Income gap between rich and poor

Here is the deal for folks who still cling to that belief:

> In a Republican administration, the poor are prevented from becoming > poorer until after the rich become richer. > In a Democratic administration, the rich are forced to become richer > before the poor are permitted to become poorer.

My own theory in the widening income gap between well paid people and badly paid people is very simple. It is not very much about politics and mostly about economics, IQs and productivity.

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The economics of this is that work contributions of not so intelligent, or unqualified, people are replaced by computers. The easiest example, besides CNC manufacturing, is to see how store cashiers are being replaced by automatic checkouts. Same applies to very many other professions.

As computers become smarter, more and more people are being pushed out of the economic bandwagon and fall on the fringes. They simply cannot contribute much that is within their abilities.

This is significantly different from the past industrial revolutions, where people replaced by machines simlpy learned to operate such machines and overall, produced more. Now, there essentially is a lesser need to have anyone operate any machines, as computers do it better.

I do not know what the future holds, and possibly, we will stumble on the answer on what to do with such displaced people, and the society will continue happily employing them for something useful. Possibly, we will be forced to improve our education system, with some minor gains due to that.

It is also possible that we will not stumble on any such solution and more and more people will be pushed to the fringe, as computers can substitute for a greater percentage of population every year. The bleak social consequences will be easy to imagine.

I find this trend to be very disturbing, as eventually almost everyone will be eventually displaced from productive activity. Remember that even now, world chess champions barely win chess matches against computers. For more food for thought, read

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Tax policy or trade policy cannot do much to stop this essentially technological, microeconomic development. Social policy may make the fate of displaced workers a bit better, and in the meantime an economic solution may be found.

The individual answer to this is that to be successful, it is important for young people who are not wealthy, to become sophisticated, focused and highly educated individuals. This is, clearly, not feasible for everyone, but it is important to at least try.

I do think that this issue will be a fundamental source of instability for decades to come.

i
Reply to
Ignoramus10488
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Am I missing something? I'm 62, totally permanently disabled, and am still finding ways to make money. Now, if I could only find a way to make more time ..............

Steve

Reply to
Steve B

Steve, I think that you are basically an intelligent person to begin with, and second, those ways are not quite like a regular job, which is what I was talking about.

i
Reply to
Ignoramus10488

I largely agree. It is all about power not about party.

--Winston

Reply to
Winston

FWIW, ca. 1963 - 1970 or so, there was an expected answer to this problem you identify, which, for forward thinkers in economics, was apparent even then. Trend lines in automation were already making the logical conclusion quite clear. (This was a central subject in Policy Science at the time, and the academic analysis and thinking on this was what I was studying.)

The assumptions were that the work week would be shortened to four days; eventually less. More people would be required to fill a certain number of man-hours of work. Education would take up many of the remaining hours for individuals, as technical developments would require an increasingly well-educated work force.

Capital would be under pressure except for truly entrepreneurial opportunities; dividends would be reduced because more profit would return to workers. The gap between returns on capital invested in mature industries and the rates of return possible for new enterprise would keep innovation well-funded and expansive.

It was a vision that was similar to European social democracy. It went to hell in the US for a variety of reasons, and globalization has given capital the upper hand, basically undercutting the social democracy model in the US. (It remains effective in Germany, however, which beats our pants off to this day in balance of trade.)

This was before globalization and the proliferation of finance. It was assumed that the pool of capital would have nowhere to go as dividend rates dropped -- except to innovative projects.

You have an economics background, so you'll recognize the Stockholm School thinking involved (think Gunnar Myrdal, and _Beyond the Welfare State_). The view of labor and capital in this thinking comes from Post-Keynesianism. It didn't anticipate the rise of Japan or the Asian Tigers, or Asian economic models, and of course it didn't anticipate the rise of China.

So now we're basically stranded with a neoliberal model that's just taken it in the shorts. Also known as the Washington Consensus, it's in ill repute around the world. Several European countries are taking a fresh look at Germany's flavor of social democracy, which is going to cause a lot of turmoil in international trade and finance if major trading countries adopt conflicting models.

Reply to
Ed Huntress

Far too many people believe that low paying jobs should be eliminated. Minimum wages are pushed up and the consequence is these low-end jobs disappear and society supports these people with social programs. These people are denied the satisfaction of accomplishment and contribution and their pride is stolen from them. Don't blame machines, that is a reaction by business to control cost, a counterplay to political induced instability to a free market. Is a person truly better off sitting at home collecting government hand-outs that keep them under control and in a state of hopelessness?

What percentage of the bottom earners are there because they just lack the ability to be trained for more lucrative positions and what percentage are there because of bad decisions, bad choices and apathy? If there are no consequences because society will always provide a big TV, food, clothing and shelter...why try?

What ever you subsidize, you get more of. What ever you tax, you get less of.

Reply to
Buerste

Subsistence farming - it's the future. Look at Zimbabwe's total collapse over just a few years...

Reply to
Pete C.

The full strength version of this is Smart Fraction Theory:

Joe Gwinn

Reply to
Joseph Gwinn

Which article are you referring to, specifically?

Reply to
Ignoramus5662

You've said this before, and it's still bullshit, as it was then. Automation marches on and if you don't keep up, at least within firing range of the leaders, you're out of business.

No well-run business keeps extra people when it's cheaper to employ automation. Most small businesses are not well-run, so I wouldn't disagree that you may be one of the foot-draggers. But the compulsion of manufacturing economics would drive you to automate or die, even if you're a bit behind.

In any case, it gives you an excuse to argue against better wages and conditions for workers -- but it's only an excuse.

A false dichotomy.

Why did YOU try, then?

When you subsidize entrepreneurship with a safety net, you get more of it. This isn't a subject that can be debated. It's well documented.

Reply to
Ed Huntress

I am not sure if I agree with this.

  1. If it is cheaper to replace a man with a computer if the man works
5 days a week, making that man work just 4 days a week makes replacing him with a computer even more economically attractive (since a computer/machine can work 7 days a week and even nights).

  1. Education is a good, useful thing. The question is, can a person who can be replaced with a computer, become so much more intelligent and knowledgeable that he can finally get a job that cannot be done by a computer.

I am sure that, as always in economics, education will have some marginal effect, but I would expect it to not have a large effect.

I cannot see how this logically follows from anything you said.

I cannot make any meaningful comments about Germany.

I do not think that the remedies that you outlined, would do us any good and therefore I disagree with the above paragraph.

i
Reply to
Ignoramus5662

I am confused as to what you are saying.

Are you saying that, if minimum wage was eliminated, the progress of replacing people with machines would stop? I find this to be very unlikely.

And, if minimum wage was dropped, the wage disparity would increase, not decrease, so I cannot see how you can blame wage control for income disparity. It seems to be a bogus argument.

To have a better TV, more clothing and bigger shelter?

i
Reply to
Ignoramus5662

I think that minimum wage laws have been detrimental to the lowest of the low end employees, but have not had any impact on anyone else. Minimum wage laws only affect a very small percentage of people. From my own tiny speck of experience, I used to have a couple of min-wage guys to do gopher work. I can't do that anymore, those functions have been eliminated or absorbed by other people. BUT, I sure learned that not all people are trainable for more complicated tasks! So, the couple of people that I gainfully employed are now on the dole. That sure makes sense, doesn't it? On the other hand, There have been times that I have offered signing bonuses and significantly higher wages than industry standard to attract better quality people.

My only little point is that I don't think it's always a good idea for the gov to interfere with supply and demand in the labor market. Wages are driven up when more jobs than people are available, not by gov decree. Wage laws don't affect the average employee. If there were no wage laws, do you really think wages would fall? I don't...supply and demand!

Reply to
Buerste

I'm pretty sure there are entire states that don't have a single minimum wage employee simply because there is nobody that could work for that little and reside in the state. I know areas where the starting pay flipping burgers at McD's was $12/hr+ and they could barely get enough people to maintain staff levels.

Reply to
Pete C.

I'm not saying it was a good idea. I'm just pointing out that those are things that were at the top of the policy issues list in the late '60s in the US. We were headed for social democracy.

There was a serious proposal, for example, for a negative income tax. Everyone was going to get money from the federal government until their income passed a certain threshhold.

Do you know whose idea that was? Milton Friedman's. Do you know who had made it an important part of his political platform? Barry Goldwater.

Everyone had a deep streak of social democracy running through them -- all except for the paleo-conservatives, who were the nowhere people.

Labor laws and unions were going to be the controlling forces. It was a different time and a different set of attitudes.

Computers were things that filled entire rooms in those days. My first interactions with computers were with IBM 360s. That's what ran our databases and accounting at McGraw-Hill. Our only minicomputers were typesetting machines. Of course, microcomputers didn't exist.

Today, all of the equations have been changed. Technology was part of it, but globalization was most of it. But the education idea was not just about better jobs. It was about a better life. The percentage of students going to college was going through the roof. The expected outcome was better citizens and happier people.

It's more than jobs.

Labor laws would wind up reducing mean dividends. The only opportunities for breakthrough profits would be with innovative products and services that caught fire.

It's the most successful social democracy in the world.

The above paragraph is not something you can agree with or not. It's something that you either know or not -- straight facts, well documented. It's in the economics literature. If you have a university account or other account that lets you get to the professional econ journals, you'll find it. You may also find it in the policy journals.

The exception is the idea that it's going to cause trade conflicts. That's my conclusion, and I've been working on trade issues for the past five months or so. I see trade conflicts ahead.

Hmm. There was a brief article by a Germany expert in Harper's a few months ago. It's pretty light but you'll see the general idea, without the numbers. This may or may not be behind a pay firewall -- I'm a subscriber, but it seems to be accessible without logging in. Give it a try:

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Reply to
Ed Huntress

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Reply to
John R. Carroll

On Apr 23, 3:05=A0am, "Ed Huntress"

en it in the shorts.

I think I understand why the four day work week did not happen. But I do not understand why we are " stranded with a neoliberal model."

Dan

Reply to
dcaster

Geoghegan raises some interesting points, however it all boils down to Lord Acton's astute observation "power corrupts and absolute power corrupts absolutely." How well this would work in the U.S. is problematical without wholesale replacement of the officers and senior management. As you delve into corporate history, particurarly of those US firms that went bankrupt, it is instructive to note how many times an "Imperial" CEO with an attitude was directly responsible.

Several well known German [export] companies have become embroiled in bribery scandles, so their "export success" may not be entirely due to the three factors listed in the article, but rather the application of considerable sums of money to "smooth the way."

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Unka George (George McDuffee) .............................. The past is a foreign country; they do things differently there. L. P. Hartley (1895-1972), British author. The Go-Between, Prologue (1953).

Reply to
F. George McDuffee

Another example of micro-optimization.

Most of the people that advocate this are also among the loudest complainers about high taxes and welfare queens, as well as the breakdown in "law-n-order."

By eliminating the jobs for the less skilled/motivated, we are simply creating a permanent under class (and liberal voting block), and as Grandma observed, "Idle hands are the devil's workshop." GOOD THINKING....

Unka George (George McDuffee) .............................. The past is a foreign country; they do things differently there. L. P. Hartley (1895-1972), British author. The Go-Between, Prologue (1953).

Reply to
F. George McDuffee

An interesting discussion, but one that omits an important element, namely "luck."

I am not so much referring to winning the lottery, as being lucky enough to be in the right place, at the right time, with the required set of talents, skills and knowledge.

In too many cases people confuse the relative importance of being lucky (including being born to the right parents) with being smart/exceptional.

Unka George (George McDuffee) .............................. The past is a foreign country; they do things differently there. L. P. Hartley (1895-1972), British author. The Go-Between, Prologue (1953).

Reply to
F. George McDuffee

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