The Shocking Truth About Inequality

[xchrom]

http://www.bloomberg.com/news/2013-03-28/the-shocking-truth-about-inequality.html

Economists have identified two basic reasons why income inequality has increased so much since the early 1970s. On the one hand, globalization and technological progress have made certain skills much more valuable and others much less valuable. This has increased the spread between the incomes of high-earners, who are usually better-educated, and the rest.

At the same time, employers have been passing more risk on to workers. Except in the public sector, the promise of lifetime employment is dead. Defined-benefit pension plans have been mostly replaced by defined-contribution plans. Bonuses, stock options and other forms of profit-sharing have become increasingly important forms of compensation compared to traditional fixed salaries, especially for those at the top.

Pushing more risk onto workers has resulted in greater variability in individual incomes, which in turn tends to increase inequality. Imagine an economy with two workers, both making $100 a year, and another with two workers, both making $100 on average, with variations above and below that year by year. The second economy will have greater measured inequality, even though both workers make the same over multiple years. Greater variability has another implication: Inequality looks worse when incomes are measured over a single year than over longer periods of time.

Up to now, the evidence has suggested that each of these forces -- the balance of supply and demand in the market for skills, and the greater variability of short-term earnings -- was equally responsible for the increase in inequality. Last week, however, the Brookings Institution published a paper by Jason DeBacker and others that argues that all of the increase in inequality since 1987 has been caused by the first factor. Moreover, they conclude that the inequality is permanent rather than transitory.

[dawg]

1. If market forces produce an outcome where a few prosper greatly ...

and others are unable to afford basic necessities, what do we do about that?

In my opinion, such a market is broken and requires government intervention. We can't just allow millions of people to live in working poverty in the richest country in the world.

[dkf]

2. This is the paragraph that hit me...

The issues seem abstruse, yet this academic disagreement has real policy implications. The sort of inequality that comes from workers bearing more risk can be offset with social insurance, including short-term unemployment benefits and subsidies for catastrophic health insurance. But if inequality is rising because of changes in the demand for skills, it would be better to focus on education.

Thanks for posting. This is a biggie for policy makers or it should be.

[xtraxritical]

7. The "shocking truth" is that inequality was created by the "policy makers"

corruption, manipulating the economy. I put the blame starting with Clinton and that Congress then every administration and Congress since. Clinton was a joke for American workers and he just got lucky riding the dot.com bubble.

[loudsue]

3. Anybody with boots on the ground had already figured this out a few years ago.

I'm sure glad the Brookings Institution finally figured all this out.

How friggin' stupid are these neocons.

[Demeter]

4. They still have depths to plumb

in the Stupidity Well.

[phantom power]

5. what's criminal is that we knew all these things 80 years ago

but the last 30 years, all our fearless leaders have run around acting like it's All Such A Big Mystery. It's a giant con, with 300 million marks.

[1StrongBlackMan]

6. I haven't read the article; but ...

I must point out two fallacies in the OP ...

At the same time, employers have been passing more risk on to workers. Except in the public sector, the promise of lifetime employment is dead.

When has lifetime employment ever been "alive" ... even in the piblic sector? People do, have and will continue to get fired from public sector jobs ... their bosses just have to have just cause for doing so.

Up to now, the evidence has suggested that each of these forces -- the balance of supply and demand in the market for skills, and the greater variability of short-term earnings -- was equally responsible for the increase in inequality. Last week, however, the Brookings Institution published a paper by Jason DeBacker and others that argues that all of the increase in inequality since 1987 has been caused by the first factor. Moreover, they conclude that the inequality is permanent rather than transitory.

A "balance of supply and demand in the market for skills" can't be the cause of inequality, when those market principles ONLY apply to the lower end of the labor spectrum ... IOW, those benefitting most from the compensation systems are not subject to the supply and demand market forces in the same way as those being hurt by it. The current model has it: &quot for the worker) for every job, there is a worker willing to do that job for $1.00/hr less than what we currently pay"; whereas, for the C-Suite, the model is: "Must must pay the CEO/Execs $15,000,000 because no one will do the job for $14,000,000."

So if that is a basic premise of the study ... it is flawed.

[mntleo2]

8. The poor have always been the canary in the mine

Listen People, this "news" has not been shocking for the poor. In 1996 when Welfare Reform was passed and signed into law. we activists tried to tell you all what was coming, because that law in essence defined what was to come.

It said in essence that any job, whether or not it paid the rent was "successful" and it actually replaced good government jobs with "welfare-to-work" people. For instance, in NYC Guiliani used these people to replace his city workers because the welfare recipients "worked off their welfare" which is essence was less than $.50 cents an hour. This was under the approving eye of guess who? SENATOR HILLARY CLINTON who later went around the country with Joe Lieberman crowing about how "successful" Welfare Reform was. The only "success" that they could talk about was that the roles were reduced ~ they had *no* idea where these people went, what they were doing, or the impact of this law on struggling families.

Truth is they decided to cling to the myths and "forget" about the truth about poor people, mostly women on welfare. The truth was (and they knew it) that these women used welfare in order to get a leg up. Over 74% of these women went on to college and got livable wage jobs. Over 80% of them were married when they had their children, they did not get child support, which would have kept them off the rolls. Less than 15% of these women were teens on welfare. Now these women cannot go to school and any job, whether or not it supports them and their families is the *only* way welfare deems them "successful". So much in my book for Hillary to be a "feminist" when she actually was quite active into shoving these women and their kids deeper into poverty so her rich friends could live off the backs of the poor in order to get richer.

The other fatal mistake about this is about the widespread, quite disgusting, and very stoooopid refusal to admit that poverty is an institution, it is *not* a "choice".

From Websters:

in·sti·tu·tion
a well-established and structured pattern of behavior or of relationships that is accepted as a fundamental part of a culture, as marriage: the institution of the family.

Institutions remain firmly ensconced in societies because they benefit the upper classes in spite of the horrible damage this institution promotes. The elite WANT more and more people to be poor so they can use them to enhance bank accounts. Other institutions that have been now and in the past are the Institution of Slavery, the Institution of marriage, the Institution of Racism, etc. theInstitution of Poverty is kept in place based on racism, sexism (including LGBTQ),classism, ageism, and disabilities.

Meanwhile the government was paying large corporations and mega-non-profits $millions to do the same thing - replacing workers with low income people who then replaced the jobs that made a livable wage. It then kept the low paying people and POOF! One by one, the good paying jobs were gone. I might add here with a little sadness and yes I TOLD YOU SO-ness that we told you people the next class they were going after was YOU.

See, while people were wildly applauding Welfare Reform they were so sure that this law did not apply to them: while trying to hide their prejudices ~ and using racism to the max since they assumed being poor meant "being brown" ~ and assuming wrongly that the Institution of Poverty meant "being lazy", they thought this law would just be for poor people, not THEIR "hard working" little butts. Well guess what? In America, it is illegal to pass laws for just one segment of the population, when laws are made, they apply to EVERYBODY. I might add here, that there were many people on DU who I have sparred with over the decade about this who maintained the same attitudes, but well, sad to say now that they are paying for it, they now know what I and other activists like me, had been trying to tell them for years.

The truth is the whole society is based on poverty because the upper classes depend on the poor for their own comforts. The poor are the ones who serve the upper classes and their "wages" have always been depressed. Now that the the falling middle class are vying for these jobs, well suddenly they are all surprised that what they wildly applauded in the 1990s was their fate. Even mega-non-profits use the poor in order for the rich to use them as their own private tax shelters, where "donating" merely means they give their riches and then get it back in tax breaks. they in essence "privatized" charity in order to use the poor, the disabled, women, people over the age of 50, and people of color as their slave labor, making sure there is no way out.

You will notice that "charity giving" is almost always mentioned as 2nd on the list for those shills like Ryan, Rand Paul, and their ilk who know that "donating' merely means more money from the government and it is not donating at all. they are really their own private "Cayman Islands" where they can hide more of their riches. These mega-nons are just corporations that do not pay taxes in order to give punitive, miserly "assistance" to the poor when in fact they pull in about $54,000-67,000 per client while giving on the average of only $2000 in services. These mega-nons also employ bored rich relatives in 6 figure "jobs". You can literally take a Stairway to Heaven" in these places. As you ascend, the lower floors are where the broken equipment and furniture lay and the poor work for wages that would be just a dinner at an exclusive restaurant for their "Executive Directors". As you go upwards the offices are nicer for the middle class where the case managers, social workers, accountants , and the like work as gatekeepers for the rich. The upper floors are where there is leather everywhere, original art, and new equipment.

Side note here: do *not* mistake megas with small non-profits because the little ones is where the REAL work is done, they get *nothing* from anyone, and they often operate on a budget that would not pay a social work manager's salary.

So basically, as many of us warned then when Welfare Reform was passed, they used the the Institution of Poverty to see whether or not this would work and VIOLA! Now these conditions apply to the rest of you. No it was not all Democrats, but let me tell you the key Dems today who were demonizing the poor were no different than the Repugs in this endeavor. Now they can hate you all, blame you for your poverty, make low wages impossible to live on, use their "mega-non-profits" to hide their money while making sure the palt5ry "services" they provide will make you feel like a piece of crap, all while their friends rake in the dough off your backs.

Ain't they sweet?


My disgusted 2 cents

Cat in Seattle
Board member of http://www.mamapower.org

[dkf]

9. What happens when the rich have robots and don't need to "use" the poor?

Is there more justice then?

There are worse things than being "used" for labor, mostly not being "used".

[Phillip McCleod]

10. i've always thought computers would be better suited..

..better suited to replace management than workers. they're basically decision-making machines, built for exactly the kinds of things that CEOs do.

getting a computer to operate a robot is expensive and all those moving parts? breakdowns. all the time breaking down.

much better to replace the CEOs with robots.

[dkf]

13. A computer is only as good as its programming.

Through the errors we've experienced in computer trading, it is apparent to me that you need an interjection of skepticism and common sense every once in a while.

Reliance on algorithms has been the downfall of more than a few.

[Phillip McCleod]

15. of course you realize.. i jest.

but to continue the jest..

i think relying on the safety features of poorly designed industrial machinery.. including robots.. has been been the downfall of a few, as well. when you get your ponytail stuck in the olive-picker, for instance.

difference is taking a hit on the pocket book versus an episode of 'Bones'.

'look, Dr. Brennan! i found a tooth!'

[mntleo2]

12. It all depends on how you define "work"

Right now the *only* "work" is paid work. Even feminists have gotten it wrong when they try to push women into paid work. In truth for centuries, perhaps since the beginning of humanity, the work of women has included community building and care giving, which Welfare Reform calls "doing nothing".
In fact, according to the AARP, this unpaid work saves the country over $400 BILLION a year, and if we were to build institutions to replace this work, it would costs 100s of $billions more. http://assets.aarp.org/rgcenter/ppi/ltc/i51-caregiving.pdf

The care of family does more for you than just for the family. Raising kids who are going to take care of YOU when you can no longer do it is fundamental to this society. Whether or not you have kids of your own, these kids will grow up to run our infrastructure, fight in our wars, pay YOUR Social Security, and take care of YOU when you are old and/or sick.

Care giving that is done "for free" such as care for disabled family members is saving you $billions in tax dollars. Forcing women into the work force merely subsidizes large businesses for them to say, "Do you want fries with that?" instead of caring for the ones who need it. this caregiving is more than an 8 hour job, it is usually 24/7 7 days a week and involves no sick leave, no retirement and nothing to live on when the work is done. You would be amazed at the thousands of well educated, hard working homeless women over 50 who have been left at the curb for doing this work. Nobody will hire them because they are too old and have no work history, many have lost their homes because the long term care for a spouse or an elder relative left them penniless, and many are left because their husbands ran off with the secretary and left them holding the bag.

Yet all this work is called "doing nothing" it is not defined as real work. In the meantime all this hard labor is considered by Social Security to be "zero years" meaning that all this work is not counted when it comes time for a care giver to retire or need the funds to live on while they are caring for a loved one. We will pay everybody else in the world to raise children than for the parents for far more than it would cost if the care was done by the family.

Paid work is not the *only* work that is being done in this society. It is time to take off your blinders and see some of the work women and a few men do every day that "does not count".

My 2 cents
Cat in Seattle

[dkf]

14. Well I am happy for those folks. I'm sure they found it worthwhile.

I'm not limiting anyone's choices. If they choose this then all my best to them. But there are obvious consequences that come with these choices that are known and not hidden.

[mntleo2]

16. This work needs to be valued

...not just be happy for the "choice" to do this work. It is no different with anyone who "choses" work according to their life situation, their opportunities and their talents.

Otherwise if you took all those "free" care givers who "chose" to care for loved ones and put them into paid work, YOU would then be caring for the loved ones by subsidizing businesses in order for those women to work for a wage, get it? The cost-saving because of this unpaid is huge, almost $1/2 TRILLION dollars a year.

Most developed countries except the U.S. value this work. Such as Sweden and other countries who allows 4 years off paid labor with full pay for each parent, Venezuela even pays these caregivers a wage. Care giving for elders and the disabled is also subsidized so the care giver is then not left penniless when the work is over. They also value their elders and instead of leaving them to knit beer hats for the Senior Center fund raising, they give them work opportunities to ensure they can ply their knowledge and trade to things that benefit all.

When we begin to value unpaid work in much the same way as paid work instead of devaluing it and calling it "doing nothing", then is when we can look at ALL work and understand its value to our society. Working for a wage is fine, but all work should be valued enough to consider it is worth the time and the support and look at the cost-savings it contributes instead of besmirching these women who "chose" to care for an elder rather than institutionalize them, care for their children whom God gave to them to raise instead of paying someone else who will not give the quality care these children need, or caring for an ill spouse because the cost of paying for that care will put them BOTH out on the street. Just pray you will have a person in your life who cares enough about you when the time comes rather than throw you into an institution where they could care less.

Cat in Seattle

[mntleo2]

17. Robots: Look to the future for the ones who will yet to be born

We are the stewards for the coming generations, it is not just about us and the loved ones we know. Those we do not know may someday save out lives. We should be building stepping stones and decent living conditions for coming generations, not sitting around being all paranoid about robots.

The truth is there are far more of us than the elite and the elite know it. Why do you think they live in enclaves and gated communities? Instead of thinking for one moment that they are keeping resources from other that need it. They know they do not need to sit on far more than they are hoarding that the Universe intends for us all, not just them. So they are afraid the 99% will awaken and when they do the torches and pitchforks will come out. Indeed they will, they always do and those enclaves mean nothing and will come down when millions are angry.

Here are some truths about life: Value is only valuable because everybody values something. If we decided as a whole that diamonds were not valuable then they would just be shiny rocks.

When we realize that a great deal of "wealth" is just electronic data flying through the air instead of putting value on it, we would do the world a lot of good because then that wealth is just ...well, nothing but air.

The only reason laws work is because we as a whole decide to obey them. If we all begin to disobey them, then the consequences for disobeying them goes away and those laws are just pieces of paper. This happens all the time with archaic laws that no longer work where they just becomes words on a piece of paper and have no significance or relationship to people at all.

For over 20,000 years the Suquamish, and other Northwest First Nation people did not have any such thing as "stealing". You know why? Because they knew that whatever the Earth provided was for all. Therefore whenever someone needed a blanket, they could take it after considering that the person with the blanket had enough to keep themselves warm. Every year they had a potlatch so that if someone who was more ambitious that had accumulated more than they needed, they would share the bounty they had with those who did not have enough. The Jewish tradition of the Jubilee every 7 years was much the same idea. Because this kind of thinking values people, which IS why we are alive, these First Nat5ion people did not waste time deciding who did or did not "deserve" it, they knew everyone deserves to eat, sleep, be warm, and were not worried about who "did more work" than the next in order to deserve it. Of course this meant that everybody pitched in and it would be a shame not to unless there was good reason they could not contribute. There is nothing wrong with that in a society that values others.

But n-o-o-o! We cannot have that now because well, we have been influenced by the wrong cultures into believing that some deserve and some do not. This is because people are selfish and believe they "own" things that do not truly belong to them. Therefore we force people into niches of slave labor and social situations that devalue them and we decide that all they do as "doing nothing".

The point is that this is something that operated quite well for over hundreds of millennial and could work now if we but gave up our foolish notion of separating people into who "deserves" more of this earth's bounty and who does not such as that paid work is "doing something" while unpaid work is "doing nothing". Work is work. No human who has their right mind does not want to contribute so that others also have. Any human that does not want to contribute is sick. It is wrong to have more than you need, whatever that is. If you have enough food on the table, a good roof over your head, loved ones who cherish you, enough supplies to last through the winter, you have enough. It is time to call being wealthy a shame, not something to spend your life trying to achieve, we need to strive to spend our lives making sure we can eat and are able to love and care for one another, that is enough. People do not need two houses, you cannot drive more than one car at a time, you have no need to consume more than you need. When you only take what you need, there is enough left over for others who need it.

If the hoarders want robots to do their work so be it. Then they will spend lonely and isolated lives counting their money and not having other humans to care for or be cared for. I cannot think of a more desolate life ...

Cat in Seattle

[nineteen50]

11. Our economic system

switched from production to finance. Finance has no patients for acquiring wealth through the process of development and production so it usurps existing systems of production and service and sucks the wealth out of them. Currently it is sucking the wealth out of everything of value in the public sector that is why we have an attack on S.S, Medicare, education, and pensions.