Wednesday, January 22, 2014

Income, Wealth distribution: A few interesting numbers

I saw this video a couple months ago. It presents some very fascinating information about wealth distribution. Now some of the statistics they provide are open to debate - for instance I have seen Wealth numbers for the 1% ranging between 30% and 50%, a pretty significant variance. But most numbers put the 1% as controlling 46 of the wealth in the US. Expanding the scope to the world, the 1% control roughly 38% by most reports I have seen.

I don't disagree with his suggestion that the top 1% control too much of the wealth, or receive too much income (there is a difference between wealth and income, the top 1% receive 10% of the income). The disparity is obscene.

However, I was left feeling like I didn't have enough information. The graph is pretty and all, but graphs can say what you want them to say. So I tried to do a little math with some of the numbers.
 My assumptions: (drawn from a number of sources, mostly from the top 1 to 10 hits on Google.
  • US population = 318 million
  • US wealth = 52,8 trillion
  • US 1 percentile average income=$717k
  • US 99 percentile avg. income = $51k
  • US Households = 120 million

 Given those numbers

If the one percent were to liquid all their assets and redistribute the wealth, every person in America would get a one-time payout of $76k. That is a petty good chunk. Of course it needs to be understood that a moderate portion of that wealth is timed up in Business. So to obtain that wealth for redistribution would mean shutting down, or at the very least significantly curtailing Apple, GMC, Microsoft... I am guessing a fair number of small businesses and start-ups would also have to close shop, as many are relying on investments, which also make up a portion of that wealth. So realistically, keeping all the current "lights on", every American would get a $10k to $30k one time payment. How far is that really going to go?

If the one percent were to give up their income and redistribute it, every American would get a $7k pay raise. Average salary would move from $51k to $58k. Okay, that is a per person measure, and so were are confusing kids in that mix. So if we redistribute by household, then each household gets and additional $20k per year, roughly. Again, realistically many of the one percent-ers have harder than average jobs, so they do deserve to be compensated accordingly, so the practical number is more likely to be somewhere between $8k and $15k per year. That would still be a nice number, though for most, it won't be particularly life changing.

 But let's take a look at the people we are depending on to do something about this...

 President Obama's income is around 1.7 million
roughly 11% of congress are in the 1%
US House, Senate Avg income = $174k

They are all above the average. Not sure they can be counted on. What about the celebs?

Jay-Z: $450 million
Kanye West: $70 million
Alec Baldwin: $65 million
Michael Moore: $50 million

I haven't seen any of them making the first move, have you?

I can think of four ways the inequality can be fixed.
1. The wealthy voluntarily redistribute their wealth.
2. The government forcibly redistributes wealth
3. The non-wealthy revolt and forcibly redistribute wealth
4. The non-wealthy peaceably protest.

Numbers 1 and 2 aren't going to happen. Let's be honest. People tend to look out for themselves.  Most everyone think they are under paid, that they don't make enough to support a decent lifestyle, and that the "others", get more than they deserve. Our current leadership have been seen as champions of this cause, and under their tenure the gap between rich and poor has grown at a record rate.

Number 3. is an option, but it is generally ugly and  bloody, and it usually leads to everyone being worse off than before.

Number 4, is the possibly the ideal option, but almost impossible to implement. Here's how it works: Stop supporting businesses owned by the 1%. That means shop local small businesses, buy local grown food. That also means doing without things (most brand-name products, movies, sporting events, big concerts, etc...). You don't have to completely abandon them, but if everyone cut their current investment by half, the one percent-ers would feel it, and would have to respond, either by reducing their take, or eliminating jobs. If the former, then hooray! Mission accomplished. If the latter, then it is up to the 99% to dig in and create wealth producing jobs for those people, which further reduces dependance upon products provided by the one percent.... Any takers?

Any other suggestions?

It is also interesting to note that while there are 11 million listed as unemployed in the US, there are 4 million listed job openings. Certainly some of this can be explained by issues of compatibility, or training, or emotional or physical disability, but... all of it? Is it really fair to redistribute wealth to someone who is unemployed because... he is waiting for "the right job" ?

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