May 22, 2013

Wealth Inequality. Who should make more? (will be updated soon)

     There was a time that the United States had a prominent ability to allow its citizens to gain wealth. Not the few but the many. This was not due to social policy but by business men and women making money, hiring people, selling goods and services. Those people who were hired got a head start in life by getting a job. Just a job. Working for someone, or having your own business and making your own money. Voluntary transactions were a part of this. You never forced people to buy a Macbook Pro. They wanted one. You sold them the goods/services in exchange for money.
       Now, not so much. Now, it's not only harder (in some states versus others) to get a business license, you have to a large chunk of fees and there is more "red tape" to get to point A to point B. In another words, it's a pain in the butt to start a business more than it used to be.

     There are other issues as well. Now, in our country, it is thought that a higher education should get you a job. News flash: that's not really working. I could get a degree in Psychology, wait...even a doctorate....but still have trouble finding a job. Unless it was teaching Psychology at a school and being a part of a research team. There is simply a lack of demand for those with these skills.
       Wealth inequality, as I have been saying for years (reading through economic literature) was less important compared to better part of this: economic upward mobility. This means, over time, a person will start "small" with a lower income but gain wealth over time. This is still very true, but some people are in fact, left behind. However true this is, the importance is that everyone should be aware that this does still occur but it depends on what state you live in. There is plenty of literature that supports this. If you are a college student, or have access to peer-reviewed articles search for "economic mobility" or "social mobility" or "upward mobility" or "socio-economic mobilty" etc etc.
         There is some of these papers that mention that there's a chance that upward mobility is less than what it used to be, even prior to the recession. This is also true. Take for example California: poor upward mobility. Also, many of their citizens (even native born) are moving out of California, not only skewing the statistics of who-is-who and what kind of money they're making, but giving us a sign. That sign may be indicative of poor policy implemented (from politicians) making it harder and harder to grown a business in California, even with it's high standard of living and high cost of living (which makes this even worse).
             Back to inequality. Yes, this exists. But why are some poeple have more money than you or I? How did Henry Ford make his money? Warren Buffet? Bill Gates? Steve Jobs? How do any of these people make mone in the first place?
       These people make a product, invent something, do something better than anyone else, innovate, motivate and then dedicate their time into the process of getting it sold to others.
        This is harder to do now.
         When a person starts from a less well-off family, they may have started in within the poverty bracket, or maybe they were considered above the poverty line but had too many things to pay for (food, housing, transportation) and this left them barely pay check to pay check. This is considered the "working poor" and many of these families fall between the cracks, and may end up in poverty.
         However, research has been done about what can reduce the chances of prevalence of poverty. For one, if the head-of-household were to work full-time, instead of part time (many of them work part time), that would reduce the prevalence of poverty. If other people within the household of working age (unless being the care taker of children, for example) were to work just a few extra hours a week.....this would also reduce the likelihood of poverty. Or at least alleviate the tendency of it. Or at least reduce the financial tensions by a large chunk.
          Why is this important to know? Because we should compare that to those that work full time versus part time. You could work 20 hours per week, make 11 bucks an hour for a whole year and only make $10,560. This is below the federal poverty line. If you worked 30 hours (not quite full time yet) you would make $15,840 per year. That's above the federal povery line. If you were to work 38  hours per week, you would make $20,064 per year.
         What about minimum wage, you ask? Consider this: who are usually the types of people who make minimum wage? Executives, right? No. Nurses, right? No. Engineers? Teachers? Financiers? Construction workers?
           Notice that most of these people have a higher skill set than let's say....someone who works at McDonalds. When I worked for Sears automotive, changing tires, batteries, air filters, headlight bulbs, checking for tire leaks, etc; I was offered 9.50 per hour. I had zero skills. Many of the workers there mentioned something to me, something along the lines of "if you work here for a few months, you typically get a 50 cent raise and then 25 cents after that every 6 months or so."  However, what they also mentioned was this depended on not only the time you spent working hard, but what you attitude was towards customers, cleanliness, punctuality, effieciency of your work, etc: Essentially, if you worked hard enough and tried hard enough, you would get paid more.
             The results were clear. Hard work pays off. So do risks, however.Not so much anymore. Or is it?
             Here is a video about the wealth inequality in America. It's an insightful video but it has numerous flaws. I have seen plenty of videos about wealth inequality. Several They all preach the same message of "they have more stuff than you," and I think these people behind these ideas are implying that you should stop it.  Here is a link to the video.
           There are several reports and news articles and/or videos that always.....always mention the same thing or something along the lines of "they have more than you do" or "the rich are getting richer while the poor are getting poorer" or "the middle class is shrinking while the rich are growing" or "the robber barons are taking away the poor's money" or "the rich should pay their fair share of the wealth".  I hear this often. In fact, I think if a person hears something so often, it becomes a fact. It's the same for science or religion, even if you hardly do your own research on some of these topics.
             There is wealth inequality and I understand that. I get that. I am not a moron. But, did you know that there are reasons why you should think this is not AS big of a deal than before?
              What if I told you that the middle class is not shrinking? Or the people do move up the economic ladder? That minimum wage laws effects the poor and make them worse off?
              This doesn't sound true because you have not heard the arguments for them often enough, nor have you heard or seen the literature behind it.
           Here are some critiques about that Wealth Inequality video.

Here

Here