Brad Wardell's views about technology, politics, religion, world affairs, and all sorts of politically incorrect topics.
Published on March 3, 2013 By Draginol In Economics

Found this video here:

Even being familiar with the stats, it was a really fascinating and well put together illustration of the massive level of inequality in wealth we have in the United States.

I have two fundamental criticisms with it.

First, knowledge isn’t understanding. That is, the author gives me the impression that he thinks wealth is “distributed” by some..entity. That somehow wealth is being divied up by some sort of directed intelligence and that we, as a society (presumably through our government) could somehow alter this inequality.

Second, it doesn’t even try to explain how this inequality happened in the first place. At best, it sets up strawmen such as “does the CEO work 318X harder than the average person in their company?”  While working “hard” is often the difference between poverty and middle class, it has relatively little to do with why 1% of the population controls so much of the nation’s wealth. 

Wealth distribution is a macro-system. If it is to be understood, it needs to be looked at from a macro-level. Emotionally driven anecdotes of individuals or even generalizations of individual groups is worthless.

Your local grocery store

To understand what is happening at the macro level let’s look at something that is so basic to our day to day lives that has also transformed right in front of our eyes. Your local grocery store.

In 1983 the store owner would need to employ many cashiers. When checking someone out, they looked at individual price tags and rang them up on the cash register. Those price tags were placed on every product by employees with a price “gun”. You usually had a bagger. You also needed a lot of these people because checking out was a relatively slow process.  People paid by cash or (burrrrr) more often a personal check.   The goods being purchased had been stocked on the shelves by a small army of stockboys who practically lived in the warehouse in back trying to manually sort out all the goods that had come in from a vast array of different suppliers.

As a result of the above, the owner of the store’s relative wealth was limited because the wealth the store generated was distributed out to a small army of employees.

Fast-forward to today.

That same store owner now owns a much much larger store.  In fact, that store owner is actually a principle at a consolidated franchise company that owns many many stores.

Goods come in with a bar code so no price tagging is needed, eliminating those jobs and the associated expenses. The goods also come him from a tiny number of suppliers who have undergone the same automation and subsequent consolidation as the stores have.  The number of stock boys is far fewer because it’s so much quicker to put things up. Goods arrive in the store already organized by a just-in-time warehouse at a franchise distribution center.

Most of the cash registers are gone having been replaced by automated ones. What few human-run checkout lanes are now operated by people who simply move the bar-coded item through a scanner and the customer does their own bagging. The customer pays by simply sliding their credit card through. 

It would not be an exaggeration to say that the equivalent store generates more than 318X more wealth for the owners than for each employee.

Automation is nothing new. However, the rate and pervasiveness of automation continues to increase exponentially. As a result, the inequality we see is likely to continue to grow.  In fact, the rate is likely to increase.

Our government has actually set in policies that hasten this trend. Minimum wage laws, while well intended, result in these business owners eliminating positions and making cutting edge automation more attractive.  Getting rid of minimum wage laws wouldn’t eliminate this trend, it would merely slow it down. 

We also have increasing regulations and costs associated with hiring humans which create an incentive for the store owner to invest in more machines faster and his suppliers to outsource more overseas where regulations aren’t as tight.  Decreasing regulations, however, would only slow this trend, it wouldn’t stop it.

In another several years, the store owner will likely have machines that can automatically stock goods onto shelves via their RFID tag. Even fewer cashiers will be needed because the customer will be able to simply walk out of the store with their items in the cart and have all their items charged to their credit/debit account as they pass through an automated RFID scanner. Your favorite fast food joint won’t need people to take your order. You’ll simply tell it to a Siri-like order taker (or input it on a keyboard).

Thus, the “store owner”, that 1%-er (and again, at this point, the “store owner” of 1983 is long gone) will have an even greater share of the wealth than they do today.

What can be done?

I don’t really have an answer.  I don’t think anything can be done even though I often feel the same distaste for wealth inequality as most people do.

Overall, the lives of nearly all Americans are vastly better than they were 30 years ago.  And before someone points out a statistic on “purchasing power” I think you’d be hard pressed to find any sane person who would want to go back and live in 1983.  Life is far better now than it was 30 years ago for virtually everyone in the United States.

But the wealth inequality strikes most people as being fundamentally unfair. Having had some success myself I am no stranger to that tingle of envy at the advantages others got – especially when they are given kudos by a society that is oblivious that the biggest difference between those people and the hundreds, if not thousands, of others who had the same idea/ability/drive was that those people started out with massive massive advantages.

While I spent much of my childhood growing up in a 2 bedroom apartment with my single mother eating “shit on a shingle” a few times a week because that’s what we could afford to eat and saving and scraping from an early age so that I could work 3-jobs to afford to attend a minor state-school that wouldn’t even get me an interview at a major tech company,  I’ve watched people become more “successful” largely in thanks to them starting out with connections from Harvard or MIT or some other place their parents sent them.  My point is, I can relate to that unspoken feeling of unfairness.

However, someone less successful than I am can point out that I was raised by a mother who instilled responsibility and economic common sense from an early age and that I’m a white male thus I too have many advantages over many others. There’s always someone more disadvantaged than you.

Hence, envy or resentment is a futile path to take. You just have to let it go or it’ll poison you.

As a society, should we really care about this growing wealth inequality? And if we should care, we should have take a hard look as to why we care. Because if that reason boils down to envy or resentment then any solutions that spring up are likely to take us down a very dark path.

I personally don’t like the level of wealth inequality. It offends my sense of fairness. But I can’t think of any solutions to it that don’t essentially involve stealing from one group and handing it to another “just because”.  It’s one of the reasons why I don’t like a strong federal government, it just creates more opportunity for the gamification of our economic system (talk to a successful hedge fund manager – federal regulations make the hyper-wealthy financial managers of the world possible).

Besides, in another 30 years, we should reach the singularity and at which point, who will give a crap? Winking smile


Comments (Page 4)
on Mar 05, 2013

If everyone stuffs themselves silly and some rich guy watches the other 90% of the pie while it molds, how has the pie growing substantially bigger been a problem for the guys at the bottom?

 

Working poor in this country are all but non-existent.  The poverty line, which continually moves up and in no way represents actual poverty, almost entirely covers people that don't work.  Whether by choice or circumstance, they're not contributing in the first place.

 

I never went hungry.  I was "poor" and eligible for all kinds of government assistance my parents had no interest in when I was a kid.  "Poor" people of today are eligible for multiples of what I was, at far greater income levels, while the basic necessities are cheaper.  The only problem here is all the lies being fed to ignorant people with little knowledge of both history and the state of society.

 

Society collapses not when the rich have too much of the wealth, but when the percentage of the population no longer working becomes so high that societal unrest becomes commonplace.  Europe has already hit this point, we're not far off.

on Mar 06, 2013

Focus should not be on the wealthy but on the lower classes. Without opportunity to improve, discontent will flourish.

There should always be reward for those who strive, if this creates wealth for some, so be it. But for society to prosper there needs to be opportunity  for the less fortunate to live a good life and feel content. History shows what happens to a society when the masses have had enough ...

It's up to the government to get the balance right ... although from what I've seen, the US should stop catering for the wealthy ...

on Mar 06, 2013

I see that a few commentators have said that while the rich have gotten richer, even the poor are better off than they were in 1980.

That may be true, but what hasn't been given a fair mention is the considerable widening of the gap between the rich and poor.

No mention has been made of the difference between the poor and the exceedingly poor... those who have fallen through the cracks an have no income; no home; no medical care.... NO prospects... except for perhaps a body bag, because nobody 'll cough up for a coffin or a decent burial, etc.

For all those who are better off, there's still millions who aren't.

on Mar 06, 2013


There IS a wealth re-distribution system in the USA. It's called borrowing all currency at interest from a state granted banking cartel. People should be free to choose what currency they want to use, but they are not. Neither should the unborn should not be sold off on the bond market.

To make it worse, Taxation takes wealth from mainly the middle class, while exempting the super rich, who can offshore, or even put their wealth into a trust or foundations.

Large corporations should not be granted socialist welfare (read the book "Free Lunch"); corporations are one of the largest recipients of sweetheart deals, protection, barriers to entry. To compound matters, banks and large corporations privatize their profits while seeking to socialize the losses (the losses are transferred to the taxpayer via the so called national debt - aka selling off the unborn)

Automation is *not* the problem. If we all part own the automation, we all benefit. However, when all the means of production (automation) are in the hands of a few, and moreover enforced by various barriers to entry, you get compounding inequality. Now add to this all the unfairness outlined above.

The USA is simply a Plutocratic Oligarchy that is rapidly descending into Fascism.

on Mar 06, 2013

BruntFCA
To make it worse, Taxation takes wealth from mainly the middle class, while exempting the super rich, who can offshore, or even put their wealth into a trust or foundations.

The middle class is the economic heart of the American economy. The idea you can tax the super rich to provide entitlements to the middle class is a total myth. There are not enough of them. Even Obama admitted that his tax the super rich plan was not an attempt to actually balance the budget, just a matter of fairness. In order to pay for middle class entitlements the only group large and rich enough to tax is the middle class. No matter what happens and regardless of what taxes the super rich and up paying expect the taxes of middles class Americans to sky rocket as the baby boomers reach retirement and stop paying into their entitlements and start all taking it out instead.

on Mar 06, 2013

The problem is that minimum wage hasn't been ADJUSTED to inflation. There are millions of Americans living BELOW the poverty line. Some of these individuals would love to go to school but cant afford to do so because of children and/or other reasons. We need to educate our population and ADJUSTING the minimum wage will help us in this endeavor.

The problem is the minimum wage hurts smaller businesses i believe the minimum wage should be adjusted to the tax bracket of the company you work for (And the hiring wage should be posted in the establishment). But saying that ADJUSTING the minimum wage kills jobs is about the same level of bullshit hostess pulled when it was failing as a company and decided that it was going to blame unions.

This is the problem of fresh water economists, they don't understand how the high skill job market works. Before you can have one you need a populace that is educated.

on Mar 06, 2013

Nichtganz
ADJUSTING the minimum wage will help us

No it won't!  For every dollar extra you got, there'd be someone with their hand out for it... eg: the taxman; your local supermarket; your utilities; the gas companies; clothing stores.... everyone who had to pay higher wages.  When everyone has had their chop, you'd be lucky there's any left for education.

A few years back we were governed by price indexation and arbitrary processes to determine incomes... the two were inorexably linked.  If prices rose markedly we'd get a pay rise.  Trouble was, every pay rise prompted price rises for basic food essentials, rents, fuel, transport. 

I recall one pay rise that I wished I'd never got.  I received an extra 6 bucks in my weekly pay packet after the government took 7 in tax. Then bread, milk, meat, fuel all went up, heaps of other life essentials as well.  It worked out after deducting the additional costs to eat, get to work, etc, I was actually 14 bucks a week worse off after my 13.50 wage increase.

on Mar 06, 2013

Well, what other modern nations in the world have a high minimum wage and high taxes for the top earners?  What is their economy like? Level of unemployment?  Are the people in those nations suffering?  

on Mar 06, 2013

Nichtganz
But saying that ADJUSTING the minimum wage kills jobs is about the same level of bullshit hostess pulled when it was failing as a company and decided that it was going to blame unions.

Using the word "adjusting" instead of "raising" doesn't change a thing.  Business owners have been very vocal that a forced wage raise will hurt their businesses, which are already hurting in this abysmal economy.

 

on Mar 06, 2013

The problem is that minimum wage hasn't been ADJUSTED to inflation. There are millions of Americans living BELOW the poverty line.

 

Now find the millions of Americans living below the poverty line that work.  Oh, wait, they don't.  Believe political hacks less please.  There is almost no one working for a living at minimum wage.  The lion share of minimum wage earners are secondary income earners in households that live well above the poverty line, most of the rest are high school students.

 

The working poor are a fraction of a fraction, and even then most of them aren't making minimum wage.  They're single mothers working part time to avoid losing their benefits.  Work too much and you get kicked off your aid and literally can't afford to pay for the child care the government has made obscenely expensive.

on Mar 06, 2013

I'm not sure if it's an answer to the original problem of 'too much automation' but here goes.

You know what's missing in a big store?  Cheerfulness.

I mean really, the fact that you can walk in, pick out all your groceries, and check them out yourself at the express lane without having a conversation with anyone, that's just terrible.  Sure, it's expedient, but you lose the personal touch.  Not that there's much time for a chat with the cashier what with the ease of scanning purchases.

So yes, there's a lack of cheer in the store.  The prices might be competitive, but if that's the only thing keeping the customer coming back then you have to keep hacking away at your costs until there's basically one guy on duty and he basically just sheriffs the automated systems.  That's madness.

Place a value on the customer's smile.  It's not enough that they come to shop in your store, they have to be happy too.  That's how your human workers earn their keep - by being a friendly face for the business.  If a customer has a complaint or an unexpected query they're also far more adaptable and useful there than an AI.

on Mar 07, 2013

You can have a conversation at the automatic checkout line- I often do when I do my grocery shopping.  Harris Teeter is pretty good for that- very good workers in general.

 

on Mar 07, 2013

 [/quote]

Lord Xia

Well, what other modern nations in the world have a high minimum wage and high taxes for the top earners?  What is their economy like? Level of unemployment?  Are the people in those nations suffering?  

Their standard of livings are far below that of the United States. But they have less wealth inequality. 

If getting rid of wealth inequality is the goal, there are ways to do that- you can literally just take from one group to give to another to give the illusion of equality. But in the long-run, you simply equalize the misery.

I prefer taxes to regulation because regulation leads to gamification. 

on Mar 07, 2013

Frogboy
I prefer taxes to regulation because regulation leads to gamification.

 

Yep.

 

on Mar 07, 2013

Frogboy

 

Quoting Lord Xia, reply 53
Well, what other modern nations in the world have a high minimum wage and high taxes for the top earners?  What is their economy like? Level of unemployment?  Are the people in those nations suffering?  

Their standard of livings are far below that of the United States. But they have less wealth inequality. 

If getting rid of wealth inequality is the goal, there are ways to do that- you can literally just take from one group to give to another to give the illusion of equality. But in the long-run, you simply equalize the misery.

I prefer taxes to regulation because regulation leads to gamification. [/quote]

 

Not true on equalizing misery.  Money is a normal good, and therefore has declining marginal utility.

There is more misery from a person making $1,000,000 and nine folks making $10,000, than ten folks making $109,000.

(this is not saying that a pure socialistic distribution of wealth is a good thing- just that marginal net social benefit is maximized with the second income distribution and minimized with the first)

 

The standard of living isn't that much lower in Western Europe compared to the US, and you also have to look at the value of the safety nets.

 

At a certain point, money does become less valuable.

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