The New Gilded Age

[malchior]

I'd imagine social security is a big part there - it is reliable income...for them. The more interesting thing to me is that it is pretty much across the board stagnation. When you flip to income it gets worse. I don't have a graph handy and am running out so I'll find it later but the income gains of the top 1% are insane while the top 5% is fairly good and everyone else is terrible. That isn't an economy working for everyone. The causes are likely many but it is looking like it is 1) real and 2) a problem.

[Isgrimnur]

Even just viewing by quintile looks bad.



Source

[noxiousdog]

New adults (and note that includes 15-18 year olds) SHOULD earn less than retirees.

And yet 82% of the last fifty years indicates that it's not the case. But who's to blame? It's surely not the new adults setting their own wages.

Also of interest to me, note the barely-there blip for retirees during the last recession.

Right. Because we are smarter about retirement and we are healthier so people work longer. That's a feature, not a bug.

[noxiousdog]

Even just viewing by quintile looks bad.



Source

That's how math works.

The higher up in the income bracket you are, the more likely you have investment income. Investment income is going to be exponential, not linear.

[Isgrimnur]

Even just viewing by quintile looks bad.



Source

That's how math works.

The higher up in the income bracket you are, the more likely you have investment income. Investment income is going to be exponential, not linear.

And there are more tax loopholes.

[malchior]

The higher up in the income bracket you are, the more likely you have investment income. Investment income is going to be exponential, not linear.

Sure - that is a way to look at it. My gut says it is wrong but it is feels reasonable. More importantly is this a sustainable model for human civilization?

Also I like to point out that they think art galleries and charity are enough is hilarious. People can't afford homes but they'll enjoy the free art? The disconnect is epic there.

[noxiousdog]

The higher up in the income bracket you are, the more likely you have investment income. Investment income is going to be exponential, not linear.

Sure - that is a way to look at it. My gut says it is wrong but it is feels reasonable. More importantly is this a sustainable model for human civilization?

It depends.

I think if you can learn a skill before age 30 and have basic financial sense, I think it works pretty well. One of the things that needs more representation is how people move through the quartiles through time. 25 year olds shouldn't be in the same one at 55 year olds. I know there is some research about generations, but I'd like to see more on an individual basis as they move through life.

For those that can't meet that basic requirement, they probably are always going to be in poverty. Because of this I tend to support the idea of a universal minimum income and education assistance.

[Isgrimnur]

SCIENCE!

Chetty et al.’s study in this issue of Science (1) is therefore a tour de force for producing historically comparable estimates of absolute income mobility—the fraction of individuals in a birth cohort who earn, at age 30, more than their parents did at roughly the same age—over the post–World War II period. Their striking conclusion is that there has been a large decline in the rate of upward mobility across successive U.S. birth cohorts, from 92% of children born in 1940 earning more than their parents to only half of children born in 1984. Although Chetty et al. find that the slowdown in Gross Domestic Product growth has played a role, they conclude that faster economic growth is insufficient to restore mobility to its immediate postwar level in light of increased income inequality—a critical insight for policy and research.

[Pyperkub]

SCIENCE!

Chetty et al.’s study in this issue of Science (1) is therefore a tour de force for producing historically comparable estimates of absolute income mobility—the fraction of individuals in a birth cohort who earn, at age 30, more than their parents did at roughly the same age—over the post–World War II period. Their striking conclusion is that there has been a large decline in the rate of upward mobility across successive U.S. birth cohorts, from 92% of children born in 1940 earning more than their parents to only half of children born in 1984. Although Chetty et al. find that the slowdown in Gross Domestic Product growth has played a role, they conclude that faster economic growth is insufficient to restore mobility to its immediate postwar level in light of increased income inequality—a critical insight for policy and research.

We've known for a long time that regressive tax cuts are... regressive.

[Kraken]

SCIENCE!

Chetty et al.’s study in this issue of Science (1) is therefore a tour de force for producing historically comparable estimates of absolute income mobility—the fraction of individuals in a birth cohort who earn, at age 30, more than their parents did at roughly the same age—over the post–World War II period. Their striking conclusion is that there has been a large decline in the rate of upward mobility across successive U.S. birth cohorts, from 92% of children born in 1940 earning more than their parents to only half of children born in 1984. Although Chetty et al. find that the slowdown in Gross Domestic Product growth has played a role, they conclude that faster economic growth is insufficient to restore mobility to its immediate postwar level in light of increased income inequality—a critical insight for policy and research.

We've known for a long time that regressive tax cuts are... regressive.

And that social mobility began to close off in the '80s. The social class you're born into is the one you'll die in, more likely than not.

[Isgrimnur]

Anecdotal story about me and my family that says differently.

[noxiousdog]

Are you guys suggesting near entry level wages should change by generation?

If so, why?

[Combustible Lemur]

Are you guys suggesting near entry level wages should change by generation?

If so, why?

Inflation?

Sent from my SM-N950U using Tapatalk

[noxiousdog]

Are you guys suggesting near entry level wages should change by generation?

If so, why?

Inflation?

Sent from my SM-N950U using Tapatalk

The numbers are all inflation adjusted.

[Fitzy]

Are you guys suggesting near entry level wages should change by generation?

If so, why?

Inflation?

Sent from my SM-N950U using Tapatalk

The numbers are all inflation adjusted.

The graph up above is not inflation adjusted.

[noxiousdog]

Are you guys suggesting near entry level wages should change by generation?

If so, why?

Inflation?

Sent from my SM-N950U using Tapatalk

The numbers are all inflation adjusted.

The graph up above is not inflation adjusted.

How is that relevant?

[malchior]

Are you guys suggesting near entry level wages should change by generation?

If so, why?

I'd say yes. Entry level jobs at those wages used to require a high school degree. They now generally require a 4-year degree and a significant debt load. It is a huge problem that has lead to lower household formation, wealth creation, and put them well behind their parents. So yes, I'd expect employers to have to pay more considering they are the ones raising the bar on entry level requirements. In other words they used to shoulder a significant part of the cost of training their employees. Now they don't. That is a implicit wealth transfer to capital...which capital frankly doesn't need considering their compounding growth.

[noxiousdog]

Are you guys suggesting near entry level wages should change by generation?

If so, why?

I'd say yes. Entry level jobs at those wages used to require a high school degree. They now generally require a 4-year degree and a significant debt load. It is a huge problem that has lead to lower household formation, wealth creation, and put them well behind their parents. So yes, I'd expect employers to have to pay more considering they are the ones raising the bar on entry level requirements. In other words they used to shoulder a significant part of the cost of training their employees. Now they don't. That is a implicit wealth transfer to capital...which capital frankly doesn't need considering their compounding growth.

That's a fair argument, though I think it's a bit complicated.

Newly graduated college wages were worst in the 90's, but have been trending up since. It's high point was '69. Still, the range is relatively small. with it varying from 45k ('95) to 59k. Currently it's 50k.

I think it's remarkably consistent considering the business cycle over that period of time.

[Remus West]

Thats a horribly misleading method of looking at things. The average over all jobs is a worthless number considering the variety of jobs and the costs to prepare for those jobs. I'd be interested in the average starting salary of a grad with an educational cost of X versus a similar educational cost of X. Giving the overall average entry level position means the starting pay for someone accruing more debt (for presumably a better job and higher starting salary) is balanced against someone not doing the same.Also, how is the average computed? Do they account for every grad or only those attaining a job? Too many method questions to trust those numbers.

[Fitzy]

Are you guys suggesting near entry level wages should change by generation?

If so, why?

Inflation?

Sent from my SM-N950U using Tapatalk

The numbers are all inflation adjusted.

The graph up above is not inflation adjusted.

How is that relevant?

It would be perfectly relevant had you been talking about the numbers in the graph, but I missed part of the conversation and responded based on the assumption you were claiming the graph numbers were inflation adjusted.

I made a mistake.

[Moliere]

94%? How is this group getting away with not paying their fair share? Lock 'em up!

[Pyperkub]

A decent argument for NOT cutting taxes...

[PLW]

We definitely have a progressive system, but it distorts things a bit to only look at income taxes.

[noxiousdog]

I've always hated looking at Social Security as a tax because it isn't supposed to be a wealth transfer. It's just a very bad forced savings program.

Anyway, I wonder what they mean by the lowest quartile paying corporate income tax.

[Isgrimnur]

Small business owners who aren’t paying themselves a salary?

[RunningMn9]

Those tax graphs are always incredibly misleading. Yes, the top earners pay significantly more income tax than the bottom earners. That’s because the bottom earners barely have any income to tax. You can’t squeeze blood from a stone.

[Pyperkub]

Small business owners who aren’t paying themselves a salary?

s-corp's and llc's?

[noxiousdog]

Small business owners who aren’t paying themselves a salary?

s-corp's and llc's?

Do you really think there's enough of those in the bottom quartile to move the needle?

Sent from my Pixel using Tapatalk

[Daehawk]

On one end you have humans who want jobs and need to make money for themselves and family. On the other you have companies who want to streamline their business and save money. The in between is when chaos comes to be. As the future becomes the present that slider will move with certainty to the machine taking over all menial jobs. When the machine do it all and yet support the human in everything to the point where the human can survive comfortably without work then that day will be Utopia.

[Kraken]

Not just an American phenomenon

The world’s super-rich hold the greatest concentration of wealth since the US Gilded Age at the turn of the 20th century, when families like the Carnegies, Rockefellers and Vanderbilts controlled vast fortunes.

Billionaires increased their combined global wealth by almost a fifth last year to a record $6tn (£4.5tn) – more than twice the GDP of the UK. There are now 1,542 dollar billionaires across the world, after 145 multi-millionaires saw their wealth tick over into nine-zero fortunes last year, according to the UBS / PwC Billionaires report.

Josef Stadler, the lead author of the report and UBS’s head of global ultra high net worth, said his billionaire clients were concerned that growing inequality between rich and poor could lead to a “strike back”.

“We’re at an inflection point,” Stadler said. “Wealth concentration is as high as in 1905, this is something billionaires are concerned about. The problem is the power of interest on interest – that makes big money bigger and, the question is to what extent is that sustainable and at what point will society intervene and strike back?”

Stadler added: “We are now two years into the peak of the second Gilded Age.”

And for those who won't click the link, this is what a gold Ferrari looks like.

[Zarathud]

The good news is that the Rockefellers and Carnegie families of the Gilded Age created charitable institutions to better society. If Bill Gates can use his charitable work to regain respectability, so can today's billionaires. I'm ready and waiting for this market opportunity.

[Moliere]

The good news is that the Rockefellers and Carnegie families of the Gilded Age created charitable institutions to better society. If Bill Gates can use his charitable work to regain respectability, so can today's billionaires. I'm ready and waiting for this market opportunity.

It's called The Giving Pledge.

[Pyperkub]

LA as the new gilded age prototype

In this Gilded Age, like the one at the end of the 19th Century, the gap between rich and poor is widening; monopolies have more power over business, business has more power over politics and politics are close-fought and hyper-partisan. The pace of change — technological, cultural, social — is dizzying.

In his presidential campaign, Donald Trump simultaneously evoked two Gilded Age types, the plutocrat and the populist. “Trump is the perfect figure for the new Gilded Age. He’s like something out of Mark Twain’’ (who coined the term “Gilded Age’’ in 1873), says David Nasaw, a biographer of Gilded Age industrialist Andrew Carnegie. “Exaggeration is his essence.’’

The most striking feature shared by the two Gilded Ages is growing economic inequality. In the 19th Century, the juxtaposition of squalor and splendor shocked a rural nation that was moving to the city; today, it haunts a nation that can remember the relative equality of the Depression, World War II and the long post-war period.

Nowhere is this inequality more apparent than Los Angeles, where hundreds of encampments have sprung up on beaches, in riverbeds and in canyons as the homeless population has exploded and expanded beyond its old boundaries.

The homeless camp where the December wildfire started was only a mile from a new hilltop mansion twice the size of the White House that’s for sale for $500 million. It destroyed the $5.5 million house of former NBA star Andrei Kirilenko, singed some vines at Rupert Murdoch’s Moraga winery and forced celebrities such as Paris Hilton and Chelsea Handler to flee.

A sign of the apocalypse? Or just bad karma?

[Kraken]

The 9.9% is the new American aristocracy

I’ve joined a new aristocracy now, even if we still call ourselves meritocratic winners. If you are a typical reader of The Atlantic, you may well be a member too. (And if you’re not a member, my hope is that you will find the story of this new class even more interesting—if also more alarming.) To be sure, there is a lot to admire about my new group, which I’ll call—for reasons you’ll soon see—the 9.9 percent. We’ve dropped the old dress codes, put our faith in facts, and are (somewhat) more varied in skin tone and ethnicity. People like me, who have waning memories of life in an earlier ruling caste, are the exception, not the rule.

By any sociological or financial measure, it’s good to be us. It’s even better to be our kids. In our health, family life, friendship networks, and level of education, not to mention money, we are crushing the competition below. But we do have a blind spot, and it is located right in the center of the mirror: We seem to be the last to notice just how rapidly we’ve morphed, or what we’ve morphed into.

The meritocratic class has mastered the old trick of consolidating wealth and passing privilege along at the expense of other people’s children. We are not innocent bystanders to the growing concentration of wealth in our time. We are the principal accomplices in a process that is slowly strangling the economy, destabilizing American politics, and eroding democracy. Our delusions of merit now prevent us from recognizing the nature of the problem that our emergence as a class represents. We tend to think that the victims of our success are just the people excluded from the club. But history shows quite clearly that, in the kind of game we’re playing, everybody loses badly in the end.

It's a long column, as is typical of the Atlantic, but worth the time, as is also typical.

[Skinypupy]

A fascinating read, thanks for the link.

[noxiousdog]

I read that article too and agree with much of it.

The only thing that disappointed me is it didn't go into the effects of times on households. IE, while median household income stays the same over a decade, what happens to a single median household over that decade?

Other than that, it was a fascinating look at a very complex problem.

[LordMortis]

By any sociological or financial measure, it’s good to be us. It’s even better to be our kids.

I think we've always just called them trust fund babies.

OtOH, 9.9% seems big to me

As of 2016, it took $1.2 million in net worth to make it into the 9.9 percent;

$1.2 million is (to my mind) is trust fund baby wealth accumulation.

But to most places I look the top 10% is a household income from all sources of about $110,000

https://dqydj.com/income-percentile-calculator/

Which is inconsistent with the idea that a typical household making $110,000 a year is the same people with $1.2 million in wealth and yet....

https://dqydj.com/net-worth-percentile- ... ed-states/

So something is very off in my brain. A personal ven diagram of people who both have accumulated $1.2 million in wealth and who "only" make $110,000 a year is very small group of people whom are essentially retirees or single haorders like myself (who does not have $1.2 near his sights, nor will he when he retires)

So I have some re-alignment to do, I guess...

[PLW]

According to your link, to make it to the top 10% in HH income, you need 160k/year. I think you're mixing up personal and HH income.

[LordMortis]

According to your link, to make it to the top 10% in HH income, you need 160k/year. I think you're mixing up personal and HH income.

Maybe that's part of the re-alignment I need to make, separating individuals from households. The multibreadwinners with $1.2 million in wealth... Which gets harder to see. The people I know at that level, still in the workforce are almost all single income families and as much as it isn't right, all but 2 have a man as breadwinner. The two that don't have the man as a breadwinner are two income families. None have a stay at home husband.

There will be something thinking about how small my world is tonight.

[noxiousdog]

So something is very off in my brain. A personal ven diagram of people who both have accumulated $1.2 million in wealth and who "only" make $110,000 a year is very small group of people whom are essentially retirees or single haorders like myself (who does not have $1.2 near his sights, nor will he when he retires)

So I have some re-alignment to do, I guess...

It's not easy, but it's not so far out of the realm of possibility as to be impossible.

Saving 20k per year (keep in mind this would include 401ks + matching) and a historical average 7% real return on stocks will get you to 1.2 million after roughly 23 years. This doesn't include house leverage and appreciation.

15k per year gets you there in 27 years.
10k in 32 years.
6k in 40, or a career from 25 to 65. Think about that for a second. $500 per month including 40ks gets you to 1.2 million net worth.

The key is starting early and not keeping up with the Joneses.

Regardless, that's not the point of the article. It's that rich people don't even know they are rich.