all getting better off with time, inequality is acceptable.'

That is exactly my point, but looking back at the OP, there is a follow-up: the fact that most everyone is getting better off over time is probably the reason why social unrest is actually decreasing, contrary to the popular claim that it is increasing.

I don't want to go off topic, but there is another inequality issue related to the other two, which is: inequality is almost certainly a necessity of economic development. In other words, inequality causes everyone to be better off. This isn't necessarily easy to prove because there are so many examples that are so different from each other, but there are some telling examples, such as China, whose spectacular drop in poverty rate over the last 30 years or so has been accompanied by an increase in inequality. Correlation does not always equal causation, but I think in China's case there is a good argument to be made: Increased freedom causes increased inequality causes increased standard of living for virtually everyone.

But inequality isn't just about new technology- look at things like retirement. It seems like most people in my grandparent's generation were able to retire at some point, and live if not well, than comfortably. Lots of people in my parents generation have had to put that on hold. I'm sure there are lots of people who, given the choice, would take retirement and no ipad to working another 5-10 years and having an ipad.

Retirement funding is certainly a big problem, but I think you are reading it backwards: It is because of increased standard of living that retirement has gotten more expensive. Specifically, it is because people are healthier and living longer.

 

[CAC1001]

I don't want to go off topic, but there is another inequality issue related to the other two, which is: inequality is almost certainly a necessity of economic development. In other words, inequality causes everyone to be better off. This isn't necessarily easy to prove because there are so many examples that are so different from each other, but there are some telling examples, such as China, whose spectacular drop in poverty rate over the last 30 years or so has been accompanied by an increase in inequality. Correlation does not always equal causation, but I think in China's case there is a good argument to be made: Increased freedom causes increased inequality causes increased standard of living for virtually everyone.

IMO there's two types of inequality here, monetary and standard of living. Many confuse monetary inequality as also representing standard of living inequality, but it doesn't. Monetary inequality can grow while standard of living inequality decreases.

 

[SixNein]

I'm sorry, I was unclear. Let me rephrase: Could you help me out by providing a logical reason based on a factual and relevant starting premise for why such a point should exist? I'm not going to use an ancient Egyptian social structure as a basis for making decisions regarding social structure today!

I think the inequality we have today is a result of the lack of available jobs. We don't have enough job creation to create enough scarcity in the labor markets to get wages moving. The economy has been hemorrhaging job creation ability due to automation, globalization, and other factors. So the labor markets are ending up more and more saturated as more and more workers are being displaced. And quite frankly, automation is going to continue to climb up the corporate ladder and so is globalization.

See I don't think our inequality is structural. Education may help spread the saturation of the labor market, and it may help some, but I don't think it will solve the problem. In general, I think we have crossed an equilibrium were we simply don't need everyone in our economy. Technology is wiping out the need for a segment of the population.

 

[mege]

I think the inequality we have today is a result of the lack of available jobs. We don't have enough job creation to create enough scarcity in the labor markets to get wages moving. The economy has been hemorrhaging job creation ability due to automation, globalization, and other factors. So the labor markets are ending up more and more saturated as more and more workers are being displaced. And quite frankly, automation is going to continue to climb up the corporate ladder and so is globalization.

See I don't think our inequality is structural. Education may help spread the saturation of the labor market, and it may help some, but I don't think it will solve the problem. In general, I think we have crossed an equilibrium were we simply don't need everyone in our economy. Technology is wiping out the need for a segment of the population.

I think the recent economic crunch forced many companies to tigthen their belts when they were otherwise on 'cruise control' and able to support a lot of extra employees (layoffs cost cache). Companies have all realized that they CAN get along with less workers, especially considering the extra expenses that come along with workers. I think too long the US was escaping the shift to a 'worker lite' society, and now it's been forced upon us.

The government needs to lower the per-worker cost enough to allow for companies to higher more (but each individual probably will work slightly less). Hopefully the SCOTUS will strike down the ACA as a good start and it will spur some hiring since employers will know what to expect for costs better.

 

[SixNein]

I think the recent economic crunch forced many companies to tigthen their belts when they were otherwise on 'cruise control' and able to support a lot of extra employees (layoffs cost cache). Companies have all realized that they CAN get along with less workers, especially considering the extra expenses that come along with workers. I think too long the US was escaping the shift to a 'worker lite' society, and now it's been forced upon us.

I don't see a way to get out of this situation, and I expect it to become more pronounced as time goes forward. In my mind, the question is what to do with these people? How much inequality can people stand?

Sure, we could strip minimum wage laws, but I don't think this will solve anything. It'll increase corporate profits because the saturation will drive those prices down, but I don't expect more jobs to suddenly appear. We are in a situation were one group can produce for all. And the size of that group is likely to continue to shrink in the future.

I can't think of too many things that can't be automated.

 

[ThomasT]

Wrt the title question, I agree with what I take to be the OP's basic premise that income inequality per se isn't generally causally linked to social unrest; and I agree with the hypothesis that unemployment associated with the economic crisis, associated with questionable practices by the financial sector (associated with the perception that the government in some ways reinforced the questionable practices and has not only done little to prevent them, but has actually rewarded many who engaged in those practices) are the more significant precursors of the OWS phenomenon rather than income inequality.

The fact that a relatively small percentage of the population controls a relatively large percentage of the total wealth would seem to have little to do with the unemployment rate.

 

[russ_watters]

I think the inequality we have today is a result of the lack of available jobs. We don't have enough job creation to create enough scarcity in the labor markets to get wages moving. The economy has been hemorrhaging job creation ability due to automation, globalization, and other factors. So the labor markets are ending up more and more saturated as more and more workers are being displaced. And quite frankly, automation is going to continue to climb up the corporate ladder and so is globalization.

See I don't think our inequality is structural. Education may help spread the saturation of the labor market, and it may help some, but I don't think it will solve the problem. In general, I think we have crossed an equilibrium were we simply don't need everyone in our economy. Technology is wiping out the need for a segment of the population.

I think that's an odd thing to say considering how low unemployment is/has been and given the inverse relationship between unemployment and inequality in the short term, but in either case you didn't even address my question much less answer it. I'm not sure why you even bothered to quote it! Since my question was designed to help answer yours, I must conclude yours was simply a red herring that you didn't really expect a serious answer to.

 

[mheslep]

I'm sure you can find similar creation of jobs during the Clinton presidency.

Agreed. Not as great, but yes.

The slump in job creation seems to have started during Bush.

Slower under Bush than the 80's late 90's, but still plenty to maintain a 4-6% unemployment rate with a growing labor force, unlike now.

Or fed policy, or a different international climate, or completely different population demographics, or some combination of other conditions. There are lots and lots of things different today than in the 80s.

Yes, agreed, government policy (including the Fed) is not the only factor, but IMO it is the most important reason for the current lousy jobs condition.

 

[SixNein]

I think that's an odd thing to say considering how low unemployment is/has been and given the inverse relationship between unemployment and inequality in the short term, but in either case you didn't even address my question much less answer it. I'm not sure why you even bothered to quote it! Since my question was designed to help answer yours, I must conclude yours was simply a red herring that you didn't really expect a serious answer to.

I must have taken your question the wrong way. I read it as if you were challenging the very idea of inequality.

I'm not sure that its odd per say. Technology and globalization are rendering quite a few skill sets worthless. So more and more people are competing for skill-less jobs, and its causing the labor market to be saturated. Either the economy has to create enough jobs to get those wages moving, or it has to create a wider diversity of jobs.

http://www.irle.berkeley.edu/events/spring08/feller/productivity_wages_graph.gif

Technology is driving our productivity more than people.