Presented without comment

[Partha]

http://finance.yahoo.com/tech-ticker/th ... l?tickers=

• 83 percent of all U.S. stocks are in the hands of 1 percent of the people.
• 61 percent of Americans "always or usually" live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.
• 66 percent of the income growth between 2001 and 2007 went to the top 1% of all Americans.
• 36 percent of Americans say that they don't contribute anything to retirement savings.
• A staggering 43 percent of Americans have less than $10,000 saved up for retirement.
• 24 percent of American workers say that they have postponed their planned retirement age in the past year.
• Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.
• Only the top 5 percent of U.S. households have earned enough additional income to match the rise in housing costs since 1975.
• For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.
• In 1950, the ratio of the average executive's paycheck to the average worker's paycheck was about 30 to 1. Since the year 2000, that ratio has exploded to between 300 to 500 to one.
• As of 2007, the bottom 80 percent of American households held about 7% of the liquid financial assets.
• The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.
• Average Wall Street bonuses for 2009 were up 17 percent when compared with 2008.
• In the United States, the average federal worker now earns 60% MORE than the average worker in the private sector.
• The top 1 percent of U.S. households own nearly twice as much of America's corporate wealth as they did just 15 years ago.
• In America today, the average time needed to find a job has risen to a record 35.2 weeks.
• More than 40 percent of Americans who actually are employed are now working in service jobs, which are often very low paying.
• or the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.
• This is what American workers now must compete against: in China a garment worker makes approximately 86 cents an hour and in Cambodia a garment worker makes approximately 22 cents an hour.
• Approximately 21 percent of all children in the United States are living below the poverty line in 2010 - the highest rate in 20 years.
• Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.
• The top 10 percent of Americans now earn around 50 percent of our national income.

[Harlowe]

Partha, what is this "crazy, loser, victim" data you are posting.

[Partha]

Well, I own this business that manufactures pitchforks, and I'm trying to spike demand.

[Lurker]

[Kulaf]

Now the big question......why? Are the top 1% somehow keeping everyone else down? Or is it.....welcome to the global economy?

[Freecare Spiritwise]

Now the big question......why? Are the top 1% somehow keeping everyone else down? Or is it.....welcome to the global economy?

Well put. I'd say the rest of us 99% better figure it out or we're in for a bumpy ride.

[Freecare Spiritwise]

I was thinking of what exactly would put me in the 1% (that's at least 250k a year, right?) and neither seems really acceptable.

I could:

1. Quit my job, go totally freelance, give up all of my free/family time, put money ahead of happiness and probably be there in a year to 18 months. That would be the high road. Sleep is for pussies.

or

2. Fuck over my boss, steal all his clients, compete against him and be a ruthless negotiator. I'd probably lose half of them but the other half would probably just pay up. Oh, and I could put them over a barrel to complete some of the already-halfway completed projects to squeeze them even more. Again, some would bail but some would pay. At least they'd get the best work. I'd have to poach some of the employees to meet the deadlines. That would probably put me firmly in the 1% within days/weeks.

With either, my wife would probably leave me but at least I'd have a 20 year old girlfriend as consolation. Oh, and a boat - I like boats. There's many paths to success, but off the top of my head those would be the two quickest for me personally.

[Lurker]

I was thinking of what exactly would put me in the 1% (that's at least 250k a year, right?)

Average income for the top 1% is about 1.3 million per year. You're thinking of the top 2-3%.

=====

Kulaf, I don't know that there's an easy answer for why more and more wealth is being concentrated at the very top. It can't be explained by them working harder or having more education. Something systemic is preventing the vast majority of people from benefiting from economic growth and it's an unsustainable situation.

[Embar Angylwrath]

You guys have to understand that "income" doesn't mean "cash". That's where a the big disconnect is. For a W-2 employee, or a 1099 employee, what you report as gross income is really the actual amount of cash you get (and then for W-2 employees, the government makes us take out your taxes for you and send it to them, because they don't truct you to do it yourself).

For people who have small businesses, something the accountants call "income" is not an all cash equation. And, even if it was, you still have to leave a large part of the "income" in the company, especially if its on a growth curve.

When revenue is recognized, (I.e. an invoice) you have to count it as income even though you haven't collected it yet. In most businesses, terms are 30 days, but everyone pushes you to see if you'll let them slide to 60 days. So in practicality, I have to report as income cash that I won't collect for some time. How would you like it if the IRS said "estimate your next two months of pay, and tack that on to your calculation of of gross annual income for tax reporting purposes"?

Graphs like that are very misleading, as they try to impose the same type of income recognition on everyone, without adjusting for the real cash position of people. A more honest graph would capture actual spendable cash, from all sources, including reverse income taxes which are the functional equivalent of cash. It would be tough to do, maybe impossible, but the "income" acceleration graphs are meaningless for the purposes of knowing the actual truth of the matter. There's just too many disparities on how and what income is defined. When you start looking at the tax code, which is the real driver of what is and isn't the definition of income, and all the things like what you can deduct as an expense and what you can't, and how you have to capture and recognize revenue, even if it doesn't exist as cash yet... its a worthless excercise.

Here's te reality that sort of flies in the face of stagnant "income" as show on that graph. How have standards of living continued to rise over the years for most Americans if income has remained stagnant?

[Ddrak]

What I'd like to see from Lurker's graph is the ratios. The relative rise in the lower incomes is lost in the pixel noise (which I'm sure was the intent of the graph).

@Kulaf:

Why is complex. Parts are global competition for low-skill jobs which reduce the net worth of unskilled US labor. It's further split by the increasing availability of higher education, which lowers demand for uneducated labor. Other parts are the tendency of rich people to marry other rich people then have relatively few children which concentrates wealth in those second and third generation wealthy.


@Embar:

Arguing cash vs accrual basis as a factor in the differentiation is nuts. Sure, you account for invoices that won't be paid for 30 days but that just effectively shifts your income position by 30 days - it doesn't raise or lower it at all. It's not "estimate your next two months of pay, and tack that on to your calculation of of gross annual income for tax reporting purposes", it's "estimate the next two months and take off the first two months".

If those graphs actually plotted disposable income then you can bet the gap would be significantly wider.

As to standard of living, it may have continued to rise (I'd be interested in some sort of objective data to confirm this) but the question is whether the increase in the bottom quintile matches the increase in the top 5%. If not then the disparity is widening.

Dd

[Lurker]

Ddrak,
Here's the same basic chart showing the percentage rise instead of inflation adjusted income. (Source)

Here's te reality that sort of flies in the face of stagnant "income" as show on that graph. How have standards of living continued to rise over the years for most Americans if income has remained stagnant?

Borrowing and debt. Also, what ddrak said.

[Embar Angylwrath]

@Dd (and Lurker)

You two totally missed the ppoint, focusing on one element and disregarding the rest.

For W-2 employees, income = cash. Net income = cash - deductions.

For businesses, income = invoices paid or unpaid - depreciation - minus expenses + unallowable expenses or percentages thereof - interest on debt + health insurance (yep.. us self-employed people have to treat healthcare costs as wages) and a whole lot of other shit that anyone who has never run a business has to deal with.

Also... lets say that at the end of the year the company has an actual cash profit, but that profit goes back into the business to hire more people, buy more equipment, grow the business... the owners still get taxed on that "profit" even though they never saw a dime of it. Last I checked, a bank won't cash a Profit and Loss Statement....

[Jarochai Alabaster]

Also... lets say that at the end of the year the company has an actual cash profit, but that profit goes back into the business to hire more people, buy more equipment, grow the business... the owners still get taxed on that "profit" even though they never saw a dime of it.

I'm confused. Why wouldn't your business be taxed on its profits before spending its surplus on items and employees to grow the business? I don't see it mattering if the money's used to grow the business or cut as a bonus check to the owner - it's still money the business made and should be paying taxes on. And if it's being used to grow the business you can't really say they never saw a dime of it, as that cash has been used to provide the business with expanded resources.

I'm genuinely curious here, because either I've misunderstood you or you're suggesting businesses paying taxes on profits is a bad thing.

[Ddrak]

I seriously doubt anyone in the top 1% is running a sole proprietorship, partnership or even S-Corp. Their taxable income (which is what is being measured) won't have anything to do with any of the stuff you're talking about here, Embar - it will all be coming from stocks, trusts and other financial vehicles.


Now, although it's off-topic, in the case of a sole proprietorship (or similar, where the business tax *is* the personal tax), income is basically what you said though you definitely missed a whole bunch of stuff (written off invoices is a good one to start with, which brings accrual in line with cash accounting). If you're really doing that much then you probably should be an incorporated entity.

If you reinvest profit back into the business by hiring more people then that isn't taxable income (payroll is expenditure). Similarly, buying equipment may or may not be taxable depending on how your accountant works the depreciation and whether it's actually leased or bought (many companies leverage the loan interest as a tax deduction as well).

Dd

[Partha]

http://sociology.ucsc.edu/whorulesameri ... ealth.html

In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one's home), the top 1% of households had an even greater share: 42.7%. Table 1 and Figure 1 present further details drawn from the careful work of economist Edward N. Wolff at New York University (2010).

[Minute]

I want someone to answer Kulaf's question. Someone here mentioned the introduction of women into the workplace as standard practice.

[Partha]

You ask me, Minute, I'll tell you the concentration of too much wealth into too few hands tends to accelerate without adequate pushback. If the government either aids or condones the concentration, then revolution is the historical antidote. There's a paragraph I've quoted before.

Societies turn unstable when distribution of incomes is too uneven. Revolutions like those of 1789 and 1917 and 1985 have usually broken out when the top decile of priviligentsia is more than, say, fifteen times richer than the mass of population. In stable countries like the United States, Japan, China, and all West Europe, the after-tax incomes of the richest decile in the interwar (1945-1985) years were rarely more than seven to eight times the incomes of those even on welfare relief.

We had that problem in 1929 here. Without the massive government intervention in the '30's, we might well have had our own little revolution, as can be noted by the explosive growth of the Communist Party, socialist parties, and the unions during that time. Since 1980, though, there's been a concerted attack on both the New Deal's social safety net and the means for poorer people to obtain wealth through either collective benefits (union-busting) or through education (defenestration of the public school system). Companies have moved retirement from being an employer expense to an employee expense (401k), and then largely taken that money out of the communities. When one has an outsized amount of money in a country where money is free speech (especially aimed at the politicians who write the laws), the laws tend to benefit those with money.

I wish I could say I see it getting better, but we've got about a quarter of the nation eager to destroy it in the name of saving it for the rich, and a bunch of lying shitheels with the public megaphone invested in making sure the folks who pay their salary get their way. I fully expect to be holed up on a farm somewhere in ten years unless we get President Palin, in which case it'll be less than four before I'm off farming.

[Kulaf]

I want someone to answer Kulaf's question. Someone here mentioned the introduction of women into the workplace as standard practice.

I've said it in the past. When women entered the workforce and literally doubled the amount of workers I firmly believe it dilluted wages. Not trying to sound sexist this is just a cold fact of economics. Our economy has since recovered from that and has tried to move on but the constant influx of outside workers continues to put downward pressure on wages.

[Embar Angylwrath]

There's another factor to consider... changing credit standards.

Issuance of easy credit (credit cards, easy-to-get mortgages, car loans, etc), allowed Americans the illusion of improving wealth, since they could buy more items on the same wage than previously possible. This perception that buying more stuff = wage increases dampened upwards wage pressure. This change began to happen in the 80s. It became easier to get a credit card, easier to buy a car. Later in the late 90s, you could buy a house for 3% down, and just a few years after that, no money down and people began using homes as ATMS to artificially support lifestyle habits and purchases.

Some of you can remember when there was only one TV in the house and one computer, and maybe two phones, one in the parent s room and one in the common room. Many of you remember having only one car, because that's all the family could afford at the time, since car loans were harder to get. Now... every kid but the most poor has a personal computer, their own TV, their own cell phone. Parents have two vehicles if not three. Credit card debt is used to finance much of this. If poeple paid for items when they had actually saved up the money instead of financing lifestyle choices, most Americans wouldbe in a much healthier financial position and have higher net worth.

[Torakus]

Dammit Embar stop asking people to be responsible. We want to live the easy life and damned if we will work hard for it, we want the government to serve it up for us while we make bad financial decisions for ourselves.