# IS Wall Street the main cause of U.S. income/wealth inequality? **URL:** \ **Category:** Great Debates\ **Created:** [February 12, 2016, 1:45pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926 "2016-02-12T13:45:17Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [February 12, 2016, 7:31pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/21 "2016-02-12T19:31:14Z")
> [@sciurophobic](#): > > When someone can make money investing in a company whose stock value goes up when employees are laid off that’s inequality. Do you have any idea why the stock value might go up after a headcount reduction? ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [February 12, 2016, 7:32pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/22 "2016-02-12T19:32:03Z")
> [@sciurophobic](#): > > When someone can make money investing in a company whose stock value goes up when employees are laid off that’s inequality. Why?? 😕 If an auto manufacturer, as a basic example, automates their processes, needing fewer employees while upping manufacturing standards and quality, why shouldn’t that company make more while needing fewer people? Do you invest in companies that are willing to lose money by keeping on unneeded staff?? ---
**Author:** ![lance\_strongarm](https://avatars.discourse-cdn.com/v4/letter/l/87869e/32.png) [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)\ **Post date:** [February 12, 2016, 7:35pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/23 "2016-02-12T19:35:53Z")
> [@XT](#): > > :dubious: If you’ve simply been putting in your 10% into a 401K for the last 20 years you are going to be close to a million dollars by now, because the one thing on your list you didn’t mention was investing. You may not FEEL particularly rich (I certainly don’t) but by the standards of many on this board having a million dollars or more in assets makes one ‘rich’. _What_ 10%? My wages are too low. ---
**Author:** ![lance\_strongarm](https://avatars.discourse-cdn.com/v4/letter/l/87869e/32.png) [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)\ **Post date:** [February 12, 2016, 7:38pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/24 "2016-02-12T19:38:47Z")
The rich can get rich, or richer - good for them. The real question is why are the 1% getting rich but not the rest of us? It used to be everyone could get rich without it being a competition. The modern economy puts all the spoils of growth into the hands of the rich rather than spreading it out. Workers are more productive, but wages stopped following the increase in productivity. Why? ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [February 12, 2016, 7:48pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/25 "2016-02-12T19:48:29Z")
> [@lance\_strongarm](#): > > _What_ 10%? My wages are too low. Does your company have a 401K or other pre-taxed deduction program? If so, then the money comes out before you are taxed, and in many cases you won’t see a very large change in your take home pay. Simply budget for the change and then forget about it. And before you say only rich people can do this, I’ve been doing this for decades now, and started long before I was making a substantial amount of money…and continued to do it even after the dot com bust when network engineers became a dime a dozen and the market was flooded with engineers laid off from dying tech companies and the salary market price dropped like a stone. Sometimes it was very hard, but the end goal is to have that money when I want to kick back and retire. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [February 12, 2016, 7:54pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/26 "2016-02-12T19:54:13Z")
> [@lance\_strongarm](#): > > The rich can get rich, or richer - good for them. The real question is why are the 1% getting rich but not the rest of us? It used to be everyone could get rich without it being a competition. The modern economy puts all the spoils of growth into the hands of the rich rather than spreading it out. Workers are more productive, but wages stopped following the increase in productivity. Why? Depends on your field really. When you say ‘the rest of us’, you need to be aware that not all labor categories are stagnant or dropping, just some of them. But the broader answer to the last part of your paragraph here is that the value add that most companies are experiencing doesn’t come from labor, but from automation and expert systems and streamlining of their processes. So, since it’s not labor that is increasing the productivity it’s not being reflected in labor getting an increase in their pay. If you are in a category of labor where the industry needs you to gain increased productivity then you have a bargaining chip to use wrt increased salaries. If those gains are due to automation, however, then you don’t, since it’s ‘the rich’ who are dropping in the capital to provide that automation, and the only ones besides them that benefit from that are the consumers and the very vertical labor who does the automation in the first place. ---
**Author:** ![lance\_strongarm](https://avatars.discourse-cdn.com/v4/letter/l/87869e/32.png) [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)\ **Post date:** [February 12, 2016, 8:02pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/27 "2016-02-12T20:02:31Z")
> [@XT](#): > > Does your company have a 401K or other pre-taxed deduction program? If so, then the money comes out before you are taxed, and in many cases you won’t see a very large change in your take home pay. Simply budget for the change and then forget about it. I’ll forget about it until my checks start bouncing. My point was that many workers today don’t have extra money to invest because wages haven’t kept up with inflation. They are wage-poor and investment-poor. > [@](#): > > And before you say only rich people can do this, I’ve been doing this for decades now, and started long before I was making a substantial amount of money…and continued to do it even after the dot com bust when network engineers became a dime a dozen and the market was flooded with engineers laid off from dying tech companies and the salary market price dropped like a stone. Sometimes it was very hard, but the end goal is to have that money when I want to kick back and retire. I love it when people say “anyone can do this because I did.” You aren’t typical. Millions of workers today can barely pay the bills and don’t have spare cash to save or invest. ---
**Author:** ![lance\_strongarm](https://avatars.discourse-cdn.com/v4/letter/l/87869e/32.png) [@lance\_strongarm](https://boards.straightdope.com/u/lance_strongarm)\ **Post date:** [February 12, 2016, 8:04pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/28 "2016-02-12T20:04:46Z")
> [@XT](#): > > Depends on your field really. When you say ‘the rest of us’, you need to be aware that not all labor categories are stagnant or dropping, just some of them. The bottom 90% of the income distribution has been stagnant or dropping for the last three decades. That’s not some, that’s most. > [@](#): > > But the broader answer to the last part of your paragraph here is that the value add that most companies are experiencing doesn’t come from labor, but from automation and expert systems and streamlining of their processes. But that’s always been true. So how did wages rise for 100 years before? How did we create the middle class? ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [February 12, 2016, 8:12pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/29 "2016-02-12T20:12:38Z")
[QUOTE=lance strongarm] I’ll forget about it until my checks start bouncing. [/QUOTE] Well, that would mean you didn’t budget. 😛 > [@](#): > > My point was that many workers today don’t have extra money to invest because wages haven’t kept up with inflation. They are wage-poor and investment-poor. There are certainly millions of Americans…10’s of millions actually, who COULD take advantage of a 401K program but don’t. I’m unconvinced that all or even most of them couldn’t, however. So, do you have a cell phone with a data plan? Home internet? Do you get cable or satellite TV? Do you have a new car or a car payment? Do you ever eat out? Fast food for lunch, perhaps? Or are you basically going through life spending the minimum already (using that public library account to chat on this message board, perhaps?), eating ramen every night and taking it to work every day, biking to school on a 30 year old bike, etc etc? If so then yeah, you are screwed…there is zero room for you to invest. If not, then there are some things in your budget you could do without to put in at least something towards your retirement. Even if it started out as just $5 per pay check it’s something. > [@](#): > > I love it when people say “anyone can do this because I did.” You aren’t typical. Millions of workers today can barely pay the bills and don’t have spare cash to save or invest. And I love it when some of my cow-orkers say exactly the same thing to me (as I give this speech a lot at work) while they are texting on their cell phone or telling me about going to the casino on Friday evening or munching on their Wendy’s lunch. Maybe it’s true in your case…you just have zero slack and couldn’t invest a penny. But it’s not true in all or, in my experience even most cases. It’s just a matter that the folks making the decision would rather have that cell phone, that high speed internet connection, that cable or satellite TV or whatever than to invest that money for the long term. ---
**Author:** ![sciurophobic](https://avatars.discourse-cdn.com/v4/letter/s/cab0a1/32.png) [@sciurophobic](https://boards.straightdope.com/u/sciurophobic)\ **Post date:** [February 12, 2016, 8:13pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/30 "2016-02-12T20:13:02Z")
> [@D\_Anconia](#): > > Do you have any idea why the stock value might go up after a headcount reduction? Because it increases shareholder value, unemployed workers be damned. ---
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [February 12, 2016, 8:15pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/31 "2016-02-12T20:15:34Z")
> [@sciurophobic](#): > > Because it increases shareholder value That’s the purpose of a (for profit) corporation. What is your alternative? ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [February 12, 2016, 8:41pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/32 "2016-02-12T20:41:47Z")
> [@XT](#): > > Nor did I say that hedge fund managers get rich by saving their pennies. However, ‘rich’ is a relative term, and I’ve seen it said on this board that having a million dollars (or some other arbitrary amount) is ‘rich’…and that is certainly attainable to anyone who is disciplined enough to invest from an early age in their 401K or whatever other investment medium they choose. Despite periodic setbacks, things like money market funds or other funds have paid off pretty well, in my own experience at least, over the past 20-30 years. Am I in the top 1%? Nope. It would be nice but no, I’m not. However, I’m nearly at the point where I can retire on my investments with what I get from Social Security being a nice bonus, which is kind of what I was going for. I was pretty much agreeing with you as you disagreed with Shodan. We’ve had threads before about the definition of rich, but the way you and I are rich doesn’t contribute much to income inequality. We’re not outliers who skew the average income and wealth level. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [February 12, 2016, 8:48pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/33 "2016-02-12T20:48:14Z")
> [@puddleglum](#): > > Google, MasterCard, Adobe, Microsoft, and Pepsi all have Indian CEOs. It is just false that executives are protected from international competition. That’s not what is typically meant by international competition. 90% of the people who work in my building were born outside of the US. But they pretty much all went to grad school here, and are pretty much all citizens or on the path to citizenship. They are no more international competition than Isaac Asimov (who was born in Russia) was. Outsourcing the CEO job to Banaglore would be. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [February 12, 2016, 8:55pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/34 "2016-02-12T20:55:58Z")
> [@lance\_strongarm](#): > > …wages haven’t kept up with inflation. [The average hourly wage in 1964 in constant dollars was $19.18 in 1964, and is $20.67 now](http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have-barely-budged-for-decades/). This is wages only - it does not take into account the increase in value of non-wage benefits. Regards, Shodan ---
**Author:** ![octopus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/octopus/32/3716_2.png) [@octopus](https://boards.straightdope.com/u/octopus)\ **Post date:** [February 12, 2016, 9:02pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/35 "2016-02-12T21:02:44Z")
> [@DSeid](#): > > [I think this op is better here than in Elections but if a mod feels otherwise please feel free …] > > Sanders’ singular message is income inequality … caused by Wall Street having the economy rigged. > > It’s a nice sound bite, a good marketing angle that hits on Hillary’s vulnerabilities hard, but is it actually true? And would a tax on every trade be a meaningful part of a solution or would it risk significant negative impacts? > > (Please note: IMHO income, and more so wealth, inequality must be meaningfully addressed for the good of the society as a whole, the wealthiest inclusive, and I believe that economic populism is a winning political tactic this season. Simple messaging sells best. Selling the product of a candidate or even of an approach is a packaging issue, not a reality issue. This discussion however is hoped to be a reality one.) > > My assessment is that reality is much more complicated than what Sanders presents and that the solution he proposes are both simplistic and risk more harms than goods. He wants war on the 1% and as he points out about military interventionalism internationally, sometimes good intentions have unintended consequences. > > The hollowing out of the middle class is resulting from multiple factors. [ul] > [li]More and more jobs of the middle class are being automated including jobs of many knowledge workers. maybe eventually increased automation will, by way of increased productivity, raise the whole boat … but for now it mainly raises the prospects of those who own the capital.[/li][li]For both better and worse we are unavoidably part of an international economic community. American workers are competing internationally and we are competing internationally to the place to invest capital. The net global impact is a major decrease in income and wealth inequality as the poorest of the world move up, but we have some negative local impacts.[/li][li]As noted by Sanders, higher education is a virtually required minimum to get a middle class job now, but getting such uses up most families’ ability to accumulate any wealth. (I do not think his solution is realistic, but the observation is, I believe, valid.) [/li][li]And also addessed by Sanders, the tax structure that favors the very wealthiest.[/li][/ul] > > Let us assume, for the sake of discussion, that Sanders somehow, with magical pixie dust gets a political revolution and accomplishes his free college in public institutions, paid for by taxes on all trades and much greater taxation across the board but especially on corporations and the income brackets, and increases minimum wage to $15/hr federally … given the first two listed factors, what happens? Does it actually fix them or does it accelerate and amplify their impacts? > > My assessment is the latter but I would be interested to hear a reasoned (not sound bite or shouting) discussion of it. > > Thanks. Voters hollowed out the middle class by voting in politicians that enacted insane policy. You cannot have de-facto open borders and global free trade while having a wage floor. All it takes is some research into how much stuff those huge container ships move daily to realize that jobs were going to move to where labor is cheap. If the state could legislate wealth the USSR would still be around and China would still be communist. ---
**Author:** ![octopus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/octopus/32/3716_2.png) [@octopus](https://boards.straightdope.com/u/octopus)\ **Post date:** [February 12, 2016, 9:04pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/36 "2016-02-12T21:04:28Z")
> [@lance\_strongarm](#): > > I’ll forget about it until my checks start bouncing. > > My point was that many workers today don’t have extra money to invest because wages haven’t kept up with inflation. They are wage-poor and investment-poor. > > I love it when people say “anyone can do this because I did.” You aren’t typical. Millions of workers today can barely pay the bills and don’t have spare cash to save or invest. Millions of workers also buy stuff they don’t need. But, on that subject, since it appears we could use more demand side economics a basic income with no minimum wage would be a good start in solving economic issues. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 12, 2016, 9:07pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/37 "2016-02-12T21:07:24Z")
> [@Shodan](#): > > His singular message is stupid. > > Wall Street didn’t rig the economy. Rich people get rich by spending less than they earn and investing the rest. That’s how the world works. Sam Walton got rich by creating Walmart. Not by shopping there. The notion that most people got rich by spending less then they earn and investing wisely is largely fantasy. What people are talking about when they say “Wall Street rigging the economy”, is that a number of people on Wall Street got rich by selling complex financial instruments that they knew to be flawed or outright fraudulent. The regulatory mechanisms that were in place to prevent this sort of thing from happening were largely inadequate or ignored. And for the most part, the people who were responsible largely did not suffer any consequences. When people talk about “rich” they are not talking about middle managers and executives making six figures and worth a million dollars, mostly tied up in their house and 401k. They are talking about a self perpetuating class of super-wealthy bankers, hedge fund managers, venture capitalists, CEOs, and corporate board members and who control vast amounts of capital and actively work to enact legislation and other policies to increase their wealth at the expense of the middle and working class. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [February 12, 2016, 9:12pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/38 "2016-02-12T21:12:01Z")
> [@octopus](#): > > Voters hollowed out the middle class by voting in politicians that enacted insane policy. You cannot have de-facto open borders and global free trade while having a wage floor. All it takes is some research into how much stuff those huge container ships move daily to realize that jobs were going to move to where labor is cheap. > > If the state could legislate wealth the USSR would still be around and China would still be communist. China IS still communist. Just sayin’… ---
**Author:** ![sleestak](https://avatars.discourse-cdn.com/v4/letter/s/919ad9/32.png) [@sleestak](https://boards.straightdope.com/u/sleestak)\ **Post date:** [February 12, 2016, 9:21pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/39 "2016-02-12T21:21:53Z")
> [@sciurophobic](#): > > When someone can make money investing in a company whose stock value goes up when employees are laid off that’s inequality. Actually, that is progress for the most part. Imagine Widget Co. makes widgets. Widget Co. figures out a way to make more Widgets using less workers. This will, in most cases, make the cost of producing the widgets go down. Widget Co. produces more widgets for less cost. Widget Co. sells more widgets than their competetors. Widget Co. lays off some workers because Widget Co. is producing more Widgets and earning more profits using fewer employees. The stock rises because Widget Co. is more profitable and more people want to own the stock. The laid off employees, however, aren’t very happy until they get another job. Sooner or later the laid off employees get another job producing something else. This process can really suck for the laid off employees. However, for the market as a whole you have Widget Co. making more widgets using less people. The laid off people will get jobs and _produce something else_. And in the end you have Widget Co. producing more widgets cheaper _and_ Widget Co.s previous employees producing something else. so you end up with more stuff overall. The short term can really suck for anyone who is laid off. However, if this type of process didn’t occur, we would still have 50%+ of the work force producing food instead of making things like cars, T.V.s, computers, etc. > [@](#): > > lance strongarm , something you may want to think about. Most of the rich people I know budget using ‘[pay yourself first](http://www.investopedia.com/terms/p/payyourselffirst.asp)’ as the primary budgeting decision. Most poor people I know (and I’ve done this in the past myself) use the ‘pay the car/boat/house/t.v./whatever’ first method of budgeting. This is the ‘Oh man! I like the new Dodge Challenger! Even though I have a three year old Mustang, I just gotta have the new Dodge Challenger!’ method. In fact, one of my best friends earns (including his wife’s income) about twice what I do. They both have shiny new cars. They have real marble in the bathroom and kitchen, recently added. They have taken lots of expensive vacations. And they are about -\>\<- this close to losing it all. One bad month and they are screwed. Additionally, they will work until the day they die if they don’t change the way they spend. Now, it isn’t easy to do. You have to eliminate debt except for a mortgage. You have to put off buying new stuff all the time. You may have to read Mr. Money Mustache\*. But if you do it you can save and invest. Slee \*I have no connection to MMM. Just think he has some good ideas. ---
**Author:** ![Shodan](https://avatars.discourse-cdn.com/v4/letter/s/9f8e36/32.png) [@Shodan](https://boards.straightdope.com/u/Shodan)\ **Post date:** [February 12, 2016, 9:23pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/40 "2016-02-12T21:23:41Z")
> [@msmith537](#): > > The notion that most people got rich by spending less then they earn and investing wisely is largely fantasy. No it isn’t - I have already given a cite to that. Regards, Shodan [Previous page](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926.md?page=1) [Next page](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926.md?page=3)