At what point is income inequality too unequal?

Great Debates
1

Inspired by this post from user_hostile in the “Stupid Republican idea of the day” thread. I waited for u_h to start the thread since a couple of us encouraged the idea, but since he hasn’t yet, I thought I’d go ahead and start it.

The key idea is contained in this quote, which follows a link to an AP News story detailing that 1 in 2 Americans is either poor or low-income:

So if we’re at 50% struggling now, what is the tipping point? At what point is it going to be too much for our society to bear?

I’m not really asking “at what point will there be violence” (although that could be one reaction), I’m asking more “at what point will there be a reaction/instability?”

I think the Occupy protests are the start of it, but I don’t think they’re the last part of it.

Myself, I think when we see about 65% struggling to make ends meet and having trouble putting food on their family* we’ll start to see some real ugliness. If that reaches 80%, I think our society is in big trouble and will not continue much longer in it’s present form.

What do you think, and why?
*I hope that makes some of y’all Let’s go to the quarry and throw shit down there.

2

I wouldn’t put a number on it. I would put the point where such an inequality is the result of a legalized form of slavery, serfdom, or other kind of indentured servitude. To quote a meant to be comical phrase, “The world needs ditch diggers, too.” So long as people are free to change jobs, obtain more education, and start their own businesses, I would scratch my head at the need for government intervention.

I would also look at it in a “normal” economy. Not one in nearing the 4th year of a downturn/stagnation.

3

In addition to income inequity, we also need to look at if there is an opportunity to advance out of your current place in society.

An increase in income inequity is often accompanied by a decrease in the ability to move out of a lower income bracket. If education is priced out of the hands of people, it is very hard for them to get a job that requires education. Seed money is required to start your own business.

And the first person to post “poor people are just jealous of the wealthy”, or “the solution for the poor person is to just get a job that pays more”… gets a snort of derision from me.

4

Is there a smiley for that now?

5

Never. If someone’s standard of living is low, that is the problem. The problem is not that someone else’s standard of living is too high.

6

There are not an infinite number of resources available, thus, it is possible that a reason for someone having a low standard of living is that someone else is hogging all the resources.

If your view differs, please explain why we are able to put a percentages on things like wealth, income, etc.

A percentage implies a finite amount of something, otherwise we couldn’t quantify things like oil use, control of monetary resources, electricity usage, etc.

Do you think there is an infinite amount of wealth, and the people with none just aren’t trying hard enough?

7

I don’t have so much a problem with income inequality, as with income growth inequality.

For the first half or so of the last 100 years, middle class and wealthy incomes increased at close to the same rate (a little higher for wealthy incomes). But for the last 50 years, middle class income has not increased much, while wealthy incomes have increased by significantly more than they did previously.

I believe this is because government policy shifted towards being more favorable to the wealthy, and less helpful to the middle class.

Here’s a link.

8

I don’t know. Over the last 15 years there has been a large shift in the public about health care because health care became so expensive that it is now more or less a luxury item for large swaths of the public. Despite that, large numbers oppose any kind of public reform. However, that doesn’t mean they’d oppose private sector reform.

I would guess the real problem is when income inequality is translated into a ‘captured’ government that is transparently designed to service the agenda of the wealthy and powerful. Also when 70% of the public can’t afford necessities. Also when people realize that the usual keys to advancement (good work ethic, social skills, education, talent) no longer pay off or result in any kind of better life down the road. But we are already seeing all those things in some form or another now.

However for some of us ‘the rich’ are an abstraction. I don’t meet ‘rich’ people at all. I sometimes meet upper middle class and professional class people (physicians, pharmacists, lawyers, etc). But ‘the rich’ are not something concrete I can really relate to or against. I think that is a situation a lot of people who don’t live in large metro areas will see.

Also on the other end of the spectrum you have the fact that in times of stress and despondency many people turn to the right rather than the left, which increases inequality. Fascism (not that I am comparing US groups to fascists) had a lot of support from both corporate backers and working class/working poor people. So if people find out that they can’t afford to go to school or see a doctor there is just as much of a chance they will turn to the right politically (become xenophobic and nationalistic) which means they will align with a party that promotes further income inequality and reductions in the social safety net and welfare state.

9

The problem is that it’s not that simple. There are people who even before the recession needed to work more than one job just to make ends meet. At what point would they be able to pursue an advanced education or look for a better job? Even holding one job, doing that and going to school is not easy (or cheap).

The worse thing about economic debates, in my opinion, is that people like to break it down to black and white -“The rich are rich because they work hard, and the poor are poor because they’re lazy.” Except, that’s not true.

Right now, we have government programs that are (barely) helping low income families. Programs like food stamps and SSI are designed to help people who aren’t making enough money to be able to put food on their tables. Even with a job in the military, my family and I need to rely on WIC to help provide extra support. Right now, my wife stays at home. True, it’s easy to say, “Tell her to get a job,” but again, it’s not that simple. My daughter is autistic, and my son has developmental delays. Both would require specialized daycare. That’s expensive.

Further, my son has an eating disorder that requires an overnight nurse. Even being in the military with Tricare, I couldn’t afford that without the government programs available in the state I’m stationed in. I don’t know what we’re going to do in a few months when I need to separate (layoffs are affecting even the Navy). Even ignoring my own basic health needs, I still need to find a job that will provide for my two children’s health needs.

I personally believe that it’s necessary for the government to provide assistance for people who need it. This is, after all, government of the people, by the people for the people. When you have everyone being able to meet their basic needs, it’s good for the society as a whole-crime goes down, you have a better educated populace, a healthier society, etc. When you have a small elite holding most of the wealth, the rest of the populace suffers.

To answer the OP, however, whatever percentage you come up with, it’s too high. No one should be told that they should be required to live a low standard of living.

Marc

10

Pretty hard to live at all on a ditch digger’s salary, let alone obtain more education or start a business.

11

I don’t understand the premise of the thread. It’s as if there is an assumption that reducing the amount of money a CEO makes will in any way make a difference on the hourly worker wage.

We had a one-time gift of high wages after WW-II because we had something like 75% of ALL the manufacturing facilities in the world. All the other industrialized nations were literally bombed out of the picture. We produced everything from cars to toasters which encompassed all the tooling and raw materials needed to make those products.

Those days are gone and will never return. The end result is that out of the ashes of defeat rose countries who rebuilt with the newest manufacturing facilities and had a supply of modest wage workers. This has been exacerbated by the emerging economies of China and India who have an inexhaustible source of cheap labor.

We are now competing against these nations using an education system that is attacked for demanding grossly substandard achievement. We are competing against better educated workers earning much less money.

There is a a reason China is buying up companies like IBM and Volvo and investing in raw materials. They don’t have to reinvent the wheel to compete, they only have to buy what already exists and use their excess cash to compete against cash-strapped companies.

This is where the discussion begins about the gap between CEO’s and factory workers. Factory workers compete against foreign workers for the same hourly wage. CEO’s are few and compete against each other locally. It’s easier to boost their wage using performance metrics as a reward.

You can use the term “fairness” but it’s really nothing but wishful thinking in a worldwide economy where we are all in competition for the same hourly wage.

12

You can start a roofing business with literally nothing but a hammer and ladder and nothing else. One person can shingle a modest house in a week earning a net profit of $1,500 or $75,000 a year. Not sure what can be earned installing wallboard but the tools are the same. I’m in my 50’s and I’ve had to do a little of everything to survive 3 1/2 years of unemployment. I can empathize with an argument that manual labor is not for everyone. It’s also tough on the start up because of the skills needed to work profitably. My last remodeling job turned out a very low wage when all was said and done because I’m not the fastest plumber/mudder/electrician/carpenter/window installer on the planet.

13

Really? I can start a roofing business without a license? Without insurance? Without being bonded? Without a vehicle? Without prior experience? Without safety equipment?

How many jobs would a person need to perform at a loss before acquiring the necessary “skills needed to work profitably”? And why is it that among the things you said are need to start this business, you neglected to mention them until you’re 2nd-to-last sentence? If they are necessary, then clearly you need them in addition to the hammer and ladder your first cited.

Bottom line: it takes more than the desire to start a business to actually do it, and it takes more than platitudes and wishes for people to eat.

Removing all the regulations and licensing procedures and insurance/bonding requirements wouldn’t just mean more roofing businesses, it would also mean more shitty roofing jobs.

So for you, there is no point at which the haves and the have-nots are going to come into any sort of conflict, no matter how unequal their economic positions become?

14

You’re right. American companies should make more of an effort to hire successful and more economical foreign CEOs.

The top paid CEO in Canada, for example, made $24 million in cash, benefits, and other income. The second-most highly paid CEO made $17 million, and the rest of the top ten made between $14 and 11 million. Compare that to to the average American CEO compensation of $11 million, with top performers making as much as $135 million per year, and I see this as a great way for some American companies to add $100 million of pure profit to their bottom lines!

I mean, if a British guy can leave a US company to go to Japan to make $11 million a year running Sony, surely some American company can fire their CEO who makes $20, $30, $50, or $100 million a year, hire this Brit for $15 million, bank the rest of the money, and still have a fully qualified, skilled person doing the job of the overpaid American whom he replaced!

Don’t like that idea?

It’s called “globalization,” people. Get used to it.

15

After reading your posts, it’s clear that you don’t understand what I’m asking in the OP; I’m sorry I wasn’t able to phrase it more coherently for you.

I’ll try again, tho: at what point of inequality would the relative positions of the haves and the have-nots come into some sort of conflict?

16

Come on, dude, that’s just examples of the gubbmit stifling the Free Market with overly burdensome regulations. Dude, if someone who has no idea what they are doing, and doesn’t have the financial resources to pay for any damage that they might cause, wants to take his hammer and ladder and start a roofing business, what the hell is wrong with that? Why would the gummint want to stop these self-starting Job Creators? Gaarrgh, how many jobs must be lost to excessive government intrusion in the Free Market???

In fact, I’ve been thinking about setting aside my university degrees in international relations and history in order to start up a plastic surgery business. All it takes is a scalpel, a couple syringes, and one of those fold-out massage tables and I’ve got a new career. What could go wrong?

17

My wag: when the rich can no longer profit from the poor. Or said the other way, when the poor can no longer buy stuff from the rich.

My biggest beef with these threads is that “the poor in America” is such a overly broad definition as to be completely meaningless. My reasoning is that “the poor in America” own things like iPods, Xboxes, cars, tvs, microwaves, and houses. And there are no shortages of rationalizations for why “the poor in America” NEED those things.

So as long as “the poor in America” are buying those things, people like the late Steve Jobs, Bills Gates, the Ford Family, the Walton family, and evil bankers, will continue to profit. And as long as the poor CAN buy those things, they will continue to both be poor and mildly content.

But the key answer to your question is that of upward economic mobility. As long as people in the US either have it or perceive it, they aren’t going to do anything to topple the upper echelon.

As a contrast, imagine if the top 1% were part of the Royal Family, and as such the only way to be part of the 1% is to be born into The Royal Family. That’s a pretty demotivating environment. And eventually the conflict you describe forces the surfs to rise up and kill the monarchy. Guys like Zuckerberg wouldn’t exist, instead all internet systems would be owned and controlled by the Royals. As would all the land, and roads, and buildings.

For all the bitching on this message board, the US still has upward economic mobility. And the American Surfs aren’t about to turn the rich into cat food (aka vote for higher taxes on the rich) because they still believe they might some day be rich.

The real irony here is that the poor in America could forgo their consumer lifestyles and allow themselves to acquire wealth. While at the same time generating less profit for the top 1%. The financial melt down was this sort of pattern. People convinced they had to have a house, the biggest house possible. As a result, those people got really poor, and others got extremely wealth.

In summary: It’s not that there is income inequality, or how wide the gap is, it’s the way that matters. That’s why I keep pointing to all the countries with a better Geni coefficient that are still hell holes. People leave those countries to live in the US because of the potential for upward economic mobility.

As as this is the one year anniversary of the the Arab Spring, it might be a good time to look at why Mohamed Bouazizi lit himself on fire. And to give you a hint, both Tunisia and the US both have the same coefficient.

18

White House unveils streamlined business rulesThe regulatory reforms are intended to save businesses time and money, but critics say other new rules offset the improvements.

ETA Again I urge you to look up why Mohamed Bouazizi lit himself on fire.

19

I was going to make a crack about your response totally missing the point, but did you know that wealth is distributed more equally in Tunesia than it is in the United States?

Interesting, and totally true.

20

Just for the record, is this thread different from this active thread?

At any rate, where are you getting that figure from?