Almost Classical

I'm not a huge fan of the minimum wage, but I also admit it isn't going away. It's a feel-good public policy that some nations embrace with complex brackets (Australia indexes for age of worker) and others simply don't have at all. There's little economic correlation between the minimum wage and job creation, because the wage tends to trail earned wages in skilled trades. Which nations don't have legal minimum wages? How about Denmark, Iceland, Norway, Sweden, and Switzerland! Germany has regional minimums, handled by local governments, just as many states in the United States set their own minimums. How can it be that social democracies don't have minimum wages? They have a history of employee ownership, through unions with board seats at companies. The United States lacks a similar history of corporate-union or even government-union cooperation. Our unions are more adversarial. (Maybe they should try another approach; it might increase wages and influ...

The narrative is set, and as a rhetorician, I appreciate the value of a good story in shaping public debate. The rich are getting richer, the poor are getting poorer, and many of the middle class are being pushed down into the lower-class. It's a sad story, a compelling story, and in some important ways it is a fiction. Yes, the middle class is shrinking. That should concern us. But what if the shrinking middle class is as much a result of people moving into the upper class as it is a result of others moving down the social ladder? In fact, some research shows there are more people moving from the middle into the upper income brackets, leaving a smaller middle class — but not for the reasons being promoted by the media and politicians. Exceptions in the media coverage exist, as they do in little tiny dimly lit sections of academia. Readers know I enjoy Robert Samuelson because he digs deeper into statistics than other newspaper columnists. The 'hollowing' of the mi...

A September 2015 report from the Brookings Institute demonstrates that significant increases in top marginal tax rates would have minimal effects on both income inequality and the federal budget. This report was prepared by William G. Gale, Melissa S. Kearney, and Peter R. Orszag. It should be stressed that Orszag was Pres. Obama's director of the Office of Management and Budget and a former director of the Congressional Budget Office. Nobody can claim Orzsag is a conservative or libertarian — he is an excellent analyst. Read the report here: http://www.brookings.edu/~/media/research/files/papers/2015/09/28-taxes-inequality/would-top-income-tax-alter-income-inequality.pdf A larger hike in the top income tax rate to 50 percent would result, not surprisingly, in larger tax increases for the highest income households: an additional $6,464, on average, for households in the 95-99th percentiles of income and an additional $110,968, on average, for households in the top 1 perc...

The Georgetown University Center on Education and the Workforce ( cew.georgetown.edu ) tracks the return on investment (ROI) of college and specific college degrees. Though going to college is better than not, assuming the individual graduates on time and from a good school, what you study also affects earnings. What we know about college and income: Obtaining a four-year degree is worth about $1 million over a lifetime compared to not earning a college degree. Obtaining a degree from one of the 20 most elite universities is several times more valuable than earning a degree from a non-elite undergraduate university.  Obtaining a science, technology, engineering, or math degree from any respected school is better than a liberal arts degree, by an average of $3.4 million in lifetime earnings! Obtaining a liberal arts degree from a low-ranked school is similar to not having attended a college! The following charts are from the CEW 2015 report, based on 2014 data....

The Statue of Liberty front shot, on Liberty Island. (Photo credit: Wikipedia ) It's hard, really hard to make it big in America. Well, yes, success takes work, especially if you are trying to start a business, but some in the media and within academia seem to want to convince their audiences that unless you are born wealthy and white, there's almost no hope at all of living the American Dream. The United States does have widening inequality. There are complex explanations for this, including the fact that our wealthy are wealthier (on average and at median) than the wealthy elsewhere. Income inequality, which isn't the same as wealth inequality , is also increasing for many complex reasons. But, there are actual signs that more people can and do start businesses. You wouldn't know that, though, based on how some present research data to the public. The following article from Quartz ( The Atlantic ) is so flawed, statistically and philosophically, it demonst...

The "one percent" of income earners, and even the one-tenth of top one percent, might be the only segment in the United States that has caught up to pre-recession income and growth levels. Though I never support wealth redistribution, clearly the opportunity curve is… broken. If the middle and upper-middle class cannot advance, it's unlikely the economy can move forward for all citizens. Even in the richest 3%, there's a growing wealth gap Robert Frank | @robtfrank Friday, 5 Sep 2014 | 3:13 PM ET CNBC.com America's millionaire population hasn't grown significantly in 10 years, according to new government data, suggesting that not everyone at the top is benefiting from the recovery. The latest Surveys of Consumer Finance from the Federal Reserve paints the familiar picture of widening income inequality in America. The wealthiest 3 percent of households control 54.4 percent of the nation's wealth, up from 51.8 percent in 2009. But the gains are hi...

The following was posted to the comments section of a very old blog post: The Top Ten Reasons I Hate Capitalism: 10: Kim Kardashian 9: Vast economic inequality destroys democracy 8: Survival of the fittest (I'm definitely not among the fittest) 7: Donald Trump 6: The Attitude of the Fittest toward the Unfit 5: Reality TV 4: Walmart 3: Mark Zuckerberg 2: It appeals to the worst aspects of human nature And the #1 reason I hate capitalism: I am not Bill Gates! Envy! Perhaps that's what it comes down to. That's what the conservatives and defenders of Capitalism would have us believe. Or perhaps there is just something inherently unfair and unjust about it. Yes, it is easy to dislike some of the wealthy in our supposedly capitalist nation. And the easy response is that the United States is not a purely capitalist nation, certainly not as Adam Smith envisioned capitalism and not in the sense that the Austrian economists believed in and promoted either a minima...

As people debate into Lean In: Women, Work, and the Will to Lead  by Sheryl Sandberg, the topic of pay inequality often arises. President Obama has also made the issue of "fair" compensation a political issue. But, is there really a problem with inequality within the same job, or is there something else at work? Based on research, it seems that if you want to study comparisons of apples to oranges, examine the "income inequality" debate. The differences in pay are more the result of career choices than differences within identical job positions. Why Women Earn Less According to a new report (PDF) by the American Association of University Women, the man would be earning a salary of $51,300. The woman's pay would be $39,600—about 77 percent of what her male counterpart earns. The AAUW report compared the earnings of men and women just one year out of college across various sectors of the economy. The report controlled for different factors that tend to impa...

There have been a great many blog posts and columns written since President Obama spoke on July 13, 2012. Many of his defenders have tried to "correct" any confusion about what his words meant, arguing that his statements were misinterpreted by the press and taken out of context by opponents. As Charles Krauthammer rhetorically asks, "Did the state make you great?" http://www.washingtonpost.com/opinions/charles-krauthammer-did-the-state-make-you-great/2012/07/19/gJQAbZOiwW_story.html The problem for Pres. Obama and his supporters is that his argument is deeply flawed. We do succeed with the help of friends, family, church, non-profit organizations, and, yes, government (generally of the local variety). But, many people have the exact same access to all these various supports… yet some succeed and some fail. Also, a simple point of fact: government is the people, not something outside and above the people. Without successful people paying taxes, there would b...

Today, June 29, 2011, President Obama had a press conference to address the U.S. budget mess. During his opening statements and throughout the questioning, the president kept saying that "millionaires and billionaires" needed to pay their fair share. It's a favorite phrase of the president and one Andrew Ross Sorkin addressed earlier this year. Pres. Obama might talk about the "wealthy" but he really means those with annual incomes over $250,000. Problem one with "wealthy" is that many wealthy, especially billionaires, don't have incomes. They earn capital gains and have investments, but they don't get weekly paychecks like the rest of us. Since we have an income tax, those can't be the men and women the president wants to tax. Problem two? The wealthy, at $250,000 a year, aren't all that wealthy in the cities where they are most likely to live. Rich and Sort of Rich May 14, 2011 By ANDREW ROSS SORKIN How did $250,000 become the magic n...

I recommend: http://www.economist.com/blogs/democracyinamerica/2011/03/middle-class_stagnation While the above is primarily a short summary of other columns and blogs, it makes a great point: Western nations with a widely unionized workforce are still experiencing increases in wage disparity between the top 20 and bottom 20 percent (upper and lower classes). The middle class (usually defined as the middle 40-60 percent) is stagnating, as well. I've written on this blog about the "Superstar Effect" and income. See: http://www.nytimes.com/2010/12/26/business/26excerpt.html Also: http://almostclassical.blogspot.com/2011/01/skills-and-value-concentration.html The reality is that the marketplace is constantly changing. Technology has, for centuries, eliminated jobs and reduced the "value" of the lowest-level, least-specialized workers. Unions are not going to be able to offset the loss in value within some jobs. Quite bluntly, if there is any chance your job can be a...

Many of my colleagues and peers complain about "wealth concentration" and the "superstar effect" without realizing these are natural trends in any group, regardless of size. As a community expands, the effect I am going to explain is magnified. The end result approximates a "natural monopoly." Seldom is there a nefarious plot to control products or knowledge -- it just happens to be more efficient to concentrate skills and products. I'm going to use a large-scale, modern example to explain how skills concentration (specialization) leads to wealth concentration and the superstar effect. Afterwards, I'll offer other examples to help clarify the concept further. For nearly 40 years, from the 1960s through the mid-1990s, when a company wanted to use computers to automate and improve a task's accuracy the firm would hire a team of programmers. As a result, companies of every size and type had customized software. This was great for programmers, but ...