America likes the idea of the self-made man, the man who starts his own business, pulls himself out of obscurity, and becomes a success.
Over time, some Americans have started to believe that a self-made man should also be a selfish man. That a millionaire shouldn’t pay taxes because they’ll only be “squandered,” that a smart businessman roots for the economy to collapse so he can buy real estate cheaply, that taxes on business should be lowered so the wealthy can do better. In much of America, that attitude is regarded as an important component of how a self-made man succeeds—applauded, because it’s thought to be a sign of the vigor of America.
But plenty of millionaires feel differently. Some contest the notion of a self-made man altogether, arguing that anyone successful has relied on government spending—infrastructure, an educated workforce, enforceable contracts—to make their mark. Some of them even believe that paying more taxes and investing in public services is the way to more prosperity—for everyone. “What I’m talking about is what policies will not just help me personally, but that I think will be good for our country and my kids’ generation,” Morris Pearl, a former managing director at the investment fund BlackRock, told me. He added, “I don’t want to live in a country where a few people do amazingly well and everyone else does poorly, because anyone, including me and my kids, may end up not being one of the winners.”
Source: The Millionaires Who Disagree With Trump on Taxes – The Atlantic
Economists are still trying to hash out how the country got to this place, where so many jobs pay less, comparatively, and so many workers are struggling to make ends meet. The work of the economist David Autor suggests that automation is partially to blame. His research finds that improvements in technology helped augment a certain class of jobs, making the people in them more productive, while also replacing the more repetitive jobs with computers and machines. That means that the top earners are able to make more money than they were in the past, and that there’s a growing need for people to fill lower-wage jobs that can’t be automated (think janitor or nursing assistant). But the jobs that once built the middle class—bookkeepers, assembly-line workers, call-center employees—have disappeared.
Other economists, such as Thomas Lemieux, argue that a shifting labor landscape is to blame for some of the decline in middle-class wages. As companies outsourced jobs to cheaper locations, U.S. jobs either disappeared or paid less, in order for companies to remain competitive. Additionally, declining union coverage means people who would normally get union wages no longer do, which also puts a downward pressure on non-union wages, since non-union plants no longer have to compete. And because the minimum wage has not kept pace with inflation, Lemieux and others argue, other wages haven’t either. If minimum-wage salaries remain low, other salaries up the income ladder—including those of managers—remain low too.
In addition, American companies have become very good at cutting labor costs, said Harry Holzer, a professor of public policy at Georgetown. They turn people who were once full-time employees into contractors, cut back on wages and benefits, and do everything possible to maximize productivity without sharing those gains with the workers. “Employers have become very good at taking the low road, minimizing labor costs, no matter what it takes,” said Holzer.
via A Middle-Class Stronghold’s Uncertain Future – The Atlantic
The inequality data here comes from an annual analysis Berube and Holmes conduct comparing the incomes households earn at the 20th and 95th percentile in large American cities. This year, they also looked at the cost a household would pay to rent a home at the 20th percentile of rental units in each city. Then they compared that cost (for instance, $10,286 a year in Washington) to what families earn at the 20th percentile of incomes.
As a rule of thumb, you shouldn’t spend more than 30 percent of your income on housing. So if families in the 20th percentile by income have to spend more than that to get a home in the 20th percentile of available rents, that’s a sign that they’re probably paying more than they can afford. Among the 97 cities Berube and Holmes looked at, poor families in the most unequal cities spend more than half their income on rent.
Source: Unequal cities are also more expensive for the poor – The Washington Post
Pretty interesting new study released from Oxfam, as reported by The Atlantic, worth sharing in (nearly) its entirety below (emphasis mine):
There are several reasons for this growing problem according to Deborah Hardoon, Sophia Ayele, and Ricardo Fuentes-Nieva, the study’s authors. The first is the disconnect between work and earnings. The share of national income going to workers has been falling while the share of income given to owners and top executives is rising, a phenomenon that can be seen in the stagnant wage figures of workers around the world despite growing corporate profits and productivity.
Persistent patterns of wage inequality, especially among the poorest workers, can seriously damage global efforts to eradicate poverty.
Taxes also play a pretty big role in the discrepancies, according to the report. Wealthy clients can hire financial advisors, accountants, and other pricey professionals to help them navigate the tax system, using loopholes to sock their money away in tax havens. Such efforts have helped keep nearly $8 trillion of money untaxed in offshore accounts, the study finds. Taxing that money isn’t just a matter of fairness, the report argues: The lost public revenues means less money for government programs that aid the poorest and neediest, allowing gaps in education, health care, and quality of life to persist and even grow.
To build an economy that distributes its wealth more evenly, the researchers suggest creating a stronger system of taxation that prevents trillions of dollars from being pulled out of circulation via offshore accounts and allows companies to reduce their tax liabilities via loopholes. The report also suggests that politics needs to change, diminishing the power that companies exercise through tools like lobbying and patents, which can decrease competition and raise prices.
It’s in everyone’s interest to fix the problem of economic inequality, even those who are thriving amid the increasing inequality. The study notes that prolonged periods of a widening wealth gap are bad for entire countries, as they can stunt overall economic growth. In a still-fragile global economy, that threat’s a problem for everyone, not just those suffering at the bottom.
Source: Oxfam Report Finds 62 Wealthiest People Have as Much Money as Half the World – The Atlantic
A recent Harvard report revealed that 25 percent of renters in the U.S. are spending 50 percent or more of their income on monthly rent…with no apparent end in sight.
Basic wisdom (which was largely established by rules governing public housing eligibility) warns a healthy bank account means that one’s housing costs shouldn’t exceed about one-third of a person’s take home pay.
A recent report from the Joint Center for Housing Studies (JCHS) at Harvard, puts some numbers on just how bad this problem is: About half of all renters in the U.S. are using more than 30 percent of their income to cover housing costs, and about 25 percent have rent that exceeds 50 percent of their monthly pay.
Source: Rent Is Too Expensive – The Atlantic