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Decreasing the income gap is better for the economy and society
    #6420771 -

I think the economy would benefit if the distribution of wages were more even. At the moment there are a lot of really rich people who don't do much with their money except saving it. Simply because they have more money than they can spend.
If more money went to people with lower incomes they would consume more and money would flow faster through the economy. Production would rise and more jobs would be created. There would be less poverty, better health and education.
Or is my logic flawed? Maybe if there's less money in the banks and stocks companies couldn't invest as much. On the other hand, the money that's circulating usually circulates from bank to bank.
Then there's always the question if this situation is desirable. I think it is.

I live in the Netherlands where, because of taxes and minimum incomes, the distribution is more even. Our economy is strong and the standard of living is high. People don't have to work as hard and have more spare time.


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Re: Decreasing the income gap is better for the economy and society [Re: cybrbeast]
    #6421092 -

> At the moment there are a lot of really rich people who don't do much with their money except saving it.

Actually, that is not true.  Really rich people do not save their money, or they quicky become not really rich.  One of the things I learned in macro-economics.  :smile:  (They invest... and invested money is working money that benefits everybody regardless of who owns it... from what I remember.)


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Just another spore in the wind.

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Re: Decreasing the income gap is better for the economy and society [Re: Seuss]
    #6421105 -

Right. You have one group of people (middle class/poor) who's money is costing them money (loan debt) and the other group of people who's money is earning them money (investments). That's why the gap is growing and will continue to grow. No real solution to that exact problem, but getting rid of income tax in favor of a consumption tax would probably go a long ways towards making a better quality of life more easily obtainable and by more people.


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Happiness is a warm gun...

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Re: Decreasing the income gap is better for the economy and society [Re: unbeliever]
    #6421127 -

I'm not smart enough in economics to know how to fix it... or even to know for certain that it is broken and needs to be fixed. This is one of those subjects that I have a difficult time wrapping my mind around.


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Just another spore in the wind.

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Re: Decreasing the income gap is better for the economy and society [Re: Seuss]
    #6421157 -

Seuss said:
I'm not smart enough in economics to know how to fix it... or even to know for certain that it is broken and needs to be fixed. This is one of those subjects that I have a difficult time wrapping my mind around.


I tend to agree, this might be one of those rare cases where you have to treat the symptom. Otherwise you'd likely have to kill the patient to cure them. And what is it that really is the problem? Not the difference in income, but rather the difference in quality of life. From people not being able to afford healthcare, to not having the money for college, trade schools and the like and in a surprisingly large (and increasing) number of cases simply having food to eat. How do we solve these problems?

Universal healthcare, paid for by taxes. Libertarians hate that noise, but if you consider yourself an even halfway decent human being then giving up a little of your money to help people be able to live without pain and disease should not be an issue. Of course where these tax dollars come from may make a difference as well.

That's where the consumption tax comes in. Instead of taxing what you earn, tax what you spend (beyond what we do now). That way if you need more cash for food this month you can just not buy that plasma screen tv or take that vegas vacation or whatever. This puts the responsibility with the individual. Of course we have to hope our taxes are going to good causes, once the government has them.

How do we accomplish that? Better and more diverse representation in government would be a huge help. More transparency in government spending as well as an increase in accountability of same. Throwing money at Iraq with no over-all strategy or plan for an end, for example, is not good. Ramping up our nuclear arsenal, (R&D and production) is another questionable use of funds. If people are so concerned with "saving america"... lets make sure it's worth saving, lets make sure we have all these gold paved roads of opportunity, wealth and happiness most of the 3rd world seems to think we have.

Anyway, that's just my opinion.


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Happiness is a warm gun...

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Re: Decreasing the income gap is better for the economy and society [Re: cybrbeast]
    #6421173 -

I think this is a gross mischaracterization of the actual cause of the widening gap between the "rich" and the "poor" in America. There seems to be this persistant myth about the super-rich who use their money to acrue money and don't let anyone else into the club. A simple scan of all the newcomers in the Forbes listing quickly proves this to be false.

But we do know that there is a wage gap between the rich and the poor, so the real question is, where does it come from?

The answer is simple: education.

Quoting from Nobel-prize winning economist Gary Becker:
"There has been a general trend toward rising gaps between the earnings of more and less skilled persons. With regard to education, real earnings (that is, earnings adjusted for changes in consumer prices) earnings of high school dropouts did not change much. Earnings of high school graduates grew somewhat more rapidly, so that the gap between dropout and graduate earnings expanded over time.

The main action came in the earnings of college graduates and those with postgraduate education. They both increased at a rapid pace, with the earnings of persons with MBA's, law degrees, and other advanced education growing the most rapidly. All these trends produced a widening of earnings inequality by education level, particularly between those with college education and persons with lesser education."
Source

This is further backed by the OECD which has reported:
"University graduates (tertiary type A) aged 25 to 64 in the United States earn, on average, 91% more
than those who have completed only upper secondary education. This earnings premium is higher
than in all other OECD countries for which data are available except Hungary where the premium is
135%.

Those aged 25 to 64 in the United States without upper secondary education earn, on average, 30%
less than those who have completed upper secondary education. This gap is greater than in all
countries except the United Kingdom where, at 31%, it is essentially the same."
Source

So there isn't some magic "money trust" that's creating a gap between the rich and the poor in America. It's the oldest story in the book, work hard and you'll get rich. Stay in school and you earn more money. Borrow money to go to college and you'll make even more.

Now, the President's plan to cut college loan availability isn't helping this (nor are the current high interest rates), so that should definitely be something to be concerned with.

But do we really want to change a system where working harder earns you more money? A quick google search reveals that many nations in Europe (where college does not necessarily mean more money the way it does in the US) are facing shortages of doctors, IT experts, and medical researchers. It's already pretty well known that the vast majority of the world's medical research takes place in the US. Do we really want to ruin that?

Personally, I don't think so.

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Re: Decreasing the income gap is better for the economy and society [Re: Economist]
    #6421198 -

> The answer is simple: education.

Makes sense. The reason I went to college was so that I wouldn't have to spend my days doing manual labor. (I'm not a money person, but you could read this as "so I could make a lot of money" if it makes more sense.) If I thought that I wasn't going to get a good return on the investment I made in my education (college in the US isn't cheap!), then I wouldn't have gone to college.

> are facing shortages of doctors

How many people would go through medical school, paying the huge costs for education, if they were going to make the same wages as a janitor?

Hmmm... one of the trends I am noticing in my two replies is "cost of education". Granted, not everybody has the mental capacity for college, but for those that do, if it were free for US citizens as long as you took a full load and maintained a decent GPA... what would that do to the system?


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Just another spore in the wind.

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Re: Decreasing the income gap is better for the economy and society [Re: Economist]
    #6421202 -

Where do you get the funds for this education? Either you have well-to-do parents or you go into massive debt. There are scholarships, sure, but there aren't enough for everybody. It's a matter of logistics that people are going to be excluded from higher education by these factors.

And maybe if the markets were really "free" I'd buy into people being able to educate themselves and have a fair shot at starting a business (which almost always requires going into debt for startup money). But in reality we have industries constantly being bailed out by the government, we have corporations rigging the system to take advantage of government subsidies. Then you have the normal day vagaries and risks that are inherent in starting a business.

Of course you can go work for somebody else. But there is only so much room at the top of that corporate ladder. And in case you haven't noticed, the cost of living is skyrocketing while wages are most definitely not keeping up. Employment may trend down, but the type of jobs gained back are not on par with those lost. Do I even need to mention all the jobs sent over seas, or how that trend was encouraged by the current administration's policies?

We do not live in a black and white, Euclidean world where what should be, actually is.


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Happiness is a warm gun...

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Re: Decreasing the income gap is better for the economy and society [Re: unbeliever]
    #6421204 -

Quote:
> are facing shortages of doctors


And I'm sure that has nothing to do with the massive malpractice insurance costs doctors have to pay, due to the out of control well-dipping litigation in this country. Which incidentally interferes with the legitimate cases as well as driving doctors out of business. I know of a couple different doctors I've had (or family/friends have had) that had to close because of this very factor.

Just sayin'


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Happiness is a warm gun...

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Re: Decreasing the income gap is better for the economy and society [Re: unbeliever]
    #6421227 -

unbeliever said:
Where do you get the funds for this education? Either you have well-to-do parents or you go into massive debt. There are scholarships, sure, but there aren't enough for everybody. It's a matter of logistics that people are going to be excluded from higher education by these factors.


Yeah I've really never understood this argument (Seuss I believe this addresses your point too). Just go down to your local community college anywhere in the US and ask how much a class is. Usually it's $50-$100. And you usually need to take around 40 classes to graduate (5 classes a semester x 2 semesters x 4 years). So the total is something between $2000 and $4000. Most Americans carry more credit card debt than that, so it's really hard to view this as a "hard" barrier to getting an education. It's definitely a "soft" barrier, most people don't have a spare $4000 just hanging around, but even at minimum wage, $4000 is a VERY achievable goal.

The OECD measured the massive 90% earnings gap between people with a college degree and those without, NOT between people with a Harvard Degree and those without. So getting a bachelors from your local community college actually gets you more money than most people think. It gets you into the wide range of jobs that simply say "Must have college diploma to apply".

Now, many Americans in our culture of "must be the best" DO take on massive debts to attend Ivy League institutions, and this is usually what you hear about in the papers, but the reality is, it's just not that expensive to get a bachelor's degree in the United States.

I do think, however, that the key difference between the US and Europe is that you have to choose to get a degree in the US. With the European educational system, it's not much of a choice since college is free, there's basically very little reason not to do it. However, by charging even a minimal fee ($2000-$4000), Americans have to show a level of commitment to their education that likely doesn't exist in Europe.

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Re: Decreasing the income gap is better for the economy and society [Re: unbeliever]
    #6421232 -

unbeliever said:
And I'm sure that has nothing to do with the massive malpractice insurance costs doctors have to pay, due to the out of control well-dipping litigation in this country. Which incidentally interferes with the legitimate cases as well as driving doctors out of business. I know of a couple different doctors I've had (or family/friends have had) that had to close because of this very factor.

Just sayin'


I too disagree with malpractice lawsuits in the US. But I was talking about Europe. Nations like Germany and Ireland actually face a shortage of doctors because doctors would rather move to Canada or America and make more money with the same degree.

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Re: Decreasing the income gap is better for the economy and society [Re: Economist]
    #6421255 -

Companies can't afford to employ nothing but well paid managers and not everyone can be their own boss of a successful business. In our society there HAS to be people on the bottom, in terms of income. And as I mentioned, I don't know if that's a solvable problem or even a problem at all.

Where the problem lies is in the difference in quality of life. We probably don't need to drastically change how much money any one portion of the workforce is making, but what they do earn needs to be adequate to the cost of living and has to go further than it does now.

So once again, I'm not arguing against the gap itself, just the effects it has when combined with the shortcomings of the rest of our system.


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Happiness is a warm gun...

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Re: Decreasing the income gap is better for the economy and society [Re: Economist]
    #6421296 -

> Usually it's $50-$100. And you usually need to take around 40 classes to graduate

My college was 130 hours needed to graduate and $80 (aprox) per credit hour. They also required that you lived in the dorms the first two years, which ran around $450 per month (~$2000 per semester for four semesters). Grand total was around $18,000 for an engineering degree, not counting cost of living for the two semesters outside the dorms (which was much cheaper). This was in 1990 dollars for an in-state university.

When I priced MIT, out of state, it came out to around $20,000 per semester (total, including housing, food, etc). Although they were very willing to help me with loans and scholarships, I couldn't accept an educational debt of $150,000 to $200,000 for an undergraduate degree.

I also almost went into the Air Force Academy, but decided against it after they said my eyesight would keep me grounded. It would have been free, but required a six year commitment after graduation.

> It gets you into the wide range of jobs that simply say "Must have college diploma to apply".

Another thing that Dr. H told us in one of his stories... he didn't care, for the most part, about somebodies GPA in college. He wanted to see the diploma. Why? Because it shows that the person can set goals and complete what they set out to accomplish.


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Just another spore in the wind.

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Re: Decreasing the income gap is better for the economy and society [Re: unbeliever]
    #6421299 -

Can you be more specific about "quality of life"?

Personally I think it's nearly impossible to get a handle on this. Certainly there are people on the true bottom, those who are unemployed, starving, and without healthcare. My question simply becomes: how many are there, and does this compare favorably with other nations executing alternative policies to our own?

Insofar as I can tell, most measures of "poverty" have been constructed for political purposes and aren't accurate. As an example, in Japan both the minimum wage and the "poverty line" are determined in each Prefecture (their version of "states"). But in America both are determined nation-wide. However, earning $14,000 a year in West Virginia will allow you to make comfortable mortage payments on your 4-bedroom house. Meanwhile, $14,000 a year in New York City won't feed you for 6 months.

But we don't have any sort of local measurement. So when someone says "$18,000 a year is the poverty line!" it's hard to not ask how many people living on less than $18,000 a year are living in a region where $18,000 a year actually IS the poverty line.

The same goes for other measures. People often through around the total number of people in the US without health insurance. Except that private business owners often don't buy their own health insurance, and most of those aren't at-risk to be unable to pay for medical procedures. Included in this group are partners in law firms. Most partnerships do not have a health-plan among the partners. Certainly there's a health plan for non-partner employees, but not for the actual partners. Yet clearly no one is concerned with the question "How will lawyers be able to pay their medical bills?"

There may be a problem with inequality in the US, but there may not be. I started studying economics so I could try and find out, but unfortunately, most of what I've found has simply been more questions.

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Re: Decreasing the income gap is better for the economy and society [Re: Economist]
    #6421338 -

Economist said:
I do think, however, that the key difference between the US and Europe is that you have to choose to get a degree in the US.  With the European educational system, it's not much of a choice since college is free, there's basically very little reason not to do it.  However, by charging even a minimal fee ($2000-$4000), Americans have to show a level of commitment to their education that likely doesn't exist in Europe.


We do pay for college. In Holland there's a flat rate of ~1500 euros a year. Everyone who studies has access to a scholarship and free public transport. The amount you get depends on your parents' income and on whether you live at home or not. If you don't finish your study in a certain time the scholarship becomes a loan.
There are no big differences between colleges like Harvard vs community college.

As Seuss pointed out, getting a degree in America is usually a lot more expensive than what you propose.

Quote:
But do we really want to change a system where working harder earns you more money?  A quick google search reveals that many nations in Europe (where college does not necessarily mean more money the way it does in the US) are facing shortages of doctors, IT experts, and medical researchers.  It's already pretty well known that the vast majority of the world's medical research takes place in the US.  Do we really want to ruin that?


This isn't the case where I live either. We don't have a shortage in doctors, in fact we only allow a certain number of people into the study each year. We have a shortage of people who want to work as nurses etc.


But back to the point
Seuss said:
Actually, that is not true.  Really rich people do not save their money, or they quicky become not really rich.  One of the things I learned in macro-economics.  :smile:  (They invest... and invested money is working money that benefits everybody regardless of who owns it... from what I remember.)


Yes they invest in stocks etc. But if that money was circulating in the economy (being spent by lower incomes), it would still go from bank to bank. Banks are usually the biggest investors.


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futuretribe.space

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Re: Decreasing the income gap is better for the economy and society [Re: Economist]
    #6421342 -

I think that microcredit is an interesting idea. We should invest more of our money into a microcredit organization, or something. $1000 is nothing to some individuals, and they certainly can invest it in some financial plan and receive a return on it, but that $1000 could make all of the difference to an individual who earns low wages and needs an opportunity to begin straightening out debt and making progress with financial goals. Putting that $1000 into financial education itself would pay off for society as a whole, as well.

The days when tycoons rode around in hot-air balloons, tossing silver coins to the people below must rise again! :grin:


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:redpanda:
If I should die this very moment
I wouldn't fear
For I've never known completeness
Like being here
Wrapped in the warmth of you
Loving every breath of you
:heartpump: :bunnyhug: :yinyang:

:yinyang: :levitate: :earth: :levitate: :yinyang:

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Re: Decreasing the income gap is better for the economy and society [Re: fireworks_god]
    #6421347 -

I thought microcredit was to help the poor in developing countries not developed countries.

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Re: Decreasing the income gap is better for the economy and society [Re: cybrbeast]
    #6421423 -

Could it not be applicable in both?


--------------------
:redpanda:
If I should die this very moment
I wouldn't fear
For I've never known completeness
Like being here
Wrapped in the warmth of you
Loving every breath of you
:heartpump: :bunnyhug: :yinyang:

:yinyang: :levitate: :earth: :levitate: :yinyang:

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Re: Decreasing the income gap is better for the economy and society [Re: cybrbeast]
    #6421572 -

cybrbeast said:
We do pay for college. In Holland there's a flat rate of ~1500 euros a year. Everyone who studies has access to a scholarship and free public transport. The amount you get depends on your parents' income and on whether you live at home or not. If you don't finish your study in a certain time the scholarship becomes a loan.


Perhaps, but that's Holland. In Germany the whole thing is free for most students. In France there's a fee, but it's as little as 150 Euros/year. Thus I think it's fair to say that a significant portion of the European Population does not need to make the same commitment to education in order to attain a bachelor's degree that it takes in the US.

cybrbeast said:
There are no big differences between colleges like Harvard vs community college.


That was my point about the US as well. While Harvard graduates unquestionably make more money, the difference between Community College and No College is significantly wider than the difference between Harvard and Community College. In order to join the "working rich" in America (as the Economist labeled them) you really only need a community college degree.

cybrbeast said:
As Seuss pointed out, getting a degree in America is usually a lot more expensive than what you propose.


I don't think Seuss pointed that out at all. I shared my experience, he shared his. I know that you can get a degree at a particular community college close to where I live for $50/class (not per credit hour, per class) and at another for around $30/credit hour, which I averaged out to $100 per class after seeming the number of credit hours necessary for graduation.

Besides, even with the cuts Bush has made it's far from impossible to get a college loan to pay the amount Seuss was talking about. The point is, it's about commitment. It's not hard to get a college degree in the US if you are committed to doing it. If you are willing to take on the debt, it's really available to anyone. The question is, who is willing to make that sacrifice?

cybrbeast said:
This isn't the case where I live either. We don't have a shortage in doctors, in fact we only allow a certain number of people into the study each year. We have a shortage of people who want to work as nurses etc.


Again, I was talking about larger trends. You have stated you live in Holland. Look at numbers for Germany, France, and the UK. I could point out numbers in the state of New Hampshire and draw similar conclusions about the US, but by ignoring the large-population states it would be hopelessly misleading.

cybrbeast said:
Yes they invest in stocks etc. But if that money was circulating in the economy (being spent by lower incomes), it would still go from bank to bank. Banks are usually the biggest investors.


I'm sorry I don't think you understand how banking works.

Banks, and their investments, allow money to circulate throught he economy in the three most important ways:
1) Student Loans
2) Home Loans
3) New Business Loans

When people buy and sell stocks, it allows companies to grow an expand (either through IPOs or additional stock offerings). When banks make loans to existing companies, again it's usually so they can expand. When banks make loans to new companies, this also involves circulating money through the economy.

There's simply no way that banks, as investors, are preventing money from moving through the economy.

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Re: Decreasing the income gap is better for the economy and society [Re: Economist]
    #6422542 -

Economist said:
There's simply no way that banks, as investors, are preventing money from moving through the economy.


I wasn't trying to say that. I was saying that if the money that rich people save and invest was to be in the hands of the poorer and thus in circulation, then it could still be invested by the banks while they handle it.
So there would be a higher circulation of money, which would boost the economy I would think. But I'm no economy expert of course.


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