If we focus on the .01%, I am not sure what we are observing says much about inequality in our society. More to do with the fact that 50 years ago, a successful US entrepeneur would sell its products to a few millions americans, if he was lucky enough to be a national success. And if it was international (even more rare, and taking many years) a few more millions western europeans. The rest of the world was basically not a potential customer.
Today a successful entrepeneur can go directly international, and with a client base that includes not only the US and Western Europe but also a huge (and quickly growing) middle class all over the world. This is several orders of magnitude the potential reach than 50 years ago. Successful entrepeneurs make billions not millions anymore.
So it's not absurd that we end up with more extreme wealth in the top .01%, and I think it is kind of structural to a modern, global society.
If we focus on the 1%, or rather the delta between the 1% and the 99%, I think we are rather observing skill supply/demand mismatch. In the US and Western Europe there is an oversupply of unskilled or low-skills labour, driving their wages down (relatively to skilled labour). So they will do worse than the more sought after skilled labour. It can partially be mitigated with better education. But part of it is also structural. Not everyone can be a good programmer or engineer. Unless we find a way to change IQ distributions, we may have a long term problem here that we may not be able to solve.
I'm actually one of the people who think that the top 0.001% are fine. People like Buffett and Gates own valuable companies. There's not much we can do to change income inequality there, largely because it's not income, it's someone's private property.
I think the truly disgusting income inequality is at the top 0.01-0.001%. The overpaid CEOs who make absurd amounts of guaranteed cash. We have a tax code that absolutely incentivizes CEOs to look out for their salaries and one time cash bonuses rather than any stock grants they get.
We used to have a tax code that favored capital gains in the extreme, but now we overly favor income. Which would your rather have? A grant of 10 million dollars in a volatile asset that has a one year lock out period and a 20% haircut, or a guaranteed 10 million dollars with no lock out and an effective haircut of ~40%. You're losing only 20% of the money as a guarantee. Most people seem to be interested in the latter option.
Whenever we have debates about raising capital gains tax Republicans rightly point out that capital gains tax doesn't actually generate that much revenue for the US government. They're right, but that's insane, given how much wealth we generate every year.
I'm all for paying people well, but make them earn it!
The problem is, if you make all your income from investing, via dividends and capital gains, you pay 15% tax on it.
The 'wedge' on the first dollar earned by a minimum wage worker is 15.3%.
And then don't get me started on the deductions, Mitt Romney's IRA etc. that mean those guys can don't even pay the 15%.
I don't think your math adds up...in NYC a huge cash bonus gets taxed at > 50% combined Fed, state and local. The CEO will always take something that's structured as future capital gain, not in 1 year, but whenever he decides to cash out.
The tax system and rent seeking in this country is a disgrace.
the idea that minimum wage earners aren't paying taxes is a nonsensical talking point with no basis in reality. It only works if you disregard FICA, which is economically unjustifiable and not done in other contexts (like quantifying big government's size and tax bite). The bottom line is there is a 15.3% wedge between what the minimum wage employer pays and what the employee receives, and that's what has economic impact. The EITC offsets a part of the wedge, but only a part of it.
What's the difference between income and private property? Nothing relevant here. Owning stock is just a ticket to future income, a share of wealth created by employees. Same as a hired CEO payment.
> In the US and Western Europe there is an oversupply of unskilled or low-skills labour, driving their wages down (relatively to skilled labour).
You're right, but the reality is that even skilled workers rarely make it to the top 1%. In fact, they might not even find a job in their field.
Even if you're super-high-skilled and work in Silicon Valley as a programmer, your net income probably doesn't come close to the entry bar of the top 5%.
Learned to scale? It is quite intentional. The medical boards are controlled by the doctors themselves. They decide how many residents to train for their specialty each year. The usual figure is about under ~300students/yr for the most sought-after (and "undersupplied") specialties. That keeps wages up. This is not like programming where you get a gamut of skillsets and 120,000 extra immigrants hopping into the pipeline each year. There is no supply/demand equation here other than what is allowed by specialty medical boards themselves.
But they still have the concept of one very highly skilled and expensive doctor in front of every patient. It is a form of craft industry. It hasn't moved on to the industrial area, where you only need very skilled workers to create and prototype, but that scale well by not putting these expensive workers in front of every customer. Even banks have done that.
I am not saying it is easy, and perhaps the technology doesn't allow it yet, but undoubtfully this is a next step in the medical profession.
Part of the problem is the US education system seems to not be turning out enough people with quality educations, even when there isn't a shortage of of credentialed people. For instance, there are plenty of lawyers. Most of them don't make much money and leave the industry quickly. Yet it is difficult to find a highly qualified lawyer to handle difficult issues.
With medical professionals, there is simply a huge shortage. Same with researchers, engineers, etc.
My company hires H1B visas not because they are cheaper, but because we can't get anyone here to do the job at reasonable rates. Reasonable being new graduate hires start out at CPI adjusted rates to near top end in silicon valley.
"My company hires H1B visas not because they are cheaper, but because we can't get anyone here to do the job at reasonable rates."
Sounds like "H1B visa holders are cheaper" to me. High quality engineers should be commanding on the order of $250k. In the absence of H1B visa holders lowering wages, that's what high quality engineers would command as an average salary; same as a good doctor or lawyer.
The main reason doctors and lawyers cost that much: you can't H1B them. Lawyer skills are too specific to a locality and subsection of the trade; for whatever reason, law school doesn't actually help with this -experience, networking (particularly for criminal law) and apprenticeship is how it ends up working. LLD is just a hoop that needs to be jumped through to get such apprenticeships. The AMA is the most effective labor union in America, keeping out highly skilled doctors from abroad by denying their skills validity.
Layer's pretty much world wide, have some form of 'local certification' in the form of 'Passing the bar', or equivalent local requirement. Its not that the skills are specific to a locality, its that in order be allowed to practice law in a jurisdiction you must complete the local requirement.
"not because they are cheaper, but because we can't get anyone here to do the job at reasonable rates."
Um... that is the definition of cheaper. In your own justification sentence. H1B must (should) be paid at your prevalent rate -- and this may not be what you consider a "reasonable" rate.
It's a proxy to take a look at potential resource reallocation.
It seems grotesque when human beings in Silicon Valley are left with no viable option but to live in their cars or under a bridge, while folks tool around in their latest Lamborarri/Ferrambo. If some people can't be meaningfully trained or can't find a means of self-sufficiency, we cannot just allow them to freeze to death on the street. It's not civilized. (I asked and found out that a male on street without disabilities in Santa Clara County receives only ~$5/day in cash and ~$4/day for food.)
Certainly more people in the upper brackets may need to pay something more than now in order for all reach a minimum standard of living, but perhaps not quite as much as billionaires. A gradual tax on all income seems like the fairest, least complicated and straightforward method... say tax starting at $25k USD (adjust for inflation/cost-of-living) , then slope up to something like 35% for most people and 50% for the top end. It's a question really of what quality of infrastructure and social investment is desired, because debt isn't free.
I've also noticed the gradual labor oversupply in first-world, white-collar jobs... there's just not enough work to go around. China, India and others also have tons-tons-tons of unskilled labor as evidenced by frequent usage of more people in-lieu of mechanical equipment for small- & medium-scale jobs. This labor supply/demand imbalance seems attributable to peak global population and increasing productivity/automation.
Perhaps an underestimated crisis is the desperate need for more entrepreneurs to create new businesses which add more jobs in order to utilize more untapped, idle value, especially of groups which are traditionally marginalized from interviews, not just because of PR value, but some groups are really good at some things. (Autistic spectrum personalities seem to be quiet good at sorting/organizing/labeling, etc.)
Today a successful entrepeneur can go directly international, and with a client base that includes not only the US and Western Europe but also a huge (and quickly growing) middle class all over the world. This is several orders of magnitude the potential reach than 50 years ago. Successful entrepeneurs make billions not millions anymore.
So it's not absurd that we end up with more extreme wealth in the top .01%, and I think it is kind of structural to a modern, global society.
If we focus on the 1%, or rather the delta between the 1% and the 99%, I think we are rather observing skill supply/demand mismatch. In the US and Western Europe there is an oversupply of unskilled or low-skills labour, driving their wages down (relatively to skilled labour). So they will do worse than the more sought after skilled labour. It can partially be mitigated with better education. But part of it is also structural. Not everyone can be a good programmer or engineer. Unless we find a way to change IQ distributions, we may have a long term problem here that we may not be able to solve.