# 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:** 5
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [February 15, 2016, 2:31am UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/81 "2016-02-15T02:31:22Z")
> [@Mijin](#): > > For the second time, no, **msmith537** didn’t throw in that qualifier, he was responding to a specific claim by **XT**. I stand corrected on who used 20 years as a a reference time frame for generating a million dollars. My apologies to msmith537. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 15, 2016, 4:40am UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/82 "2016-02-15T04:40:33Z")
> [@Magiver](#): > > kowtow to the rich? Now you sound like Mao Tse tung. How is saving money kowtowing to the rich? It’s not. Supporting policies that go against your interest as a working class or middle class American as if the interests of the super-wealthy align with your own is kowtowing to the rich. > [@Magiver](#): > > Believe it or not there are people out there with real jobs who don’t spend money on cable TV, new cars, iphones and eating out every day. They put that money in their retirement fund. Lets look at the numbers. $80 for cable a month, $400 eating out each month, $200 extra cost of new car payment per month, $60 phone cost each month. That’s $740 a month of unnecessary spending. I’m not even trying here. That’s an extra mortgage payment. People who save their money pay their house off early. Instead of 30 year mortgages they have 5-10 year mortgages. that’s 20 years without a mortgage added to retirement. Instead of spending $300 on clothes for work they go to 2nd hand stores and spend $10. Instead of $34,000 cars they buy $8,000 used cars. That’s a savings of $26,000 over 5 years. In a 45 year work span that’s $234,000. So in other words, if they save every penny, live like a college freshman for the greater part of their adult lives, they might be able to save what a 28 year old analyst at Goldman Sachs makes a year or so out of business school. > [@Magiver](#): > > The “system” isn’t supposed to provide people with jobs. The actions are pretty simple. Don’t have children you can’t afford to pay for or have the skills to properly raise. That’s the entire problem in one sentence. We have 50% drop out rates in large cities and the ones who do graduate are borderline illiterate burdens on society. > > We are now competing on a world wide basis. The days of stumbling out of high school and working in a factory making big bucks are over. That only existed for a very short time period following WW-II when the United States retained all of it’s manufacturing facilities while the rest of the industrial world rebuilt itself from the rubble. Those old enough will remember a time when the words “made in Japan” meant poor quality merchandise. Times have changed. Yeah, I read Atlas Shrugged too. It was long, boring and full of self-contradictory bullshit. I guess the question is what is to be done with all these people who don’t have the wherewithal to go to college and get fancy corporate jobs? > [@Magiver](#): > > putting your played out Fox News rant aside, there is no such entity as “Wall Street”. There is the world of business which has to compete against China, India and all the smaller 3rd world countries. Any leveling of the playing field starts by competing with their labor force and tax laws. That’s weird. I wonder where I take a ferry every day when I go to work. Of course there is an entity called “Wall Street”. It’s basically Manhattan based investment banks and financial services companies and the various exchanges they trade on. And the business of Wall Street is very different from the business of Silicon Valley or large product based companies like Proctor & Gamble or General Electric. Given your work in a factory seemed transitory by nature, I take you your normal career doesn’t consist of work that typically competes with China, India and third world countries? > [@Magiver](#): > > Nobody is sitting in a room thinking rich people rock and poor people are losers. Obviously you’ve never worked on Wall Street. > [@Magiver](#): > > They’re thinking they have to produce a product at a total cost comparable to other companies around the world. If you drill down to the hiring manager level you will find them struggling to find qualified people to operate machinery on a competitive level. > > I can tell you first hand this is a problem. When I was between jobs I worked at a factory. there was nothing particularly high tech about the products but like any product the tolerances needed to be maintained. The test I took to get the job was painfully easy. Far easier than tests I took for other jobs. The hiring person was amazed I got everything right. It was literally all 3rd grade math. She said the person before me got almost all of it wrong. I pressed her for more information and she said this was a huge problem for them. And I suppose my question back to you is why is it so hard to find people who can do 3rd grade math? ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [February 15, 2016, 5:21am UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/83 "2016-02-15T05:21:49Z")
I believe one of the factors causing an increase in wealth inequality is the rise in the number of professional women in the workplace and the number of women going to college. This is causing increasing bifurcation in society as professional men and women marry each other and become households with two high salaries, while blue collar men and women are more likely to be single or be in one income households. To the extent that the middle class is shrinking, the attrition is happening at the top as dual income professional households are moving into the upper classes. A family consisting of a doctor and an engineer, a couple of laywers, a couple of software engineers or middle managers and other pairings of professionals can easy bring home enough income to put them in the top one or two percent. At the lower end, the breakdown of the family is a big part of the puzzle. Single parenthood and divorce are not pathways to wealth. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [February 15, 2016, 5:34am UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/84 "2016-02-15T05:34:32Z")
> [@msmith537](#): > > That’s weird. I wonder where I take a ferry every day when I go to work. Of course there is an entity called “Wall Street”. It’s basically Manhattan based investment banks and financial services companies and the various exchanges they trade on. And the business of Wall Street is very different from the business of Silicon Valley or large product based companies like Proctor & Gamble or General Electric. Well then this unified entity making the statements you claim should be something you can cite. . > [@msmith537](#): > > Given your work in a factory seemed transitory by nature, I take you your normal career doesn’t consist of work that typically competes with China, India and third world countries? The factory was one of a number of companies I worked at having problems with entry level workers. What’s your point? Obviously you’ve never worked on Wall Street. And I suppose my question back to you is why is it so hard to find people who can do 3rd grade math? [/QUOTE] ---
**Author:** ![Salvor](https://avatars.discourse-cdn.com/v4/letter/s/b5e925/32.png) [@Salvor](https://boards.straightdope.com/u/Salvor)\ **Post date:** [February 15, 2016, 9:08am UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/85 "2016-02-15T09:08:42Z")
> [@Martin\_Hyde](#): > > If Wall Street is a proxy for the “financial sector” then no, most of what Bernie says is false and they do not bear the majority of the blame for any of our recent troubles. They were not the driver of taking out unwise mortgages–Federal policies encouraging home ownership and discouraging renting (by offering no tax relief to renters but offering immense tax relief to buyers and by creating a Federal clearing house for mortgages and FHA loans) are to blame for that. In many countries, even OECD countries, the American concept of the 30-Year mortgage does not exist. The 30-year mortgage would have a very small market if not for Government, because in a free market banks would only issues those with huge down payments and to people with very strong income and wealth. > > The financial sector is to blame for some things, they’ve done stupid shit that has had terrible impacts on the rest of the economy for hundreds of years. But let’s keep in mind–all industries have, in different ways. Free markets and independently operated companies will always have some negatives they cause, the question is are those negatives offset by the prosperity and economic growth that comes from having them? Market based economies (whether “social welfare” states or closer to a free capitalist state) have decided the answer is “yes, they are worth it.” The job of government is to regulate/limit the negatives as best it can, but it’s foolish to expect we can make the world perfect. Incidentally, there is a government policy that would radically increase home ownership without the resulting shaky and insolvent loan base. It has already been done in Singapore. Mandatory savings set aside from your paycheck to go into both health savings accounts and a general savings account that can be used as equity for a down payment on a home. This mandatory savings essentially enforces savings and good behavior that allows more of the population to afford a home. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [February 15, 2016, 1:25pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/86 "2016-02-15T13:25:08Z")
> [@Salvor](#): > > Incidentally, there is a government policy that would radically increase home ownership without the resulting shaky and insolvent loan base. > > It has already been done in Singapore. Mandatory savings set aside from your paycheck to go into both health savings accounts and a general savings account that can be used as equity for a down payment on a home. This mandatory savings essentially enforces savings and good behavior that allows more of the population to afford a home. If you have a cite on hand, I’d like to read more. Do they allow investing? I’d hate to have my money rotting in a savings account. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [February 15, 2016, 1:59pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/87 "2016-02-15T13:59:51Z")
> [@msmith537](#): > > So in other words, if they save every penny, live like a college freshman for the greater part of their adult lives, they might be able to save what a 28 year old analyst at Goldman Sachs makes a year or so out of business school. As I wrote just a couple weeks back in another thread: > [@Why will most Americans never become mega millionaires or billionaires?](https://boards.straightdope.com/t/why-will-most-americans-never-become-mega-millionaires-or-billionaires/743969/128): > > Someone who retired at the end of CY2015 after 30 or 40 years of investing in the S&P 500 saw a CAGR of greater than 7%. So we’re not even talking about heroic levels of frugality here. My mid-20s days of living off $25k/year and still maxing out my IRA were hardly “living like a college freshman.” Now obviously some people are already living like one before setting anything aside. But for the rest of us, there’s almost always someone who makes less and saves more. I suspect many of us have very high personal discount rates, so the present value of any future gains quickly approaches zero, even with seemingly hefty returns. Not that a junior MBA at GS is exactly rolling in it. ---
**Author:** ![Dinsdale](https://avatars.discourse-cdn.com/v4/letter/d/97f17d/32.png) [@Dinsdale](https://boards.straightdope.com/u/Dinsdale)\ **Post date:** [February 15, 2016, 3:30pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/88 "2016-02-15T15:30:18Z")
I think this discussion has gotten quite a ways from the OP. Whether an individual is able to become comfortable through savings/frugality, seems - at best - only a limited aspect of income/wealth inequality. I say this for a couple of reasons. Is it deniable that the financial system makes it easier to make money if you already have money? Even the discussion of contributing to 401Ks applies only to the middle class and up, doesn’t it? My ignorant impression is that most hourly minimum wage jobs do not offer investment plans. Nor do the folk in such jobs have excess income to put into them, or the skills to invest wisely. In fact, to the contrary, I suspect the lowest income folk who ARE able to invest, might be susceptible to high-risk investments. Who profited more from the offering and repackaging of subprime mortgages? The bankers and investors, or the middle/lower income folk who were eventually evicted and filed for bankruptcy. Look at the top end. Once someone already has enough money that their daily and future needs are covered, they have a range of investment opportunities someone less fortunate lacks. Huge percentages of income are taxed at a lower rate. So, once one attains some level of wealth, they are able to increase it at a higher rate than someone without excess wealth. Does that not increase the inequality? I consider myself middle class. To someone unemployed or working at minimum wage, I’m sure I appear extremely well off. Heck, they’d probably call me rich. And I consider myself EXTREMELY fortunate and comfortable. But the dynamics that affect my financial situation are far different from someone who has been making 7 figures the past many years. Sure, I could have put myself in a higher bracket if I wanted to. Just think what would have happened if I had invested in Apple back in 2000, or bought into the IPOs of Google, Netflix, etc. Many people who amass wealth take some risks, or work hard at attaining the necessary knowledge. I never wanted to work hard enough at making my money work. And I never was willing to take enough risks to move into the top 5%. But is the average middle class working stiff providing for a comfortable retirement even relevant to the discussion of income/wealth inequality? My impression is that the impression of such folk has been gradually decreasing. Instead, my impression is that we are seeing the few at the top becoming wealthier and wealthier, while increasing numbers of folk are dropping to where they are living closer to a paycheck to paycheck existence. And it impresses me as likely that access to different investment opportunities (i.e. “Wall Street”) plays a significant role at both ends. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [February 15, 2016, 5:51pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/89 "2016-02-15T17:51:33Z")
> [@Magiver](#): > > Well then this unified entity making the statements you claim should be something you can cite. What do you expect me to “cite” for you? A history of investment baking and finance in New York City? Or is your plan to engage in a pedantic debate on the semantics of what constitutes “Wall Street”? What makes “Wall Street” (AKA “investment banking”) different from other “big business” is that investment banks don’t make or produce anything (e.g “oil”, “software”, “consumer products”). They finance the companies that make stuff. They also speculate in the markets to make money. Now there isn’t anything inherently wrong with this business. In fact, it serves a valuable purpose in helping companies raise money so they can expand and grow. When it becomes a problem is when banks or individuals representing the banks use the superior information at their disposal to cheat or defraud others. And since the rest of the economy is dependent on the financial services industry to behave in an ethical and honest manner (in ways that they are not dependent on Gillette to make decent razor blades), the failure of a major bank can not only create major problems for customers of that bank, they can create a distrust of the entire system that reverberates through the economy. As it pertains to wealth inequality, my own personal take on the subject is that such a reliance on the banking industry creates a situation where a significant portion of other businesses are beheld to investment banks. Much in the same way the average person is beheld to their bank for their mortgage. IOW, it causes businesses large and small to make decisions that ultimately benefit the banks that finance them, not their customers, shareholders or employees. > [@Magiver](#): > > The factory was one of a number of companies I worked at having problems with entry level workers. What’s your point? My point is that people who often talk about how Americans need to learn to compete against third world workers rarely have jobs that compete against third world workers. I suppose my other point (or question) is why were these factories having such a hard time finding entry level employees who weren’t total fuckups? Because it kind of gets into a philosophical question about what to do with all those people. > [@Dinsdale](#): > > I think this discussion has gotten quite a ways from the OP. Whether an individual is able to become comfortable through savings/frugality, seems - at best - only a limited aspect of income/wealth inequality. I say this for a couple of reasons… I would agree. The point shouldn’t be “can everyone become a millionaire”. It should be “can anyone who is willing to work reasonably hard and competently and make reasonably sensible lifestyle choices be able to afford normal modest middle class lifestyle?” I don’t think “why can’t you eat $1 a day’s worth of Raman noodles like Elon Musk did before he became a billionaire” is the right message. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [February 15, 2016, 6:44pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/90 "2016-02-15T18:44:59Z")
> [@Dinsdale](#): > > I think this discussion has gotten quite a ways from the OP. I’m guilty. Maybe we should look for laws that hurt you and me but help the moneybaggers. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [February 15, 2016, 8:16pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/91 "2016-02-15T20:16:26Z")
> [@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. Average wages used to increase proportionally with increases in productivity. They no longer do. Now the vast majority of the wealth created by increases in productivity are handed to the providers of capital and very little of it goes to the providers of labor. It is becoming harder and harder for those who make average amounts of money to save enough to earn any significant amount of their wealth from capital. > [@](#): > > I only know of data for a raise in MW to $10.10, but that is projected to cost a half million jobs or so. I assume a raise to $15 will cost at least that much. If Sanders is upset by the switch to automation, raising MW is going to encourage that - automated order-takers at McD’s instead of MW human workers will become more popular. The problem isn’t necessarily automation. We are not losing jobs to China because of automation. The labor economists I know tell me that the effects of increases in the minimum wage “depends” on what else is going on. Those guys think about all sorts of crazy shit other than the effect of the minimum wage on unemployment (or more specifically the effect on job growth rates caused by an increase in the minimum wage), like the effect of the minimum wage on health or how much schooling people get or where people end up living or when they start having children, etc. The economic and unemployment effects of a moderate increase in minimum wage ($15 is probably not moderate, that would put a two minimum wage income household above the current median) are slight compared to the effect on children of that household, the effect on the health of the people in that household, the effect on the criminality of the people in that household, and all sorts of other shit. > [@](#): > > This part is obviously true, which is why protectionism doesn’t work. Bernie Sanders is wrong to oppose free trade. Most economists recognize the value of free trade - combing the universities for some far-left fruitcake to contradict this is misleading to the point of dumb. I thought we had a thread on this where I said that free trade increases the size of the pie but does not lead to the equitable sharing of that pie. the benefits of free trade seem to be going mainly to a small group of people while the rest of us mainly get access to cheap Chinese products but with fewer jobs to pay for those cheap products. > [@](#): > > I need to see that the observation is valid before addressing the solution. That is, I would need to see a cite that most families are unable to accumulate any wealth if they have a child who attends college, in particular state university. Federal financial aid does not take much of a middle class parent’s wealth (home and retirement plans are excluded) and income into account when determining the parental contribution to their children’s education. This means that most students can pay for state schools without their parents chipping in crippling amounts of money (especially if they can save on room and board). But it is still a financial burden. ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [February 15, 2016, 9:30pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/92 "2016-02-15T21:30:46Z")
The usually-cited paper for wage/productivity divergence from EPI: [The wedges between productivity and median compensation growth | Economic Policy Institute](http://www.epi.org/publication/ib330-productivity-vs-compensation/) It’s wrong though. Among other problems, they used IPD for productivity and CPI for compensation. Compensation has not stagnated wrt productivity. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [February 16, 2016, 1:43am UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/93 "2016-02-16T01:43:21Z")
> [@Ruken](#): > > The usually-cited paper for wage/productivity divergence from EPI: [The wedges between productivity and median compensation growth | Economic Policy Institute](http://www.epi.org/publication/ib330-productivity-vs-compensation/) > > It’s wrong though. Among other problems, they used IPD for productivity and CPI for compensation. Compensation has not stagnated wrt productivity. Wong as in the conclusions are not supported or wrong as in, the effect is not as dramatic as they make it appear? ---
**Author:** ![DSeid](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/dseid/32/20194_2.png) [@DSeid](https://boards.straightdope.com/u/DSeid)\ **Post date:** [February 16, 2016, 1:58am UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/94 "2016-02-16T01:58:24Z")
> [@Shodan](#): > > The assertion was made that wages had not kept pace with inflation, which is false. … Average wage is not the relevant number in this discussion. What we really want to know are the median and the variation about the mean, or some index that capture how the income is distributed. Median household income is [down](https://www.census.gov/content/dam/Census/library/publications/2014/demo/p60-249.pdf) and has stayed down. It peaked in 1999, dropped, and has never come back up. The indices that are used are the Theil index and the Atkinson Measure. > [@](#): > > … the Theil index, which is similar to the Gini index in that it is a single statistic that summarizes the dispersion of income across the entire income distribution; the mean logarithmic deviation of income (MLD), which measures the gap between median and average income; and the Atkinson measure, which is useful in determining which end of the income distribution contributed most to inequality. … > > … income inequality has increased between 1999 (the year that household income peaked before the 2001 recession) and 2013 (Table A-2). Incomes at the 50th and 10th percentiles declined by 8.7 percent and 14.3 percent, respectively, while there was no statistically significant decline in income at the 90th percentile between 1999 and 2013. … And from other already cited sources, if you dig into that 10% most of it has gone to the 1%, and within the 1% most to the 0.01%. “Assortive mating” - highly educated high earners coupling up concentrating income and wealth in the household - may explain the top 5% to some degree. I know quite a few two physician households for example. But the _extreme_ increase within the top 0.01% is not two physician households. It is the CEOs and the investment bankers. And that has occurred while income at the 50th and the 10th %ile have gone significantly down. ---
**Author:** ![puddleglum](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/puddleglum/32/137_2.png) [@puddleglum](https://boards.straightdope.com/u/puddleglum)\ **Post date:** [February 16, 2016, 3:37pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/95 "2016-02-16T15:37:48Z")
> [@DSeid](#): > > Average wage is not the relevant number in this discussion. What we really want to know are the median and the variation about the mean, or some index that capture how the income is distributed. > > Median household income is [down](https://www.census.gov/content/dam/Census/library/publications/2014/demo/p60-249.pdf) and has stayed down. It peaked in 1999, dropped, and has never come back up. > > The indices that are used are the Theil index and the Atkinson Measure. > > And from other already cited sources, if you dig into that 10% most of it has gone to the 1%, and within the 1% most to the 0.01%. > > “Assortive mating” - highly educated high earners coupling up concentrating income and wealth in the household - may explain the top 5% to some degree. I know quite a few two physician households for example. But the _extreme_ increase within the top 0.01% is not two physician households. It is the CEOs and the investment bankers. And that has occurred while income at the 50th and the 10th %ile have gone significantly down. If you look at the chart at page 5 on your link it shows your characterization is inaccurate. Median income peaked in 1999 then fell befor and after the recession of 2000-2001. It then went back up to its high in 2007 before falling because of the Great Recession and in now headed back up. Comparing the top of the business cycle with the bottom will not give an accurate account of what is going on. Much of the flattening of median household income is due to Simpson’s paradox. All types of households have been seeing increases in income, but due to the increase in the number of the poorest type of household, single moms, median incomes have not been going up much. What is your mechanism for how the increase at the very top is hurting those at the bottom. Facebook goes public and Zuckerburg and his college pals make billions of dollars, but how does that hurt the people at the 10th percentile? If it does hurt them, what can be done about it? ---
**Author:** ![Ruken](https://avatars.discourse-cdn.com/v4/letter/r/f475e1/32.png) [@Ruken](https://boards.straightdope.com/u/Ruken)\ **Post date:** [February 16, 2016, 4:06pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/96 "2016-02-16T16:06:04Z")
> [@puddleglum](#): > > If you look at the chart at page 5 on your link it shows your characterization is inaccurate. Median income peaked in 1999 then fell befor and after the recession of 2000-2001. It then went back up to its high in 2007 before falling because of the Great Recession and in now headed back up. Comparing the top of the business cycle with the bottom will not give an accurate account of what is going on. > Much of the flattening of median household income is due to Simpson’s paradox. All types of households have been seeing increases in income, but due to the increase in the number of the poorest type of household, single moms, median incomes have not been going up much. Don’t forget that household size has decreased a couple percent since '99. Even if household income were flatlining (and ignoring taxes and transfers, and not debating whether [BLS gets things right with CPI](http://www.bls.gov/opub/btn/volume-1/mobile/consumer-price-index-data-quality-how-accurate-is-the-us-cpi.htm)), that income typically covers fewer people. ---
**Author:** ![HurricaneDitka](https://avatars.discourse-cdn.com/v4/letter/h/96bed5/32.png) [@HurricaneDitka](https://boards.straightdope.com/u/HurricaneDitka)\ **Post date:** [February 16, 2016, 6:08pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/97 "2016-02-16T18:08:02Z")
> [@puddleglum](#): > > What is your mechanism for how the increase at the very top is hurting those at the bottom. Facebook goes public and Zuckerburg and his college pals make billions of dollars, but how does that hurt the people at the 10th percentile? If it does hurt them, what can be done about it? I have this same question, and haven’t gotten a very satisfactory answer, which is why I’m deeply skeptical of the “evil 1%er” and related class warfare arguments I hear from Sander-ites. ---
**Author:** ![Richard\_Parker](https://avatars.discourse-cdn.com/v4/letter/r/35a633/32.png) [@Richard\_Parker](https://boards.straightdope.com/u/Richard_Parker)\ **Post date:** [February 16, 2016, 6:16pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/98 "2016-02-16T18:16:47Z")
I’m not a Sanders guy either, but I think the charitable version of the argument goes something like this: There are three big, interrelated forces at play in our economy shaping economic inequality: globalization, technological change, and the strength of unions. Our economic and industrial policy shapes how these forces affect all of us. We make choices about trade barriers, tax policies, and union laws that do not shape the overall effect of these forces, but do determine how they play out at the margins. In general, we’ve selected policies that, in economics 101 terms, “make the pie bigger.” That is, we reduce trade barriers, we incentivize disruptive start-up technologies to grow big, and we value union rights less than we value the right of capital. The sum total of the way we’ve dealt with these fundamental forces over the last three decades is a widening gap in income inequality. Twitter replaces GM. Companies with similar market caps have vastly fewer workers. The CEOs of those companies become much richer, and the workers become displaced to lower-paying jobs. In my view, the alternative world–in which we fight globalization, favor fair distribution over efficient tax policy, and promote the right of unions–is not a better world. But it is probably a more equal one. A Sanders supporter, I imagine, argues that this equality–a more fairly divided pie–is more important than a bigger pie. Isn’t that the idea? ---
**Author:** ![Sam\_Stone](https://avatars.discourse-cdn.com/v4/letter/s/ecccb3/32.png) [@Sam\_Stone](https://boards.straightdope.com/u/Sam_Stone)\ **Post date:** [February 16, 2016, 9:13pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/99 "2016-02-16T21:13:39Z")
Since one of the supposed solutions to wealth inequality is government transfers, you need to include them when looking at the statistics. So add in the EITC, food stamps, tax changes to the middle class, and other programs. Also, you have to factor in the increase in costs to the employer in terms of mandated benefits, health insurance, occupational safety insurance and the like. These are all employee benefits that have to be added to income to determine exactly what’s going on. Finally, one of the big problems here is that money is useless unless it is traded for lifestyle improvements. So you need to look at overall quality of life and not just units of money. For example, as we move more of our lives and activities into the digital realm, the differences between income levels begin to shrink. Elon Musk and Bill Gates interact with the digital world essentially the same way you and I do. There are no special billionaire computers that give them a radically different online experience. The internet and digital technologies are great equalizers. On the internet, the poorest person can have a conversation with a billionaire. Ivy League graduates share the same debate forums as people with high school diplomas from small towns. When “Wall Street” came out in the 1990’s, Michael Douglas’s character used a large mobile phone on the beach - a sign of wealth and privilege simply unattainable to us mortals confined to phones with cords attached to walls. A car phone was something you might see in a Mercedes, which was also the only place you’d find air bags and other safety systems. Thirty years ago, there was a pretty big difference in the computers the wealthy might have compared to a middle class person. The wealthy person might have a top-line IBM PC with hard drives, while the average person might have a Commodore 64 or maybe an Apple IIc, or more likely nothing at all. Twenty years ago, if you wanted to chat with the movers and shakers you needed an account on a service like CompuServe or the Source. And you’d pay something like $10-$20/hr to do it. Today, a Wall Street billionaire probably uses the same iPhone that I use. Everyone can phone from anywhere on the planet, any time. The internet is open to everyone. Cars that cost the same amount of money in terms of hours of work required to buy are much better now. An economy car today would put a 90’s era Mercedes to shame when it comes to safety features, quality of workmanship, power, fuel economy, etc. The lifespan of the car is significantly longer today than it was then, as are the ongoing maintenance costs, making total cost of ownership lower. And the quality and feature gap between a luxury car and an entry level car is much smaller than it used to be. The same low interest rates that fueled a speculative bubble on Wall Street also made mortgages more affordable for people at the same income level as those from the 1990’s. When I bought my first house in 1992, we paid 11.75% interest on our mortgage. Today, we pay 2.9%. We have a house worth almost twice as much as the old one, and pay just slightly more for our mortgage. That change in interest rates is worth thousands of dollars per year in income. And as I said before, two big drivers are causing the shrinkage of the middle class, and one of them isn’t greedy billionaires. The big drivers are the accumulation of income at the top of the middle class by dual-income professional households, coupled with the breakdown of the family at the lower end which is reducing the number of two-income households and increasing the number of single parents. You can chalk this up to the rise of power for women, which gives them more choices in who to marry and more opportunities to find wealthier mates in college, and in government policies that make it easier for poor people to break up by subsidizing single parenthood or even incentivizing single parenthood by making subsidies available that are not available to two-parent households with one parent working. This doesn’t feed into the normal progressive narrative that income inequality is getting rapidly worse, and that it must be fixed through wealth redistribution. In fact, a lot of these changes are the result of policies pushed by progressives. For example, if you increase student financial aid for college, a lot of that money is going to accrue to Ivy League schools, because the supply for an Ivy League education is fixed. The costs for attending top tier schools are so high that they are mostly populated by the children of wealthy people, who tend to marry each other and perpetuate the wealth and privilege of their parents. They then go to Wall Street and other very high-paying industries which hire almost exclusively from the Ivy League. But somehow I don’t hear calls from the left for tearing down the Ivy League system, or for changing the admission procedure to the Ivy Leagues to a lottery based solely on educational performance instead of the complex system of admission panels, legacy preference, etc. ---
**Author:** ![Richard\_Parker](https://avatars.discourse-cdn.com/v4/letter/r/35a633/32.png) [@Richard\_Parker](https://boards.straightdope.com/u/Richard_Parker)\ **Post date:** [February 16, 2016, 9:17pm UTC](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926/100 "2016-02-16T21:17:55Z")
The problem with citing assortative mating as the cause of inequality is that it is just as plausibly the effect of inequality. The same is largely true about the nature of poor households. [Previous page](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926.md?page=4) [Next page](https://boards.straightdope.com/t/is-wall-street-the-main-cause-of-u-s-income-wealth-inequality/745926.md?page=6)