Wealth Inequality

[Mrmagoo]

Not sure I catch your drift. People with more income and more assets are richer than those with less under most definitions. Not much adjustment actually needs to be done to confirm their position on the inequality spectrum. If you are arguing that the spectrum/balance is now too tilted how should wealth and income measures be adjusted to make them more meaningful to the core purpose of the debate on inequality? If you are going to drift back into absolute poverty discussions again, please set up another post.

As to the $1m family home example, I must say that you are extremely inventive and well researched in all the ways to excuse (yourself for) underachievement. It would seem a reasonable perspective and I'm sure many would see merit in it. I do. Then I looked some more.

If you are a gazillionaire because you got off your butt and did something with your life that led to commercial success, compound interest on your assets would lead to your relative wealth expanding against the populace if the rate of growth of assets exceeds that of incomes more generally and matches the general return of asset holdings by others. Sure thing.

I am going to make an assumption that we are not talking about the kind of equality that talks about the richest man/woman since the dawn of time. If I am wrong...please walk the tightrope again whilst juggling fire. Instead, we are talking about movements around broader classifications.

Strangely, people look into this stuff with heavy effort as opposed to anecdote. One of these groups is the Australian Bureau of Statistics. Here is the key take-out from the Aug 2013 report on Household Wealth and Wealth Distribution which surveyed a sample of 14,600 households. I don't think they skewed it towards Republicans. However, I disclose that the footnotes are silent on this.

Just for kicks, here are the stats for the income/wealth relationship for Australia:

View attachment 59554

A relationship clearly exists with the lowest income decile heavily representing retirees who naturally have low incomes and are beyond the maximum wealth accumulation phase of their lives.

So, let's march on to the $1m house etc. Except let's look at stats rather than anecdote. I know it generates less emotive response, but you present this in an apparently serious way rather than deliberately fantastical. Here's the key table:

View attachment 59555

Some points to note:

+ Of the richest quintile, 92% of their total income comes from...working. Not sucking the life out of some trust fund like a hungry baby.

+ The lowest quintile has a high proportion of households classified as "owner without a mortgage" at 50%. This declines through the quintiles until, well golly gosh, the richest quintile has the lowest figure of 20%. What? Those poor rich people, who live in the family home (this group has the highest proportion of families with dependent children), and are mortgage slaves. In fact the mortgages are so distasteful that 20% choose to rent! Is that wildly below the average of 30%?

+ As you move further down the wealth figures, the household sizes shrink. Further, the number of people who work in those households shrinks as they move outside the workforce age group. Presumably they don't actually need a 5br $1m house and would be fine with a $500k 3br house that isn't quite so close to the CBD office. This somewhat narrows any mortgage burden issue that you want to rest on for a tide of woe. How strange that, as you move through your career and build a family your wealth generally increases and, when moving to retirement, your income drops and with it your wealth. Outrage!

+ As we move to the bottom quintile, 34% rent. Fifty percent own their homes outright and 12% have a residual mortgage. Government support of some kind is received by 76% of this cohort. For 76%, this makes up more than half of their income. This is a living supplement. It is not intended to be a means to afford a $1m family home in Sydney.

+ Do you think we should socialize property? Sure worked for Gadaffi. Perhaps increase the transfers some more so that full fledged government pensioners can afford to pay-down a mortgage that they may have been able to afford whilst working? Sure worked for Greece.

Next excuse please.

What if gen y largely fell into the category of having no home ownership and landed in the bottom quartile ?

Then there is a lot more going on than just what income and/or assets have been earned.

Those statistics are vastly more disturbing than I thought they would be, my income, say 2k a weekish places me into the a decent income quartile yet my assets don't come close to breaking teh 25% mark.

Every single person I know has not broken the 25% mark and we're all in our 30s.

Half of my friends are losers, true, but the other half have worked hard are in professional careers and are successful.

The only thing that would put them close to 450k mark is appreciation in house prices.

 

[Caveman]

Those statistics are vastly more disturbing than I thought they would be, my income, say 2k a weekish places me into the a decent income quartile yet my assets don't come close to breaking teh 25% mark.

Your getting 2k a week for flipping burgers?WOW im impressed!

 

[DeepState]

1. What if gen y largely fell into the category of having no home ownership and landed in the bottom quartile ?

2. Then there is a lot more going on than just what income and/or assets have been earned.

3. Those statistics are vastly more disturbing than I thought they would be, my income, say 2k a weekish places me into the a decent income quartile yet my assets don't come close to breaking teh 25% mark.

4. Every single person I know has not broken the 25% mark and we're all in our 30s.

5. Half of my friends are losers, true, but the other half have worked hard are in professional careers and are successful.

6. The only thing that would put them close to 450k mark is appreciation in house prices.

1. They don't.

2. Then save. Also, the general type of household has two income earners. That makes it easier to save. If you want to consume, you cannot invest. If you cannot invest, all you have is personal income. Pretty simple. You want assets? Save.

3. Everything which involves a sliver of differentiation seems to freak you. At least you are consistent.

4. You need to get to know more people. I suspect they may not be partnered and thus consume more of their income, making it hard to save. The stats are at the household level. Single breadwinner households in accumulation phase is being phased out. More common now is the two income household. Stats on women enering the workforce are plentiful. Don't give me a comeback on two incomes required to blah blah. There are a ton of reversions.

5. Only half? As for the rest, can they possibly consider that housing is only one type of wealth depository? Might it be that it is actually a better investment decision to rent? Where is my violin when I need one?

6. Before housing appreciation came a mortgage (well, for most). Before a mortage came a deposit (well, for some). Before a deposit came saving. Before saving came some people who actually freakin worked and were single minded about getting that deposit. A stack of billionaires did not get rich on residential property. Warren Buffet's house is something your friends would regard as insufficiently chic.

The less you whine, the more time you have to save and invest. Hang out with losers and the nits jump across and infect you. It's only time. You seem infested.

Stop whinging. You have means. You are destroying your financial position and the great opportunities that are present, whose value increases manifold with initiative. No one says the world is fair. For the most part, it is fair enough if you take the opportunities that come before us all. Piss it away, plenty of others will collect it and you'll still be whinging about how some kid from the back blocks owns a mansion in Mosman and that you knew him when he was just a blah blah. He doesn't even remember meeting you.



Mate, get off your @rse. You are rich. You just make yourself feel poor with this poison and spend your (pretty decent, I have to say) intellect against yourself. Very nasty loop. I do feel your pain. However, it's not the system. It's not perfect, but the doors to mobility are not welded shut. If there is a problem with your personal situation, it's you. You are rich. Act/think like it. All this excuse-laden policy mumbo-jumbo is waste of time.

But do let me know if you take an effort to improve your situation. Happy to help if you want to actually move forward. Heaps of people here want others to succeed and put a lot of time into it. Throw us a bone. Please.

Until then...

 

[qldfrog]

+1:
[Mate, get off your @rse. You are rich. You just make yourself feel poor with this poison and spend your (pretty decent, I have to say) intellect against yourself. Very nasty loop. I do feel your pain. However, it's not the system. It's not perfect, but the doors to mobility are not welded shut. If there is a problem with your personal situation, it's you. You are rich. Act/think like it. All this excuse-laden policy mumbo-jumbo is waste of time. ]
Spent less time on the forum (unless for learning) and more getting a life;
I came 20y ago in this country with a backpack and knowing absolutely no-one;
I wish I had had all the advantages you have now;
In 20y I made it to the class you seem to envy/despise so much;
This was done with:

• no silver spoon, inheritance or lotto win
• usual boring work: half of that as a wage earner first and save and save again
• no real estate gain: aka I never made a profit when switching houses (and morgage) and my current RE assets are buy and forget
• no hegative gearing!! yeap you read me right; my IP both commercial and residential are positively geared and I pay taxes on the rent I get

look at the sky not the gutter, be positive and you will be amazed as what you can do with a bit of will/nerves
And this is coming of a very conservative investing wise guy, with a relatively pessimistic mind (but I am aware of it and I fight!)
There is much IMHO that you need to unlearnt otherwise, you will have endless pleasure in being right in your gloomy prediction on your future.
If you are a real person, think about that and maybe discuss it with some friends;
remember also you will be who you associate with so choose well this friend.

 

[Mrmagoo]

I dont know what chic means.

So sad a discussion has turned to a series of bigotted personal attacks. All of which are nonsense. I save plenty but that has nothing to do with anything. You disagree with me so attack me personally rather than talking about society wide issues we are discussing.

This just proves my point even further about Australian society .

 

[qldfrog]

I dont know what chic means.

So sad a discussion has turned to a series of bigotted personal attacks. All of which are nonsense. I save plenty but that has nothing to do with anything. You disagree with me so attack me personally rather than talking about society wide issues we are discussing.

This just proves my point even further about Australian society .

Apologies if you find my comments a personal attack but i genuinely believe you need to change your state of mind for your own good.
I said all I wanted to in the above post so I close here.
We can go back to the core subject.

 

[tech/a]

So if we recognize that there is and always has been an inequality in wealth

What are you suggesting to re balance it? Mr Magoo ?

 

[Mrmagoo]

I dont think we can or should do anything it is upto voters at election time to decide what they want. If australians desire less and not more inequality then that will happen.

 

[burglar]

I dont know what chic means ...

Warren Buffett can afford much that the rest of us cannot.
He says the only thing he does, which the rest of us cannot afford, is air travel.
Lots of air travel.
He loves air travel!

Chic, meaning "stylish" or "smart", is an element of fashion.
So his house is not chic.

Bill Gates' house, on the other hand .....

 

[tech/a]

I dont think we can or should do anything it is upto voters at election time to decide what they want. If australians desire less and not more inequality then that will happen.

Your answer is consistent with your interaction with those here.

You are passionate in view and passive in ideas.

These are the traits of mediocrity.

 

[Vixs]

My brain is in a minor meltdown after you mentioned you are a dual income professional couple with no kids.

1) A dual income professional couple can't afford to go to the pub once a month ?????? Wow. This country is more rotten than I thought.

The earnings profile of 'two professional's with no kids' is a little different to 'two graduates getting started with no help'.

2) Working at a pub is a strong hold of employment for handsome people. Have you considered a career in sales (being serious here) ? I always suggest handsome people try their hand at sales. You can make a fortune from commission.

I did choose a career in sales, but with a while collar instead of blue.

3) A discussion of income inequality means that people on low incomes can't afford pretty basic stuff, when that happens society in unequal.

Given that the luxuries cost the same for anyone regardless of their income, I'd say that's equal. There is nothing stopping them from getting the same things except their inability or lack of desire to upskill, relocate or do something that would add more value and as a result command higher pay for their time. If you want the same luxuries as the wealthy, why complain about having to pay the same as the wealthy people? If your income is more modest, then maybe people should adjust what they consider a luxury. Everything is relative.

4) Our parents drank, smoked played around at whatever and some ever went to Europe and could still afford to purchase houses as the multiple was only 3 times average income. My old man spent most of his youth around race tracks losing all his money yet still bought a house.

And yet for a lot of that generation, many sacrificed for a while to get ahead. My parents moved from country town to country town while my dad got experience in his field, before relocating to Singapore for a few years to use the skills and experience he'd acquired and get some coin for the hard work they'd put in to get there. They came back and used what they'd saved to buy the house they wanted and start the business they wanted. It all came with a price tag.

5) Like most political commentary you confuse an opinion different to your own with something evil.

Don't know who said anything about evil, but I certainly can't relate to the negativity of many of your posts.

6) My life is pretty good. I am not struggling by any means. It is just I have done the sums and home ownership doesn't pass basic math without exceptional capital growth. Plus I can't really afford the $600 a week it would cost to pay off a relatively small mortgage over 30 years. The house will come if I ever get married.

I've gathered from previous posts you're not struggling, which makes MY brain go into meltdown when someone can acknowledge they're doing fine and yet still complain about how hard it is and how unfair it all is.

7) Number 6 doesn't really matter, because as a general discussion point, housing is expensive and poorer people spend a lot higher % of their income on housing.

Houses are expensive yes, not unaffordable. If poorer people live in less prime locations, their housing costs can be comparable to higher income earners. I can get the same size, style and condition property for a very very reasonable price further out of the city.

8) I don't really agree with anything you have said because it essentially amounts to you think that any amount of horribleness can be worked around by simply working harder and your point of struggle is a dual income professional couple with no kids, which causes my mind to just about explode from the irony of it all. You can't just work hard and magically become well off, it doesn't work like that. Giving up basically everything just to be able to survive is the definition of a poor person. Dude, you're poor, you're not really sacrificing for anything. You're poor. We're all poor people. In our parents day no one saved 5 years as a dual income professional couple for a property. Very least they waited till the mid to late 90s and got a home loan with no deposit. Many people inherited and used the money as a deposit. Many got paid absurd union wages in the 80s and had a deposit after one months work.

Yeah, the fall of the single income family and the rise of the dual income family has been a massive change to the cost of living, and it has resulted in relatively less income/higher costs of living. Unfortunately, enough families are willing to both go to work to keep that trend going.

We haven't had to save for 5 years as dual income professionals to get a house deposit. We've paid off our house deposit in debt 2x over and now have the deposit we need, and it's taken 2 years of both of us working. At the rate we're going my wife will be able to afford to leave the workforce permanently within 4 years, before we're 30. That's something we sacrifice for now, and I'd hardly call that nothing.

My aim is to establish my own business in my current field within 10 years. That will ultimately provide me with the lifestyle I want and the work/life balance I am looking for. That's going to take sacrifice, but I value the reward higher than the 'luxuries' we give up now.

I aim to be able to work by choice and not need realistically within 20 years. That's going to take some sacrifice, but nothing that I value more highly than what I'm aiming for.

Those goals are incompatible with living beyond our means.

9) if you need to sacrifice as lot to get basic stuff, that means we've gone economically backwards and if someone else didn't have to work as hard to get it or sacrifice as much, that makes society unequal.

I am happy to make the trade-offs I make. Others aren't, and that's fine, but if they wont' give up anything now for their future benefit then screw them, they don't deserve the same rewards. It's unequal if some get the same for less than others.

^^^

 

[Mrmagoo]

Your answer is consistent with your interaction with those here.

You are passionate in view and passive in ideas.

These are the traits of mediocrity.

Yes I am mediocre.

 

[Mrmagoo]

^^^

I'm going to leave this with the assumption that you are just another young liberal.

I could go on about how you should just work harder to earn more money because if two of you even on graduate salaries can't afford to go to the pub one of you is probably doing something dodgy but I'm not that kind of a person.

Secondly, it is not the kind of Australia I want to see built where a dual income "graduate" couple cannot afford to go to the pub.

I don't see that as progress or anything to aspire to. You seem to think it is a good system, because it lets you crap on people who will be less fortunate than you one day.

I want society has a whole to become more wealthy. That means my grandchildren being able to buy their first home hopefully a lot easier than I did. I want the next generation to not have to struggle at all.

What about people who are NOT part of a dual income couple ? Should marriage be compulsory ? What about graduates without a partner to help support them ? What about people with normal jobs ? You seem to think all of Australia should be about low income persons struggling to survive so that in 20 years time they can be slightly less poor than others. Seems illogical to me.

 

[Mrmagoo]

Warren Buffett can afford much that the rest of us cannot.
He says the only thing he does, which the rest of us cannot afford, is air travel.
Lots of air travel.
He loves air travel!

Chic, meaning "stylish" or "smart", is an element of fashion.
So his house is not chic.

Bill Gates' house, on the other hand .....

Haha. Me chic. That is funny.

I don't believe a word that comes out of his mouth.

 

[tech/a]

Yes I am mediocre.

So stop complaining and enjoy it.
Your not rich and not poor.
Your mediocre----perfect---for you.

We ALL rise to our level of incompetency!
And that is where we will stay!

 

[Julia]

Secondly, it is not the kind of Australia I want to see built where a dual income "graduate" couple cannot afford to go to the pub.

Vixs did not say he cannot afford to go to the pub. He is simply choosing different priorities in order to achieve his goals. I have no doubt he will achieve his aspirations because he's realistic and has worked out what he needs to do to get where he wants to go.

 

[DeepState]

I dont know what chic means.

So sad a discussion has turned to a series of bigotted personal attacks. All of which are nonsense. I save plenty but that has nothing to do with anything. You disagree with me so attack me personally rather than talking about society wide issues we are discussing.

This just proves my point even further about Australian society .

You are actually very talented. I love it. A genuine on-line method actor!!



Anyhow, no-one knows you. You have come onto this site to take the piss. So, if I am bigoted against that - guilty as charged and then some, with impunity.

Australian society includes the character of larrikinism. That's great. Well done. Not that it matters, but it also includes the proud concept of the Aussie Battler on one hand, balanced by the proud tradition of having a whinge.

Just for kicks, because I am interested in the concepts raised, although very disinterested in the responses received, here is what a theoretical Gen-Y Mr Magoo could have accumulated under the following conditions. It's not really for you. It's for other participants and readers of this thread.

We were talking of inequity and difficulty with class transition.

A person/professional/Gen-Y starting out a savings and investment program at 24 earning 50k per annum in 2004 has the following characteristics:

+ Gross salary moves from 50k in 2004 to 95k in 2013 via 5k increments
+ Saves 10% of gross salary in 2004 and increments that savings rate by 2% per year
+ Given the gripe is about property running away, we invest in Australian shares at the end of each year.
+ We lever the portfolio 2:1, in comparison to a much more levered position with regards to property
+ we allow for Tax conservatively and interest charges

The accumulated value of investment net of all realization tax is $247,500 at mid 30s. A couple in that situation (which is the average earning number per household) would be into the second highest quintile of household net wealth. If one is part-time and all else is preserved, it would be third-quintile (as is typical for this cohort). All this at age 34, well before peak earnings and asset accumulation. Household wealth in these quintiles is largely driven by choices on workload rather than some door b!tch at the entrance of a path to higher wealth status saying "members and regulars" only.

Whilst property has helped some increase their wealth, those who felt left out of the property market could have embarked on a simple savings program in the next most obvious investment - Australian shares - and done very well.

Remember that the next time someone talks about malaise and stickiness in wealth class in Australia on a website calling themselves Mr Magoo. The beliefs, like the character, are totally fictional. It's been entertaining, but time to pull the curtain....

 

[Vixs]

I'm going to leave this with the assumption that you are just another young liberal.

I could go on about how you should just work harder to earn more money because if two of you even on graduate salaries can't afford to go to the pub one of you is probably doing something dodgy but I'm not that kind of a person.

Secondly, it is not the kind of Australia I want to see built where a dual income "graduate" couple cannot afford to go to the pub.

I don't see that as progress or anything to aspire to. You seem to think it is a good system, because it lets you crap on people who will be less fortunate than you one day.

I want society has a whole to become more wealthy. That means my grandchildren being able to buy their first home hopefully a lot easier than I did. I want the next generation to not have to struggle at all.

What about people who are NOT part of a dual income couple ? Should marriage be compulsory ? What about graduates without a partner to help support them ? What about people with normal jobs ? You seem to think all of Australia should be about low income persons struggling to survive so that in 20 years time they can be slightly less poor than others. Seems illogical to me.

I wouldn't put my name to any political faction in the current environment. Whatever it seems I think to you, I don't think Australia should be all about low income people struggling to survive. I think that anyone on a low income that is unsatisfied with it in this country isn't using any of the many avenues available to increase it. I'm not going to apologise for not caring about their unfulfilled dreams and their whines about how unfair everything is. The first thing anyone needs to do to improve their lot in life is spend less than they earn, and if that means cutting out smokes and the pokies, or hotted up cars, oversears holidays that they have to pay for on credit, boo hoo.

The fact is you are doing just fine financially but are unsatisfied with, yet apathetic about how things work. I am happy with where I am because despite the fact that I have to choose to go without some things, I am years ahead financially as a result. This has been a big turnaround from being years behind the average having wasted my income for years.

You say you want the next generation to have it easier? They already have it easier. We already have it easier. Literally the entire world is our oyster - the opportunities are endless. You can go anywhere and do anything if you're willing to work on the required skills.

 

[Mrmagoo]

You are actually very talented. I love it. A genuine on-line method actor!!

View attachment 59566

Anyhow, no-one knows you. You have come onto this site to take the piss. So, if I am bigoted against that - guilty as charged and then some, with impunity.

Australian society includes the character of larrikinism. That's great. Well done. Not that it matters, but it also includes the proud concept of the Aussie Battler on one hand, balanced by the proud tradition of having a whinge.

Just for kicks, because I am interested in the concepts raised, although very disinterested in the responses received, here is what a theoretical Gen-Y Mr Magoo could have accumulated under the following conditions. It's not really for you. It's for other participants and readers of this thread.

We were talking of inequity and difficulty with class transition.

A person/professional/Gen-Y starting out a savings and investment program at 24 earning 50k per annum in 2004 has the following characteristics:

+ Gross salary moves from 50k in 2004 to 95k in 2013 via 5k increments
+ Saves 10% of gross salary in 2004 and increments that savings rate by 2% per year
+ Given the gripe is about property running away, we invest in Australian shares at the end of each year.
+ We lever the portfolio 2:1, in comparison to a much more levered position with regards to property
+ we allow for Tax conservatively and interest charges

The accumulated value of investment net of all realization tax is $247,500 at mid 30s. A couple in that situation (which is the average earning number per household) would be into the second highest quintile of household net wealth. If one is part-time and all else is preserved, it would be third-quintile (as is typical for this cohort). All this at age 34, well before peak earnings and asset accumulation. Household wealth in these quintiles is largely driven by choices on workload rather than some door b!tch at the entrance of a path to higher wealth status saying "members and regulars" only.

Whilst property has helped some increase their wealth, those who felt left out of the property market could have embarked on a simple savings program in the next most obvious investment - Australian shares - and done very well.

Remember that the next time someone talks about malaise and stickiness in wealth class in Australia on a website calling themselves Mr Magoo. The beliefs, like the character, are totally fictional. It's been entertaining, but time to pull the curtain....

Interesting how you arrived at that 24.7k a year in savings pro rata. You must be assuming some spectacular returns.

Either way for 10 years of dedicated hard work you barely break the 1st quartile on wealth.

 

[DeepState]

http://www.economist.com/node/21621908/print

Provides some interesting insights into the bulk causes of global inequality over more than a century.