The data is what it is; more income (and hence wealth) is accruing to those at the very top (think top 0.1% instead of top 5% or 1%) while real wages are stagnant if not declining. That being said, I seldom if ever hear pundits or politicians mention anything about cost/standard of living, absent some economics blogs and papers (which only myself and a tiny tiny portion of the population reads, anyway).
I think Economist/Comedian Louis CK explains it better than I ever could:
I’m not sure how things work over in the U.K, but seems like things aren’t much different from how they work here in the U.S., at least when it comes to Boards of Directors and shareholders’ epic failure to hold Executives to account.
A bank worker got the sack after she criticised her boss’s £4,000-an-hour salary on Facebook.
Stephanie Bon, 37, from Colchester, Essex, was working as a £7-an-hour HR assistant for Lloyds Banking Group when she heard about her new chief executive’s mammoth salary.
Miss Bon went on Facebook and posted ‘LBG’s new CEO gets £4,000 an hour. I get £7. That’s fair.’ But after her bosses heard about the comment she was marched from the offices and fired.
You read that heading right. According to Absolute Return+Alpha, the top 25-earning hedge fund managers made over $22 BILLION (yes, with a B) last year, with 6 of the top 10 making over a billion (again, with a B) each. To put things in perspective, if you made more than $10,000,000 last year, you were in the top 0.01% (well, 0.0095%) of filers. These guys made 50, 100, 300x that much.
In 2001, Peter Orszag and Joseph Stiglitz published a short paper wherein they concluded:
…if anything, tax increases on higher-income families are the least damaging mechanism for closing state fiscal deficits in the short run. Reductions in government spending on goods and services, or reductions in transfer payments to lower-income families, are likely to be more damaging to the economy in the short run than tax increases focused on higher-income families.
This is all fine and dandy in the ivory tower (or the White House, as it were to be less than a decade later), but in the realm of reality, theories only get us so far, no matter how seemingly reasonable their basis and underlying assumptions.
Today’s WSJ included an essay about the state of The State of California, specifically, its incredible reliance on the very-rich (top 1% +). Many if not most commentators/politicians/etc seem to think that taxing “the rich” at a (vastly) higher rate than everyone else – especially “the poor” – not only makes perfect sense, but is more than “fair,” given the increasingly high % of income accruing to “the rich.” This is all fine and dandy, except:
I’m sick & tired of politicians, pundits, and “average joe’s” invoking the term “Taxpayer” in their mostly uninformed rhetoric. You know what I’m talking about: “The Taxpayers are angry about bank bailouts,” or better, things like “The Banksters are getting rich at the expense of The Taxpayers.” First of all, 40% of Americans pay ZERO Federal Income Tax (some even get net subsidies!), so right off the bat, almost half of Americans need to seriously shut their traps & do a little research before whining about fairness of U.S. Tax (etc) policy. The half and mis-truths propagated by The Ignorati don’t stop there, though. Not even close…
There’s so much (and then some) talk about how the U.S. is the most unequal (in terms of income) of developed countries in the past few months I’ve written about it probably a dozen times already. Today, I saw something from Marginal Revolution that really puts the argument in a TOTALLY different light than almost everything else I’ve seen on the subject:
Everyone’s been claiming (the list of flapping heads/economists in this group is far too long to name them all) that income inequality in the U.S. is a HUGE terrible problem and its getting much MUCH worse, but this chart shows quite clearly that relative to other countries, income inequality is actually less of a problem in the U.S. and that even the poorest people in the U.S. are MUCH better-off than some of the wealthiest in these countries!
Now, before you jump down my throat, I will acknowledge that this is not necessarily a major surprise as the U.S. is a more advanced and productive economy. Similarly, if we look at this graph in another generation, the slope of the lines for Brazil/India/China will likely be much flatter due to the productivity gains and the nature of returns of labor, etc.
There are some good comments in the Marginal Revolution thread that are worth reading, I suggest you check them out.
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