Category Archives: Economy

Income Disparity

Posted on September 5, 2011 | 1 comment

Income disparity.

Wikipedia describes it like this:

Income inequality in the United States of America is the extent to which income, most commonly measured by household or individual, is distributed in an uneven manner.

Pretty fair I think.  It hits what I think are the important aspects of the topic:

  1. Income
  2. How measured
  3. Distributed
  4. Uneven

I think that most reasonable people wanna help out the folks who need the help.  Further, I think that most reasonable people wouldn’t personally help those folks, who-while down on their luck, aren’t down due to luck.

Anyway, very often when solutions are discussed, or when examples of success are presented, I am faced with the argument that the Income Disparity, the Income Inequality of America is very very poor.  So poor, perhaps, that we rank near, tied for or dead, last.  A common tool to measure the disparity in incomes is the GINI Coefficient.  Or the GINI Index.

The Gini coefficient is a measure of statistical dispersion developed by the Italian statistician and sociologist Corrado Gini and published in his 1912 paper “Variability and Mutability”

The Gini coefficient is a measure of the inequality of a distribution, a value of 0 expressing total equality and a value of 1 maximal inequality. It has found application in the study of inequalities in disciplines as diverse as sociology, economics, health science, ecology, chemistry, engineering and agriculture.

It is commonly used as a measure of inequality of income or wealth.  Worldwide, Gini coefficients for income range from approximately 0.23 (Sweden) to 0.70 (Namibia) although not every country has been assessed.

Most uses of the GINI Coefficient that I have ever heard of deal with Income Disparity.  Though from reading wiki, it seems that the GINI Coefficient is simply a tool to measure dispersion.  So, it’s nice to learn that the GINI is simply a statistical tool that has been applied to measure income disparity.

As I am generally ignorant of many things the measuring of income between the people of a nation, I think it’s important to learn more.  As I enter into this investigations, I’m struck by two aspects of the inquiry:

  1. Does it matter?
  2. What is being measured?

The second first.  Because the GINI can be used to measure seemingly anything at all;  fish in a body of water, water in a body of land or pine cones in a body of grass.  It’s important to know what the subject of the measurement is.  And I think that most discussions surrounding the GINI are clear on what they are measuring.

For example, we are having a discussion concerning taxation on my post concerning Denmark and the United States.  One of my friends  points out that:

The US pre-tax and transfer GINI index is at .46, while Sweden is at .43, and Denmark and Norway are at .42. That means pre-tax they are slightly more even in income distribution, but not much. German has a bigger pre-tax gap between the rich and the poor than the US at .51.

After tax the US GINI index moves to .38 — a modest improvement. But it is the most income disparity of the entire industrialized world. Taxes and transfers move the wealth distribution from .46 to .38.

After taxes and transfers Denmark is at .23.

Clearly the GINI is being used to measure two different things.  Income pre-tax and then income post-tax.  Which is valid as long as the measurements are clearly labelled.  And again, I think in most cases they are honestly so represented.

Now the first.  Does it matter?

This is trickier.  Does the fact that the richest among us make more than the poorest among us matter?  Perhaps.  It sounds like there is a body of evidence that suggests it does matter AND that when that disparity is high, society suffers.  I don’t know, I haven’t looked at it.  First blush, I think my take is that I don’t care as long as I have a reasonable shot at getting pretty close to the top.  And reasonable can mean many things.  When I buy a lottery ticket I have as reasonable a shot as anyone else.  I certainly would resent the rich having a better shot at winning numbers than me JUST because they were rich.

So, where are we.

I wanna look at Income Disparity.  Perhaps as it’s measured by the GINI.  And I wanna know, at the end, several things.  The first of which is: DOES IT MATTER?

And if it does, which of the following matters the most:

  1. Straight income.  The MONEY paid from employer to employee.
  2. Total compensation.  The total compensation from employer to employee.
  3. This measurement BEFORE taxes.
  4. This measurement AFTER taxes.
  5. Finally, this measurement AFTER social entitlement programs.

Let’s see how this goes.

Thoughts?

1 Comment

Posted in Economics, Economy, Liberty, Politics: National

Tagged ,

Leftist Californians* Hate Parents

Posted on August 31, 2011 | 6 comments

* Let’s get this out of the way right away. I know this is redundant.

From the never ending font of all things cool, we get this:

California Assembly Bill 889 will require these protections for all “domestic employees,” including nannies, housekeepers and caregivers.

…

Under AB 889, household “employers” (aka “parents”) who hire a babysitter on a Friday night will be legally obligated to pay at least minimum wage to any sitter over the age of 18 (unless it is a family member), provide a substitute caregiver every two hours to cover rest and meal breaks, in addition to workers’ compensation coverage, overtime pay, and a meticulously calculated timecard/paycheck.

What kind of special intersection of crazy and powerful could create this law?

6 Comments

Posted in Economy, States Behaving Badly

Tagged , ,

The Fonz Is Going To Jump A Shark

Posted on August 24, 2011 | 9 comments

A long time ago there was a really good economist.  Then something happened and now that economist doesn’t exist anymore.

After claiming that aliens would solve our economic woes, now rumors are out that the aforementioned Krugman has claimed that a larger earthquake would drive economic recovery:

“People on twitter might be joking, but in all seriousness, we would see a bigger boost in spending and hence economic growth if the earthquake had done more damage.”

Right.

Reminds me of this:

Milton Friedman went to Asia to visit a jobs project; it seems that a canal needed to be built.  When he arrived on the site, he witnessed that the workers were using shovels and wheelbarrows.  He asked the government administrator why there wasn’t any heavy earth-moving machinery?  The official responded that this was a “jobs program”.

Milton responded, “Well, if that’s the case, why not give them spoons and buckets?”

9 Comments

Posted in Economics, Economy

Tagged , , ,

What The?

Posted on August 23, 2011 | Leave a comment

You have to win to govern.  And winning vs. losing in political races is a zero sum game.  When your opponent gets more votes, you lose and he wins.  This creates a situation where elected officials want to “win” the vote as much, or more, than they want to “win” the debate.

I get it, but this still sucks:

WASHINGTON — Congressional Republicans are so anti-tax, surely they will fight to prevent a payroll-tax increase on virtually every wage earner starting Jan. 1, right?

Apparently not.

They’re saying a tax cut should end as planned, opposing President Obama, who wants to extend it. The policy helps the 46 percent of all Americans who owe no federal income taxes but who pay a “payroll tax” on practically every dime they earn.

Huh?

Surly they can explain themselves?

Tax reductions, “no matter how well-intended,” will push the deficit higher, making the panel’s task that much harder, Camp’s office said.

Nope.  They can’t.

I may give this whole thing up and just go watch some baseball.

Leave a comment

Posted in Economy, Elections 2012, Government, Politics: National, Republicans Can Be Leftists Too

Tagged , ,

Polling The Natives

Posted on August 16, 2011 | 11 comments

I’m at the beach this week. And, having taken vacations where we stay at a condo or a townhouse or a room with a kitchen before, we are working really hard to keep it “all in the family” by eating meals that we have cooked together.  Tonight was steaks on the grill.

In the community that we are staying, gas grills are prohibited.  In fact, charcoal grills are the only type allowed and even they are restricted to the “grill zone”.  That is, a very pleasant little area with 3-4 grills complete with seats, and a deck and plenty of room for co-grillers to meet and greet.

Tonight was a full house.

Three of us dad’s were grilling tonight and we began with the usual introductions.  Each of us was recently arrived and as such, we felt compelled to entertain conversation – we being neighbors for the next week or so.  As always in the “man way”, we began to introduce ourselves through our work, or career.

One guy ran a company that manufactured ball caps.  The other ran a boutique wine and cheese shop.  Me, I just work for the man.

We talked about the rain, the weather, women and kids.  We laughed over beers and burnt chicken.  We swapped stories and matches.  All nonsense talk really, just fillin’ time the way men do until they realize that the end is apparent.  That time in the conversation when we can reasonably claim we have to leave and still save face.  When that time comes, the conversation turns serious.

We all three began to gravitate to the economy and “the way things are”.  Now mind you, I have no idea these men’s name.  I have never seen ’em before in life and likely won’t even see ’em again here.  But we all three agreed that:

  1. A reasonable society should help each other out.
  2. That help should not create dependence.
  3. We have long ago crossed that line.
  4. Where unemployment benefits are concerned, we would be better off deciding how many weeks is enough and just lump sum the check.

I swear to gawd this is true.  I find more like minded people wherever I go.  This nation isn’t broke.  This nation is being managed by the morally inept.  By the intellectually inept.  By the spiritually inept.  Every single person I know and talk to understands that what our government is doing is buying votes.

The rest is just chit chat.

As I write this it occurred to me that my specific audience was perhaps biased; two business owners and a massive free market corporate lackey.

Then it occurred to me that perhaps there is something to be said about the fact that these individuals find themselves gathered in a rental community on the beaches of North Carolina for a week.  Maybe what successful people think matters.  Maybe when Michael Jordan advices about basketball people should listen.

Maybe.

11 Comments

Posted in Economy, Fun, Politics: National

Tagged , ,

Stagnant Wages and Employee Compensation

Posted on August 15, 2011 | Leave a comment

Do you feel that you are fairly compensated at work?  That is, are you getting from the company a fair return for what you give?  Maybe, maybe not.  I betcha that in this economy more people feel that they are NOT earning what they feel they are worth.

Is that true, though, over time?  Has out income stopped keeping pace with the times?  According to some, it would seem so:

It would seem that since 1970 or so, wages in America have been flat.  In fact, for much of the time since 1970, we have seen wages below the 1970 level.  And this fact is to be used against us to demonstrate that somehow the working class, the middle class, has it worse of now than in, well, than in 1969 apparently.

But is that the whole story?

I don’t think so:

…the level of productivity doubled in the U.S. non-farm business sector between 1970 and 2006. Wages, or more accurately total compensation per hour, increased at approximately the same annual rate during that period — if nominal compensation is adjusted for inflation in the same way as the nominal output measure that is used to calculate productivity.

…

Total employee compensation was 66 percent of national income in 1970 and 64 percent in 2006. This measure of the labor compensation share has been remarkably stable since the 1970s. It rose from an average of 62 percent in the 1960s to 66 percent in the 1970s and 1980s, and then declined to 65 percent in the 1990s where it has remained from 2000 until the end of 2007.

From the actual report:

Another useful way to examine changes in the compensation share is to
focus on the nonfinancial corporate sector (as presented in table B14 of the 2007 Economic Report of the President.) This eliminates some of the very highly compensated individuals in the financial sector. It also avoids the problems raised by separating capital and labor income of sole proprietors . Comparing the compensation paid by the nonfinancial corporations to the net value added of the nonfinancial corporations reinforces the conclusions based on the larger scope of industries. In 1970 compensation was 74 percent of the value added of the nonfinancial corporate sector. In 2006, it was 73 percent. The decade averages rose from 70 percent in the 1960s and were very stable after that: 73 percent in the 1970s and 1990s, 74 percent in the 1980s and 75 percent since 2000.

What’s this all mean?

It means that there are other ways to compensate individual besides “wages”.  For proof of this, listen to the screeching of the Unionista as he complains that having to pay for his own health insurance (actually, just 12% of it) is a “pay cut”.  Of course, that implies that the benefit was first a “pay”, or what we in the biz call a “compensation”.  Similar to health benefits are paid days off, training, 401k and sick days.  To name a few.

I “get” a pager.

So, what does that graph look like if you graph compensation rather than just cash?

That there is total hourly compensation since 1950.  If you notice, right at 1970, we have a massive arc upwards.  Contrary to what you hear, the worker is better off than he was.

Leave a comment

Posted in Economy, Liberty, Politics: National

Tagged , , ,

Without Comment

Posted on August 13, 2011 | Leave a comment

Leave a comment

Posted in Debt - Deficit, Economy, Fun, Politics: National

Tagged ,

Receipts and Expenditures – Revenues and Spending – Cuts and Rises

Posted on August 10, 2011 | 5 comments

The debt ceiling, the debate, the deal, the debate and then the deal again.  The downgrade, the market down and up and then down again.

Obama’s economy.

The deficit panel.  Compromise.  Revenues and cuts.

It’s all there.  And America wants a compromise.  But before that, I wanna define two things:

Continue reading →

5 Comments

Posted in Debt - Deficit, Economy, Government

Tagged ,

Maybe A Mirror Would Be Better

Posted on August 8, 2011 | 5 comments

For nearly 5.5 years now Barack Obama has been blaming Dubya for the condition of the economy.  In some cases, to be fair, he’s right.  Dubya and the Republicans had control of things for a number of years and they all spent like massive fools.  They deserve their share of the blame.

The strategy has run it’s course.  Except for the far left Liberati, the idea that Bush is to blame is a Trivial Pursuit answer; next to meaningless.  The current administration has had time to try their grand experiments, the results are in and stock must be taken.

Obama has to see that what he’s doing isn’t working.  In fact, what he’s doing is making it even worse.  In short, he’s taken a bad, very bad, situation, and simply done wrong.

Obamacare – an economy killing piece of legislation.  Feel good?  Free rubbers for everyone?  Sure; maybe.  But a jobs driver?  Not so very much:

From the post:

Correlation is not causation, but in fact we have a lot of independent evidence (including my own experience) that many small and middle sized companies have changed their hiring plans based on costs and uncertainties of Obamacare.

Say what ya want.  Data seems to be adding up that kids of socialist Marxists growing up learning to despise colonizers who then go to liberal law schools and organize the poor while never holding a job that demands results within the context of larger organizational constraints don’t make good Presidents.

I’m just sayin’.

5 Comments

Posted in Economics, Economy, Politics: National

Tagged , , ,

Obama’s Speech: What He Should Say – August 8, 2011

Posted on August 8, 2011 | 3 comments

The United States of America has lost it’s AAA credit rating for the first time in the history of time.  It lost it in part because of it’s long term debt and deficits and, to be fair, because of the political nonsense displayed by the Congress and the White House.

The markets are down, at one point down nearly 400 points.

Barack Obama is going to address the nation this afternoon at 1:00.

Here’s what he should say:

  1. America DOES have a spending problem.  While you can debate whether or not the S&P should have made the downgrade move, the point has been made; we need to address our fiscal irresponsibility and that begins with the President of the United States of America.  To be sure, there have been bad decisions made along the way.  But right now, right here, I am the CEO of the country; the quarterback.  And it’s my job to bring us back.
  2. I have a plan.  I am going to address the spending problems that have brought us to where we are.  I’ll identify the areas where spending has increased faster than we thought and what we want.  I’ll find ways to end programs that don’t work and streamline those that we can.  This is going to be painful.
  3. Taxes on a fragile economy are dangerous; something we don’t wanna investigate.  However, where possible the tax code should be rewritten to avoid needless loopholes and poor incentives.  It doesn’t serve anyone to implement a 35% corporate tax rate only to have the most powerful corporations hire IRS tax attorneys to avoid paying any tax whatsoever.

Here’s what he will say:

  1. The credit rating was downgraded last week by Standard and Poor’s.  This organization, who largely missed the worthiness of sub-prime securities during the housing boom and brought about the 2007 recession used numbers that were not accurate in arriving at the downgrade decision.
  2. The political infighting we saw from Congress in the last few weeks was brought about by a minority of the minority.  A few select Congressmen felt that America had to be held hostage in order to maintain ideological positions.
  3. This downgrade is not reflective of America’s ability to pay her debts; it’s a Tea Party downgrade.

3 Comments

Posted in Diplomacy, Economy, Government, Politics: National

Tagged , , ,