Wealth Distribution in America

[172andyou]

um, I don't believe that is true. A lot of wealth was created by paying a lot of people the least that they could get away with. (not being snarky, but geez, overpaying people isn't necessarily a good way to create weath)

I don't disagree with that. It was never voluntary. But they used to have to pay more for a variety of reasons. Once they no longer had to, they stopped. And there have been consequences for a heck of a lot of people.

 

[172andyou]

We will just have to disagree. I think you should invest some time looking into why the jobs were exported.

Oh, we definitely disagree. For starters, we disagree that my position comes from ignorance.

 

[Flatiowa]

I think if a person looks at the long term (centuries) of macro level economic policy, this is a brilliant short film symbolic of societal structure, progress, and rest… but I also am a bee keeper and have been for close to twenty years and I see a probably irrationally accurate similarity between bee hive behaviors and the behaviors of societies, tribes, basically any gathering of people with autonomy and low levels of outside influencing factors

 

[Tarheelpilot]

Oh, we definitely disagree. For starters, we disagree that my position comes from ignorance.

I don’t think that at all. You’re good at making assumptions. I congratulate you on such an accomplishment.

 

[Cluemeister]

but understand that when you have more net worth than 98% of the population a majority will likely consider you to be “rich.”

I thought the definition of rich was owning an airplane. That's what I've been told many times, so it must be true.

 

[2-Bit Speed]

It's funny how these conversations become so much more prevalent whenever the economy plummets and everyone feels poor. Instead of trying to figure out why the economy is suffering, let's blame everyone that has more than me!!

When you find corruption or thievery, please arrest the responsible parties. In the absence of such poor (illegal) behavior, focusing on the possessions of another is envy. Envy isn't healthy.

 

[SkyChaser]

The immediate consequences I've noticed are more consequences of a societal shift towards a luxury lifestyle regardless of whether or not you can afford it, and have little to do with the consequences of shifting wealth. Things like cars where every new car is packed to the gills with the newest entertainment system, most up-to-date safety features, and complicated electronics to squeeze the best fuel economy out of the engine - all of which drive up both the initial cost and the repair costs. Or new houses, where every house is now built with as many bathrooms as bedrooms, granite countertops, and other high-end finishes - and the price tag to match. It is next to impossible to purchase a new car or house without all those things - not because the company is greedy or evil, but because that is what other consumers are wanting to buy.

Add on eating out once, twice, or more a week, and you're adding an extra $300-$500 a month to your food cost - even if you eat solely at McDonalds and go for the cheap menu options. I'll keep my lasagna, steak, and chicken cordon bleu and skip the eating out, thanks! I get to eat delicious food and save a ton of money every month. (And I thought we spent a LOT on food until I did the math, because we eat so much "richer" than I did as a child. You can save even more by switching up with things like potatoes, rice, and noodles. Alternative protein sources like cheese and beans and pasta sauces with meat in them are good if meat is too expensive, and you can add onions or oats to stretch hamburger. There are tons of ways to stretch the food budget if necessary - if you're not eating out.)

Perhaps greater than the actual shifting of money is the shifting of attitude towards money. There is no longer any encouragement towards living within your means and no longer any shame for living outside your means and carrying debt or experiencing bankruptcy. That, in itself, will result in the money shifting from the lower classes to the higher ones.

 

[Flatiowa]

I thought the definition of rich was owning an airplane.

I think you might have misheard that, maybe what you heard was ..it was irresponsible, or folly, or short sighted, or what the hell where you thinking?

 

[Llewtrah381]

Interesting conversation. Lots of branches one could follow here.

One observation: whereas in the distant past, the uber-wealthy were aristocracy by blood and largely got their money from land, the work of the peasants, etc. In the recent past, in addition to that group there were business tycoons who started railroads, oil companies, and other rags-to-riches stories. I’d say pretty much within the past 50 or so years (and especially in the past 20-30) are two other groups: those who made a literal fortune by selling an “idea” (such as PayPal, Facebook, etc), and the somewhat lesser “nobility” of sports and movie stars. Those groups have really upended economics, I think.

I think a Jeff Bezos or Michael Gates is in the “recent past” model since, debatably, they have and continue to produce usable goods and services. But there are a surprising number of people, admittedly of lesser wealth than they, who made a still-meaningful chunk of money basically off of an idea, especially in the tech industry.

Just an observation…

 

[Larry in TN]

Sort of. It used to be that to create a lot of wealth you needed to pay people a lot to work for you. Now fewer people are needed and/or they pay is lower. The result being that the wealth (company income/value) is transferred to a few people at the top, instead of wages sufficient to live on for the people at the bottom.

Companies like Microsoft, Apple, Amazon, Tesla, and SpaceX produced extremely wealthy founders and CEOs along with many millionaires through company stock. They produced tens of thousands of high paying jobs. They provided products that revolutionized their industries. The top leaders of those companies reached levels of wealth that expanded the top of the wealth graphs posted above while benefitting thousands of employees and the public as a whole.

 

[Half Fast]

I thought the definition of rich was owning an airplane. That's what I've been told many times, so it must be true.

Only applies to Cirrus owners.

 

[cowtowner]

Want to be part of the top 1%?

Put your name on the bottom of the paycheck instead of the top

Risk everything you own every day.

Work for free for years

Work 80-100 hours a week and not complain.

Do it for a decade or three and you will maybe get there.

 

[cowman]

Companies like Microsoft, Apple, Amazon, Tesla, and SpaceX produced extremely wealthy founders and CEOs along with many millionaires through company stock. They produced tens of thousands of high paying jobs. They provided products that revolutionized their industries. The top leaders of those companies reached levels of wealth that expanded the top of the wealth graphs posted above while benefitting thousands of employees and the public as a whole.

Say what you want about Elon but if it wasn't for him the US probably would be out of the game on anything space related right now. Not to mention all the advancements Tesla motors made for electric cars. Or starlink... which is the only reason I have decent broadband internet here in the woods.

 

[StraightnLevel]

Want to be part of the top 1%?

Put your name on the bottom of the paycheck instead of the top

Risk everything you own every day.

Work for free for years

Work 80-100 hours a week and not complain.

Do it for a decade or three and you will maybe get there.

Yes. After 20-25 years you can become an overnight success.

 

[TCABM]

um, I don't believe that is true. A lot of wealth was created by paying a lot of people the least that they could get away with. (not being snarky, but geez, overpaying people isn't necessarily a good way to create weath)

Malthus’ Iron Law of Wages. Not necessarily grounded in truth.

 

[Half Fast]

Want to be part of the top 1%?

Put your name on the bottom of the paycheck instead of the top

Risk everything you own every day.

Work for free for years

Work 80-100 hours a week and not complain.

Do it for a decade or three and you will maybe get there.

Entry to the top 1% in the US only requires about $5.8M. That might not require quite as much risk and sacrifice as you suggest.

How much wealth you need to be in the top 1% in countries around the world

Americans need a minimum of $5.8 million net worth to be in the top 1% of US wealth — less than half the cutoff for Monaco.

www.businessinsider.com

 

[Flatiowa]

Not really relevant to the topic, but just an observation that I think is worth noting. When Henry ford built his first car for commercial sale, he did it in small shop in an affluent part of town, knowing it wouldn’t fit through the door when it was done, when he thought it was ready to be judged by the public he took a sledgehammer to the entrance of the shop, and that act of lunacy drew a huge crowd around to witness his “motor car” as it drove out through the wrecked store front. Genuinely pt Barnum level of showmanship. He took a big risk and it payed off

 

[TCABM]

…

Do it for a decade or three and you will maybe get there.

Yes. After 20-25 years you can become an overnight success.

Neither of those are really accurate. To stay in business, enough revenue must be generated to pay the bills. If you can’t do that, you don’t make 5 years in business. By the time you’ve been around a decade, you’ve grown enough that you’re employing others. Two decades and you employing managers of the others.

Each new employee results in income being generated for that employee who can turn it into wealth by saving some and spending some. Each new manager generates we income for not just that manager, but for the employees added that required additional management. All that income by all those employees can be used to generate their own wealth.

Or not.

But that income and wealth wouldn’t be possible if the business couldn’t turn enough of a profit each year to enable more employees to he added to payroll.

 

[StraightnLevel]

Neither of those are really accurate. To stay in business, enough revenue must be generated to pay the bills. If you can’t do that, you don’t make 5 years in business. By the time you’ve been around a decade, you’ve grown enough that you’re employing others. Two decades and you employing managers of the others.

Each new employee results in income being generated for that employee who can turn it into wealth by saving some and spending some. Each new manager generates we income for not just that manager, but for the employees added that required additional management. All that income by all those employees can be used to generate their own wealth.

Or not.

But that income and wealth wouldn’t be possible if the business couldn’t turn enough of a profit each year to enable more employees to he added to payroll.

This is not necessarily true in the world of VC (venture capital). There are companies that have survived for decades by selling a(nother) 10% stake to a larger firm every time they run out of funds.

 

[TCABM]

This is not necessarily true in the world of VC (venture capital). There are companies that have survived for decades by selling a(nother) 10% stake to a larger firm every time they run out of funds.

True, but VC firms play by the same rules. If the firm can’t make enough profit to employ quants, they probably won’t last decades in the game.

False, some VC firms are nothing more than con men.

ETA: let’s not even talk about Reg D ‘opportunities’.

 

[Flatiowa]

I have very mixed feelings about corporations’ I one way think, they drain a lot of the work capital of the line level workers production, but at the same time think without the corp guidance they would produce nothing, and all the line workers would be destitute, without work, and lost as far as what to do…

 

[cowtowner]

Neither of those are really accurate. To stay in business, enough revenue must be generated to pay the bills. If you can’t do that, you don’t make 5 years in business. By the time you’ve been around a decade, you’ve grown enough that you’re employing others. Two decades and you employing managers of the others.

Each new employee results in income being generated for that employee who can turn it into wealth by saving some and spending some. Each new manager generates we income for not just that manager, but for the employees added that required additional management. All that income by all those employees can be used to generate their own wealth.

Or not.

But that income and wealth wouldn’t be possible if the business couldn’t turn enough of a profit each year to enable more employees to he added to payroll.

The object of running a business is not necessarily just adding employees. It is finding the efficiencies of the business.

More employees doesn’t necessarily mean larger or more profitable. That is 20th century management.

 

[TCABM]

The object of running a business is not necessarily just adding employees. It is finding the efficiencies of the business.

More employees doesn’t necessarily mean larger or more profitable. That is 20th century management.

You’re right, but the question becomes one of value of the business at that point. Sure, someone can do that over time and have a career, but the day will come when it must be sold or shuttered. That requires being able to substantiate the value of the business, and if it can’t be, it’s shuttered.

 

[cowtowner]

You’re right, but the question becomes one of value of the business at that point. Sure, someone can do that over time and have a career, but the day will come when it must be sold or shuttered. That requires being able to substantiate the value of the business, and if it can’t be, it’s shuttered.

I didn’t say no employees. That’s a job. Not a business

But to allow each employee to be the most efficient that they can be. And to do that, you have to first have good employees, pay them well, but also stress them to the limit before you hire more

Technology helps also.

What used to take two people I can now do with one with automation

What used to take 100,000sq ft of warehouse space I can do with half as much with technology in my supply chain management.

I own three businesses. Two of them run with less employees per million dollar revenue than most tech companies, and they are hard product business to business

The third is a construction company, and we are slowly closing it down. Why? Because manpower. You are selling manpower. And after 40 years of doing it, I just can’t deal with the headaches of dealing with people problems on a daily basis.

One day technology and 3D printing will take over the industry. I probably won’t be alive to see it fully implemented, but it’s coming because of the inherent problem with people

 

[TCABM]

…
The third is a construction company, and we are slowly closing it down. Why? Because manpower. You are selling manpower. And after 40 years of doing it, I just can’t deal with the headaches of dealing with people problems on a daily basis.

Hence the sell or shutter dilemma. Shutting down indicates no one else sees the value of the business. But other businesses may see value of the employees and will hire them.

The likelihood of 100% of those employees being totally unemployable is low because they’ve been hired at least once.

 

[Kristin]

I always just thought this was a weird way of looking at things. Some people are doing really well, good for them. I don't see how their success is making me any worse off.

I don't pretend to know what everyone is going through everywhere but all the friends I grew up with are doing ok. I can honestly say I've never known an able bodied/minded person who made a decent effort at life who wasn't able to earn a living and have a few luxuries eventually. From where I'm sitting it doesn't seem all that dire... then again I'm wealthy enough to afford an airplane so what do I know?

There success, per se, is not. However, the combination of moving manufacturing out of the country, the tax code that incentivizes private equity to gobble up companies, load then with debt to get their money out, and then shove them into bankruptcy, are systemic problems that are having a negative financial effect on the greater middle class. Fortunately, not my tiny piece of it.

 

[Daleandee]

John Denver, a fellow pilot, pretty much sums up my thoughts on this:

 

[Ed Haywood]

And shockingly, we have made it to three pages with a mostly civil discourse and avoiding turning political and a lock!

Hold my beer!

 

[Ed Haywood]

Neither of those are really accurate. To stay in business, enough revenue must be generated to pay the bills. If you can’t do that, you don’t make 5 years in business. By the time you’ve been around a decade, you’ve grown enough that you’re employing others. Two decades and you employing managers of the others.

Each new employee results in income being generated for that employee who can turn it into wealth by saving some and spending some. Each new manager generates we income for not just that manager, but for the employees added that required additional management. All that income by all those employees can be used to generate their own wealth.

Or not.

But that income and wealth wouldn’t be possible if the business couldn’t turn enough of a profit each year to enable more employees to he added to payroll.

The decision in the early years is whether to pay yourself or reinvest in growth. I chose the latter and it has worked out well, but it absolutely took 15 years to get there.

 

[Kelvin]

I agree but I think you forgot about the generational dollar thinker. The ones who think about their families line. I grew up “poor”, my parents struggled to have any money, but we ate food we grew (vegetables and pigs, laying hens, all sorts of poultry, apple trees, sheep, and goats for milk/cheese) I got teased at school for not having the name brand/ the modern style clothes, my family driving an old car, you name it… I was an adult before I really realized how much more “wealth” my parents had than the other kids families. My parents owned land and were struggling through the farm crisis. I never went to daycare, my parents were home teaching me things on the farm. Theirs were working day jobs and paying morgages on their little house in a lot in town. When my father passed when I was 15 he left me 20 acres owned free and clear. When my mom passed when I was 25 she left me a 4 acre acreage( one of two they owned when I was growing up) and another 20 acres. And I was one of 4 kids.
I still live on that that acreage, and I can drive a mile and a half east, and another mile and a half south and every piece of land except for one 2 acre acerage is owned by extended members of my family. From brother, to cousin, to second cousin twice removed, it all has been from my great grandfather who owned 3 square miles of land in the 1890’s and beat it into his kids minds and them to theirs, that they never make more land, money gets spent and losses value everyday you don’t spend it, but every day land gets more precious. That message has held to be true through generations, but after a few generations of multiple kids it gets split into obscurity if it doesn’t continue to grow.

I like your point. Valid for sure.

As our society became portable if you will, the "Generational Dollar" mentality just vanished. I watch my aunts and uncles sell my grandparents farm land and buy new cars and other depreciate assets. They all are broke...nothing...my old man and his brother stayed put...they both have the Generational Dollar mindset.

This might be attributed the (or lack of) value we place on the nuclear family...it might be not but your point is a good point. I appreciate it very much.

 

[cowtowner]

Hence the sell or shutter dilemma. Shutting down indicates no one else sees the value of the business. But other businesses may see value of the employees and will hire them.

The likelihood of 100% of those employees being totally unemployable is low because they’ve been hired at least once.

We could sell the business, but the process of doing that would be too painful as there are so many interconnected parts with the other businesses.

Our average tenure of employees in that business is 20 years. I have one guy that’s been with me 37 years. It’s the reason we haven’t shuttered it already

We keep enough work going to keep the guys busy, and luckily, it does still make money. Just not the money the others do for the time invested. Because it’s an entity that’s been around since 1985, we have a good reputation and that alone gets us work.

We have been able to keep it afloat all these years through multiple recessions by reinvesting profits from the good years back into it during the bad. I’ll not throw it a life line again. My business partner doesn’t agree, it will become an issue when the time comes.

 

[cowtowner]

The decision in the early years is whether to pay yourself or reinvest in growth. I choose the latter and it has worked out well, but it absolutely took 15 years to get there.

We took on a partner 15 years ago when we started one of our businesses. He wanted to take all the profits out of the business every year. Told us that is how it’s done

Needless to say he didn’t last long.

 

[Morgan3820]

I understand, but many times it's the broke folks w/the new cell phone, watching pay per view, and what doesn't seem like expensive habits that over a few months adds up to a lot.

Our middle daughter, for a few years did a no-money November. She wouldn't spend any money on anything, except fuel, as she drove about 40 miles one way. Everything was purchased or paid for in advance so she socked away every check for that month. There are always choices.

Good for your daughter. So true. My daughter recently bought a Toyota Tacoma pick up. wrote a check for $20,000. Lives on her own in a nice apartment. All of this while on a stipend for a navy scholarship to med school. As you said it’s all about choices.

 

[Larry in TN]

Say what you want about Elon but if it wasn't for him the US probably would be out of the game on anything space related right now. Not to mention all the advancements Tesla motors made for electric cars. Or starlink... which is the only reason I have decent broadband internet here in the woods.

I used to think Elon was crazy. Starting his own space program. Promising insane performance and efficiency from boring EVs. Global internet from thousands of small satellites. Grid-level backup installations. Now, I think... Well, maybe he's still crazy but I'll never bet against him.

I think his autism plays a big role in the perception that he is crazy. It probably also plays a role in his ability to accomplish so much in such a short time.

 

[JOhnH]

I used to think Elon was crazy.

Just like being paranoid doesn't mean people aren't out to get you,
Being crazy doesn't mean you can't be a genius.

 

[StraightnLevel]

Just like being paranoid doesn't mean people aren't out to get you,
Being crazy doesn't mean you can't be a genius.

Genius will always appear to be a bit crazy from the outside.

 

[tspear]

I did not bother reading the whole thread. But there are a number of academic papers on this subject. The few I have read, point too just a few major causes in the wealth disparity.
1. Tax changes enacted in the early 80s; greatly expanding capital gains tax treatments and differentiating them from ordinary income. (my very brief look into this aspect I realized I do not know enough to follow the nuances of the argument).
2. Lack wage growth for the majority of the population. As productivity increased, wages have not. Causes for lack of wage growth, were mostly attributed to technology as the leading cause followed by globalization.

Tim

 

[SoonerAviator]

I did not bother reading the whole thread. But there are a number of academic papers on this subject. The few I have read, point too just a few major causes in the wealth disparity.
1. Tax changes enacted in the early 80s; greatly expanding capital gains tax treatments and differentiating them from ordinary income. (my very brief look into this aspect I realized I do not know enough to follow the nuances of the argument).
2. Lack wage growth for the majority of the population. As productivity increased, wages have not. Causes for lack of wage growth, were mostly attributed to technology as the leading cause followed by globalization.

Tim

So who benefits (monetarily) from the globalization/productivity increases of the general workforce? The CxOs, the shareholders/stock market guys. When you hold back wage growth from the lower/middle class workers in order to send more profits to wall street/executive compensation, you've transferred that wealth to the people at the top. Since it happens over and over, eventually the middle class gets squeezed over multiple decades. However, when you don't send those record profits to Wall Street, the investors start dumping stock or recommending "sell", which then hits your company leverage/liquidity options.

 

[Pugs]

Overall, the top 10% richest own more than the bottom 90% combined, with $95 trillion in wealth. (that was in the paper just citing it under your name to keep it separate from my input)

The article is a bit simplistic. Many/Most of us were in that bottom end at one point and there is no accounting for how those folks worked, lived, saved and invested (TCABM points out) and moved over time from the bottom to the top (ish). All it takes is time, hard work and living below your means and it does pay off.

 

[StraightnLevel]

I did not bother reading the whole thread. But there are a number of academic papers on this subject. The few I have read, point too just a few major causes in the wealth disparity.
1. Tax changes enacted in the early 80s; greatly expanding capital gains tax treatments and differentiating them from ordinary income.

Hang on there.

Capital gains have been taxed differently from regular income for over a century (since 1922). In fact, from 1954-1967 capital gains rates topped out at 25%, while they were re-set to 28% in 1987.

Think about it for a moment. If you bought a house in 1990 for $100K, and today you sell it for $350K, have you really earned any actual value? No, of course not - the "gain" isn't really a profit, it's just a reflection of inflation. If you take that $350K down the street to buy another house, it isn't going to buy anything larger or in better condition that what you sold, there is no actual "gain" from the transaction. Why should it be taxed at all?

Historical Capital Gains Rates

Wolters Kluwer takes a historical look at capital gains rates in the United States.

www.wolterskluwer.com