Wealth Inequality

[Smurf1976]

Well, I truly believe that today, education (as expressed by a degree) is not a way out of lower economic class anymore in the western world.(It used to be until the beginning of this century)

A lot of that comes down to supply and demand.

Looking at the past 30 or so years, the number of people holding a degree has greatly expanded whilst the availability of directly related employment has grown far more slowly.

It's economics 101 there, supply exceeds demand. Having a degree has become mainstream, to the point that those not choosing that path are viewed by some as failures. But we still need plumbers, bus drivers and so on, we don't actually need everyone to have a degree because in order to function, society needs many non-professional jobs filled by someone.

On the other side of the fence, the opposite has happened with the trades. Apprentice intakes have fallen, many of the better potential applicants have been deterred by parents and others and have gone to uni instead, training standards have fallen in the pursuit of profit, the end result being a contraction in the supply of tradesmen and an even greater decline in the supply of genuinely good ones. In 2014, the barrier to entry in the trades is higher than in most professions. Plenty of people can get themselves into uni and come out with a degree but getting an apprenticeship is incredibly difficult these days.

The effects then come down to basic economics. Supply has fallen in the trades, demand has moderately increased, government has introduced all sorts of regulations making the job harder = pay rates for many trades have increased faster than the overall average of the workforce and you can't find someone willing to do a minor job at your home because they've got more profitable (bigger) opportunities elsewhere.

I'm very much in favour of training sensible numbers of people at uni in line with the demand for skills and I support the notion that wealth should not be a determinant of who can and cannot attend university. But we still need cleaners, chefs, hairdressers, electricians, builders, truck drivers and so on, none of which sensibly require a university education.

Maybe I'm unusual here, but I have respect for bus drivers and cleaners just as I have respect for doctors and accountants. They're all necessary for society to function.

 

[Julia]

Maybe I'm unusual here, but I have respect for bus drivers and cleaners just as I have respect for doctors and accountants. They're all necessary for society to function.

I agree. Within any occupation there will be people with all sorts of characteristics, good and bad.
Being a 'professional' is no guarantee of integrity.

I do agree with Qld Frog, though, about the way a degree these days doesn't carry the cache it used to, an inevitable result of lowered standards, sadly.

 

[luutzu]

If we send everyone to uni then we're completely and absolutely stuffed as a society. Well, we are unless we're going to have degrees in plumbing, bus driving and so on which would make a mockery of the entire concept of universities.

If we don't have truck drivers, builders and so on then we don't have a functioning society. Those and many other jobs that don't require a university education are absolutely essential.

The main objective of a higher education is not to get a job.

I mean, we hope most uni grads will get a job and start repaying their HECS and pay taxes and all that... but if the main objective is just so they could work, you could do that cheaply through TAFE or trade apprenticeships.

Beside medicine or advanced research, most "professional" jobs could be done just as well or better by those who learn from work experience or have a good mentor and work and do their own further studies on the subject they're doing.

The aim of higher education is to broaden graduates, and citizens', mind and learning... to give them confidence that they're just as talented as those so called "professionals" who too often have no good reason beside a piece of paper to look down on people.

This way, not only will you have a more worldly, more rounded citizenry who might not found a job right after graduation but whose confidence and mind are opened so they might invent or innovate in some area they happen to fall into just to feed the family.

That and you have citizens who, instead of getting upset at refugees or immigrants they perceive as taking away their jobs (if a guy who couldn't speak proper English can take your job, chances are that job aren't that well paid)... that and you have citizens who understand bs when they see it and get upset at politicians giving tax breaks and friendly policies to big corporations and the wealthy.

When the people can't be spinned into believe rubbish like regulation is evil and in the way; minimum wage is bad for business and jobs; the rich are job creators and we better be extra nice and extra generous to them else they leave; blame yourself for being poor when you work two jobs... maybe then people will vote and demand policies that would enrich us all instead of the already ultra-rich - who for the life of me I don't know what they'd do with a few extra hundred millions let alone a few thousands in tax cuts.

 

[Garpal Gumnut]

Just something from left field on this.

I've been very poor and I've been rich, not super-rich but don't have to worry about money.

My Happiness is no better now than when I was poor.

So don't discount Happiness when you discuss Wealth Inequality.

gg

 

[Julia]

I've been very poor

Me also, but only for a short time.

and I've been rich, not super-rich but don't have to worry about money.

My Happiness is no better now than when I was poor.

My view is absolutely the opposite.
In the brief period after leaving a marriage when I was poor, it was brought home to me the intense disadvantage in all aspects of life. Choices are minimal. You just have to try to survive. I'd never want to be in that position ever again.

Having enough money provides a sense of independence and security, gives choices in most areas of living, and confers a sense of freedom.

That probably only applies up to a certain point, however. I will never understand the compulsion some people exhibit to go on making more and more money just for the sake of it. Money only means to me what it can provide whether for myself or as a contribution to others with fewer choices.

 

[DeepState]

Just something from left field on this.

I've been very poor and I've been rich, not super-rich but don't have to worry about money.

My Happiness is no better now than when I was poor.

So don't discount Happiness when you discuss Wealth Inequality.

gg

....though she doesn't actually say that rich made her happier.


Higher inequality does produce a lower level of satisfaction amongst the most disadvantaged, as would be expected. Interestingly, it also drags down the satisfaction experience of the richest. Perhaps we are at our best with some degree of inequality, but not too much. There is a correlation between development and inequality which distorts this a little. Perhaps the most unequal societies have a very small proportion of ultra rich, with the rest being varying shades of poor, and this impacts the top 10% result more than it would, say, for the top 1% result:



However, perhaps you were made to be happy. Wealth may be increasingly sticky across generations, but it also seems that happiness is too. An opportunity to thank your progenitors?


Final thought: A fair chunk of happiness comes from simply being grateful for whatever we've got.


Happy Holidays GG. Money can't buy the kind of happiness you are so fortunate to have.

 

[luutzu]

View attachment 60844
....though she doesn't actually say that rich made her happier.


Higher inequality does produce a lower level of satisfaction amongst the most disadvantaged, as would be expected. Interestingly, it also drags down the satisfaction experience of the richest. Perhaps we are at our best with some degree of inequality, but not too much. There is a correlation between development and inequality which distorts this a little. Perhaps the most unequal societies have a very small proportion of ultra rich, with the rest being varying shades of poor, and this impacts the top 10% result more than it would, say, for the top 1% result:

View attachment 60845

However, perhaps you were made to be happy. Wealth may be increasingly sticky across generations, but it also seems that happiness is too. An opportunity to thank your progenitors?
View attachment 60846

Final thought: A fair chunk of happiness comes from simply being grateful for whatever we've got.
View attachment 60847

Happy Holidays GG. Money can't buy the kind of happiness you are so fortunate to have.

Yea, money can't buy happiness, or true love; But poverty can't buy it either

 

[Smurf1976]

The aim of higher education is to broaden graduates, and citizens', mind and learning...

I see the point in a broader sense.

But if the aim is for a broad general education, but I'd take a guess that probably 80% of the population is capable of successfully completing a non-specific "general education" degree. And if all 80% did so, then it has no real value in terms of reducing wealth inequality. We just end up with degree qualified sales assistants and painters. We can't all work in high income jobs, since there's a limit to how many lawyers or dentists we actually need and someone still has to drive the buses.

I won't claim to have a solution to the problem of wealth inequality. I will note however that much of the policy approach over recent decades has effectively benefited the "haves" whilst doing little if anything for those without. Globalisation and "user pays" are both examples of that. Some gain, some lose, the gap gets wider.

 

[luutzu]

I see the point in a broader sense.

But if the aim is for a broad general education, but I'd take a guess that probably 80% of the population is capable of successfully completing a non-specific "general education" degree. And if all 80% did so, then it has no real value in terms of reducing wealth inequality. We just end up with degree qualified sales assistants and painters. We can't all work in high income jobs, since there's a limit to how many lawyers or dentists we actually need and someone still has to drive the buses.

I won't claim to have a solution to the problem of wealth inequality. I will note however that much of the policy approach over recent decades has effectively benefited the "haves" whilst doing little if anything for those without. Globalisation and "user pays" are both examples of that. Some gain, some lose, the gap gets wider.

I think education/training ought to be balanced between expected demand in the economy and possibilities of the new industry and economy that may arise from better trained and more qualified graduates. If we simply train people for jobs we can see, we'd probably be stuck training better sheep or cattle raising methods; that and maybe learning Latin and Shakespeare.

A good documentary below: Inequality for All

 

[Julia]

Higher inequality does produce a lower level of satisfaction amongst the most disadvantaged, as would be expected. Interestingly, it also drags down the satisfaction experience of the richest. Perhaps we are at our best with some degree of inequality, but not too much. There is a correlation between development and inequality which distorts this a little. Perhaps the most unequal societies have a very small proportion of ultra rich, with the rest being varying shades of poor, and this impacts the top 10% result more than it would, say, for the top 1% result:

I've seen quite a bit of research which has suggested it is less the actual amount we earn/have than how this relates to those around us. As long as we have as much or more, we're OK about it, but even being a bit poorer inspires disproportionate levels of dissatisfaction.

However, perhaps you were made to be happy. Wealth may be increasingly sticky across generations, but it also seems that happiness is too. An opportunity to thank your progenitors?

In the figure, this is referred to as being genetic. I wonder if it actually is in the same way that the colour of your eyes is, e.g., genetic? Perhaps difficult to determine the nature/nurture balance here.

Families will have their own narratives which will largely dictate attitude to life.
Martin Seligman, in his book "Learned Optimism" discusses at length what he calls our explanatory styles, ie how we interpret similar events differently. He makes a good case for a belief that we can choose our explanatory style, thus substantially influencing our capacity for happiness.

Final thought: A fair chunk of happiness comes from simply being grateful for whatever we've got.

I strongly agree with this. Even when the blackest events pervade our lives, it's possible to find several reasons for gratitude. Such a simple, yet powerful message.

 

[DeepState]

I've seen quite a bit of research which has suggested it is less the actual amount we earn/have than how this relates to those around us. As long as we have as much or more, we're OK about it, but even being a bit poorer inspires disproportionate levels of dissatisfaction.

My favourite. From the Harvard School of Public Health. Two-hundred and fifty seven faculty, staff and students were polled on the following alternatives:



Fifty percent chose A.

After meeting basic needs, we move to satisfying relative needs. I guess this instinct, with associated misery/envy, helps move us forward in a way that tries to satisfy the insatiable. Apparently it helps with economic progress.

 

[Smurf1976]

I think education/training ought to be balanced between expected demand in the economy and possibilities of the new industry and economy that may arise from better trained and more qualified graduates.

Agreed.

Although as a society we have to accept that if we train people for what might happen tomorrow, then in the meantime they'll be flipping those proverbial burgers etc.

 

[craft]

A good documentary below: Inequality for All

Yes it was, thanks for posting.

Interesting the correlation between wealth inequality and political polarisation.

 

[Bill M]

I won't claim to have a solution to the problem of wealth inequality. I will note however that much of the policy approach over recent decades has effectively benefited the "haves" whilst doing little if anything for those without. Globalisation and "user pays" are both examples of that. Some gain, some lose, the gap gets wider.

Your comment is spot on and then luutzu posted that video which mentions exactly what you did.

A good documentary below: Inequality for All

The is a very interesting documentary. I think about that working lady's comment, her salary was being cut and her medical insurance downgraded and she said something like "why is it that when someone makes $10 Million or a company makes $20 billion in profits do they want to take away the very little I receive." Pretty sad but true and it is one of the reasons I believe in having unions to help you get that fair pay. Respect your workers, value them, reward them fairly and build a strong middle class. I might add that at least here in Australia we are doing it a bit better than the Americans.

I wish more people like the Robert Reich's of the world were actually in charge and changing the world for the better. Thanks for the video, I watched it all.

 

[craft]

The latest blog by Bill Mitchell on the topic.

http://bilbo.economicoutlook.net/blog/?p=29766

n the Final Report, we learn that:
“Income inequality … has increased in Australia since the mid-1980s” as has wealth inequality.
Gini coefficients (closer to zero indicates increased equality) show that in the early 1980s, Australia recorded values around 0.27 to the current state of around 0.32.
The ABS data for 2011-12 (latest) shows that the mean household net worth was $728,000 while the median was $434,000, which tells you how skewed the distribution is. A “relatively small number of households had high net worth and a relatively large number had low net worth”.
Of the 33 OECD nations, “only eight … had a higher Gini coefficient than Australia ”” Chile, Mexico, Italy, Turkey, Israel, Portugal, the United States and the United Kingdom”.
“In terms of relative income poverty, in 2000, 12.2 per cent of the Australian population population had an income that was less than 50 per cent of national median income”. By 2012, this figure had risen to 13.8 per cent and despite Australia being one of the highest income per capita nations in the OECD bloc, our poverty rate is significantly higher than the OECD average.

and this was an earlier one that is relevant

http://bilbo.economicoutlook.net/blog/?p=28688

 

[sptrawler]

The problems are compounding, as the economy is contracting.
Companies are hoarding cash with the expectation of reduced sales, they are also cutting costs, including wages and staff numbers. They are also making less profit and paying less tax.

The population demographics are such, that more are moving into retirement and onto pensions, than are moving into the workforce.
This in itself is causing a problem, because the ones leaving employment were on relatively high wages, therefore paid proportionally higher taxes.
The ones joining the workforce and in existing jobs are earning less therefore are paying less tax.
Wealth inequality is going to widen, as the Government has less revenue to give away as welfare payments.
I suppose we could reintroduce death duties, like the U.K has, 40% on the deceased estate. Then use this to fund welfare and redistribution of wealth.
The options are limited, as more require welfare, the funding has to come from the taxable sector of the economy, or the wealth sector.

 

[Smurf1976]

The population demographics are such, that more are moving into retirement and onto pensions, than are moving into the workforce.
This in itself is causing a problem, because the ones leaving employment were on relatively high wages, therefore paid proportionally higher taxes.

As one example, the state public service in Tas has an actual program (not sure what it's called, there's an acronym for it) that basically seeks to downgrade positions. Eg someone employed at level 6 leaves, replaced with someone (quite likely an existing employee) at level 4 doing the same or slightly modified work. They're keen enough on it that the person leaving gets a redundancy payout of sorts.

So at the very least that's a drop in wages even if it doesn't result in an actual drop in staff numbers (though they're cutting numbers too).

I haven't heard of others doing it, but I can imagine the private sector taking a similar (likely less formal) approach. Someone earning $80K leaves, let's see if we can get the same work done by someone on $60K and save the rest. Good for profits and the bottom line, but it leaves less money circulating in the workforce overall. It's a slow but sure race to the bottom.

 

[DeepState]

Some thoughts.

What is the right Gini coefficient? Is it too high now? What was special about the 1980s base?
- Nothing was particularly special about the 1980s. However, inequality is higher than in the post war period average. What does that actually mean? The composition of industry and sharpening of power entrusted into the few have changed dynamics. Look at the movement from primary to secondary and tertiary industry for a start. Would you yearn for an industry structure and a standard of living that comes with a 1980s equivalent? More aggregate wealth...albeit, more inequitably distributed....has come about because of advancement.

What is the right labour share of income? Is it too low now? Is it too high now?
- Dunno. For you to answer.

What is the right labour share of productivity growth? Shouldn't capital get some of it if capital expenditure made a chunk of that improvement and those expenditures are now coming on line?
- Prior capex is coming on stream in a big way. It leads to at least some of the effects shown. It also arises as the economy is going through the processes of adjusting to the end of intensive mining capex.

In the absence of political plays via special interest groups, how much inequality (increase) would be occurring anyway? What is the natural level of inequality that would exist if democracy functioned as was intended? What should it be, if different, to maximally benefit the populace as a whole (not necessarily pandering to the lowest common denominator)?
- Inequality would be lower. Don't know by how much. The power of special interest groups could be countered by a truly active voting population. Education is one bit, but motivation is the greater. There is much scope for self education/elucidation by people so motivated to obtain it. Information is highly democratised. Perhaps we get the governments we deserve. Perhaps democracy doesn't work.

If you flatten the income distribution, what does that mean for the permanence of the wealth distribution?
- You entrench wealth and it creates bad tidings when the hurdle is then raised to join the class of elites.

Is the extent of inequality at present somehow unusual in a long history sense?
- Doubt it. Things were massively unequal in agrarian societies. How about during the industrial revolution? I suspect that we are positively egalitarian by comparison. Still, doesn't make it right. However...what is right for today?

Kind of funny. This is a site ostensibly dedicated to those purportedly interested in the process of money making through securities trading of various stripes. The rise of financial services to an increasingly central position in the economy together with the massive inequity that arises from within this industry and because of the economic activity that it elicits has led to a pretty major chunk of inequality that has arisen in the last 20 years. And, yet,...we want less?

 

[DeepState]

A worthwhile perspective from Montier (GMO):

https://www.gmo.com/America/CMSAtta...v67VQg/NVUMWsYvi3A2/L+S28A7Pthjp7LmOfLYQfHMJc



The world's dumbest idea is shareholder value maximisation....rampant capitalism. The type that causes huge inequality via many channels and was a source of scorn from Reich in his last book, Supercapitalism.




Everyone's lesson +1. Easy to say.

 

[luutzu]

Agreed.

Although as a society we have to accept that if we train people for what might happen tomorrow, then in the meantime they'll be flipping those proverbial burgers etc.

"Great ship takes the longest to build" - (from Tao Te Ching)

From what I see, it seems all countries plan their educational/training policies around short-term/immediate needs. This seems logical and rational at first but it both hinder progress (or grow at a much lower rate than could otherwise), and in the long term, it costs the country much much more.

So we start out with a simple premise of demand: Need plumbers, tradies, technicians, street cleaners and burger flippers at x% each; GPs, dentists, lawyers live forever so don't need that many to replace them... Look at the budget and allocate fundings according to demand/budget - maybe fund a few extra places for competition and lowering of wages.

What could be wrong with that? We can only spend what we can afford and only on what we need.

First, higher education (uni/tertiary) is a fixed cost operation so it really cost next to nothing to train additional students. You would need to increase a fixed number of places by a lot to really need a new lecture hall or additional classroom... and teachers are fairly cheap.

Second, the costs to gov't in loss income tax for the 3 years or so... how much tax is it really from a low-paid job?

So while there's a costs it's quite insignificant.

What are the benefits?

A well trained tradesman from TAFE earn a pretty decent living. A White Collar professional also earn a decent living.

What about the blue collar technician in factories/manufacturing?
Traditional manufacturing is on its way out of Australia if not already. And those jobs that do not... an average working life will be some 50 years... a heck of a lot have changed in the last 50 and the next 50 will be, in all likelihood, changed much more rapidly.

So chances are very likely that most manufacturing or labour intensive jobs will either be made redundant by technologies and new industries. And for those who worked in it most of their life, too young to retire and too old for new tricks... they will suffer and the gov't will lost both the tax from their income as well as the social security payments they're entitled to.

What I'm saying is simplistic, sure... but if people are trained, are learned, they can go very far and able to adapt much better to changing economic and other adverse development.

If we have a well trained and highly qualified workforce, the skills are the same but wages can be lowered and so we could be both competitive and attractive to employers here and around the world. What's better than a stable political system and a well trained workforce? We might even create new industries or maintain existing ones instead of our leadership saying they couldn't trust us to build a canoe.

And if we have highly qualified burger flippers... they will start asking serious questions regarding gov't policies and incentives.