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As a nerd for politics and economics, the debate between a flat, or “fair,” tax system and a progressive, marginal tax system intrigues me. I have listened to many debates about the two ideas and it's a subject discussion that I love. I used to be a fan of the flat tax idea, where everyone pays the same rate, but in recent years I've joined the side of favoring the current system of progressive, marginal tax rates, where the poor pay a smaller portion of their income, or none, and wealthier people pay a greater share in each higher bracket of income. Here is my analysis: The main argument for a flat tax is that it is simple, cost effective to implement and regulate, and considered fair as a standalone concept. If the tax rate was 12% of your income, then everyone would pay just that. Wealthier people still pay more because 12% of $250,000 is much more than 12% of $40,000, which is $30,000 vs. $4,800 respectively. The rich pay more because they make more, but it is still the same equal percentage of their income. Arguments in Story Form: PragerU released a video in 2014 titled, "The Progressive Income Tax: A Tale of Three Brothers" which became quite popular and had more than 16.6 million views on YouTube as of late 2020. I felt like I should include my rebuttal to the points made in that video because it includes many examples of why people think the progressive tax system is bad. I actually liked the video and how they depicted the whole scenario, but I believe the message is inaccurate with a few flaws. The three brothers are supposed to represent the general public of our society divided into three economic classes: Rich, middle-class, and poor. The first mistake is assuming that everyone has the exact same starting life circumstances and exact same opportunities. Conservatives love to think America is a perfect meritocracy and everyone has the same, fair chance at success if they just want it by making the right choices and working hard. While it is important to do those things and some people can find success even with bad backgrounds, we do not all have the exact same opportunities or paths to success. Even people in the same career fields can have vastly different economic outcomes. The video also insinuates that people that aren't financially successful just don't make good choices and don't want to work. Market forces do not compensate based on how hard people work. Conservatives have this obsession with the idea that the harder your job is and more hours you're putting in (if you're even allowed to put in more hours at work), then you'll make exponentially more money. The poor and middle class are described as not saving or investing by choice because they don't care, never mind the fact that the cost of living for basics is using up every dollar they've got, or at least a large portion of it. It's easier to save and invest when you have more disposable income to save and invest. I also noticed that the wives of the three brothers have very different careers which can affect the family's economic outcome. It's a lesser point in general, but the wives could come from varying family/wealth situations which will also have an economic impact. Besides the different careers they have, what about details such as how much debt they had before getting married including things like student loans, car loans, and credit card debt? Maybe the parents of the rich wife paid for her college and gifted her a car. She's already much better off than the others because of things like that. The community the three brothers move into is supposed to represent the country as a whole. The improvements are a representation of the three classes of society working together to build and improve the country. It costs money, in taxes, to build and maintain the country's infrastructure and security, so the flat tax argument is made stating that it's fair because everyone pays the same proportion of their income and enjoys the same benefits. In the microcosm setting of this video, yes, the progressive tax does seem unfair, but the analogy fails to accurately represent all factors at play in the real world. Harry, the rich brother, is upset that under the progressive tax he must pay 80% of the bill even though they're all receiving the exact same benefits, but are we all really receiving the exact same benefits that living in this country has to offer? This video depicts our society as everyone having the same exact opportunities and backgrounds and enjoying the same or similar quality of life and benefits while making Harry (the rich) pay for it. Sure, we all enjoy the same public use facilities, infrastructure, and military protection, but people can enjoy those basic things in many, or most countries of the world. What we hope makes America, or any country, a better place than others is the quality of life and opportunities for economic advancement afforded to its citizens. A flat tax sounds fair but does not produce the best quality of life for a society and limits the amount of opportunities the poor will have because their tax burden inhibits savings and discretionary income. In reality, the three brothers (or classes of people) would never live in the same community with the same benefits. Rich Harry wouldn't want to live in the same poor neighborhood as Tom. Harry would want to live somewhere with less crime, cleaner and well-maintained property, and larger, more luxurious homes. Tom can't afford better. Also, most poor people don't just work a mere 20 hours per week. They still work 40 hours or more with multiple jobs sometimes that just don't pay as much because they aren't in white collar, high paying careers. Market forces do not compensate based on how hard people work; and to portray the lower-earning class of society as just choosing to work less is offensive and incredibly ignorant. The video indicates that Harry (the rich), is being forced to pay for all the upkeep of the country as if no one else is invested in the country and economy in any other way. The poor and middle class still provide the majority of labor to fill jobs in the economy and manage/operate businesses for the rich investors, creating wealth for themselves and especially for the rich. In a progressive tax system, the rich pay the most in taxes to pay for the country's security and infrastructure and the poor pay for the luxurious lifestyle of the rich through their time and services working for their companies and through the consumption of the goods and services offered by the businesses and investments. This PragerU video is also hinting at the idea that what you pay to the government in taxes should reap proportionate benefits. No. Paying taxes isn't shopping from the government as if you're buying fruit by the pound. You don't necessarily get more benefits directly from paying more taxes, and you don't receive less for paying less. You also don’t get a say in what specific programs you want to dedicate your taxes to. That’s only generally done through elected officials. However, there are indirect benefits as I will expound on later. I came across two more allegories that try framing a progressive tax system as unfair and absurd that I want to comment on: 2nd Allegory: You are now the tax collector assigned the job of collecting taxes & deciding the fair share of each person. There is a new government program called Beautify Our City (BOC). It provides jobs for low-income folks, reducing the number of people collecting unemployment, and also helps make the city beautiful and increases property values. The unemployed now will provide lawn mowing, bush trimming, etc. for each home in the city. The program is mandatory for all residents to pay for. Your job is to knock on doors to introduce the new program to each home. You go to the first home, one that could really use this program. The grass is tall, the bushes are overgrown, etc. You knock on the door and a man in his 30s answers the door. There is a distinct smell of too many dogs in the house. You explain the new program. The man says that sounds great but what is it going to cost him because he doesn't have any money. He was laid off from his job 6 months ago & he is collecting unemployment. You mention that the new BOC program has a job for him, but he explains that he's been sick and can't do that. So you say, "That's OK. If you don't have any money, your cost is zero." You go to the next house and explain the new BOC program. This house has an immaculate lawn. The bushes look beautiful and clearly, extra attention and money, has been lavished on this property. The man at the house says he doesn't need this program. He takes good care of his property and likes doing it. You patiently explain that it's a mandatory program. The man says ok, but what is it going to cost? You reply, "How much do you have?" The man responds, "What!?" You patiently explain that each person must pay their fair share. The price for the lawn care is 'progressive' meaning people that have more money must pay more for the same services that others pay less. The man gets angry and slams the door. The BOC program is mandatory and, as a city official, you have police powers. So the next day you knock on the man's door again. But this time you have 2 uniformed police officers with you. They are carrying firearms. You knock on the door and the man answers. You patiently explain the BOC program again and emphasize that it's mandatory. Seeing the two police officers the man sighs, realizing he doesn't have any choice. So he again asks how much. You reply, "How much money do you have?" 3rd Allegory: You go to the grocery store to buy eggs, but you don't see a price tag on the eggs. Hmm. So you ask the first clerk you see and ask, "What is the price?" The clerk says you have to go to the front office & tell them how much money you make. When the front office knows how much money you make, only then will they be able to tell you the price you must pay. That's the only way to determine a "fair" price for you to pay. My response: The underlying problem these stories share is that people that have more money are being asked to pay more for the exact same products/services others receive at lower prices. They're arguing the moral case of how this is unfair for them to be tasked with the burden of funding society's programs that others are using for less of a cost. I think this is a childish viewpoint of oversimplification and misunderstanding the purpose of taxes and an organized society. The purpose of taxation and its subsequent spending is to strengthen the economy by providing safety and infrastructure for good commerce and providing opportunities for everyone to flourish, make the American Dream possible. So what exactly is the good or service the government provides that makes the rich pay more for and the poor pay less of. Safety? Infrastructure? These stories make it sound like you should be mad when you have to pay for emergency services when you’ve never needed to call for police or a fire department. Should I be mad that I have to pay for road construction and maintenance on highways I never use? Never mind the fact that maybe delivery trucks and employees of my favorite stores may use those roads and highways. Having a rich person pay more for eggs like the 3rd story above, is like asking a tall person to reach something on the top shelf for you instead of making all the poor have to buy stools. A poor person doesn’t make enough to get by with basics on the lower wage jobs they work to provide cheaper goods and services for all, so they need financial subsidies and you get mad that you have to pay higher taxes to pay for those subsidies? Then say crap like these low wage jobs should only be done by teenagers or starter jobs even though the position needs to be filled during school hours, or how raising wages means costs go up for everyone. Ok, so you like cheap goods, but it’s really at the employee’s expense then because they can’t afford to live on the low wages. The main point for this topic is not about minimum wage issues, though. It’s about comparing a flat tax to a progressive tax. If the poorest among us are paying the same level of taxes, it will cost them more of what’s needed for basic survival, not just costs in luxuries and additional comforts. It doesn’t make sense to have them pay for their own subsidies, services, and infrastructure when they already can’t afford much as is. If you like cheap goods and services, and having a safe, cohesive society, and a strong economy where more people have disposable income to contribute to growing businesses both big and small, then it makes sense to me to have the higher earnings pay for more to offset the costs. Everyone pays the same rate in certain income brackets. Those tat make more in excess of those average amounts will pay a greater percentage and they still reap a greater reward of living in comfort that our society and economy provide. People should do what they can to get better jobs, but there’s always going to be low wage jobs needing filled. I think asking the rich to pay for the roads their customers and employees use to work at and patronize their businesses which make them rich is fair. It’s still a positive trade off. I’m not asking for complete communism equality. I only suggest a progressive tax system is more effective at providing for a stronger economy. I created my own story using the example of the same three brothers to represent economic classes in society. Each of those brothers had a daughter, so this next generation of three cousins decided to make a living by going in together on buying an orchard. Harry's daughter has no debt, her education, first car, and a down payment on a house has been provided for by her father Harry. She was married a rich fellow and was willing to pay for more than half of the orchard to own with her cousins. Dick's daughter had some college paid for, but still worked hard to build a successful career. She made a good contribution to invest in the orchard and will work as the manager of it. Tom's daughter grew up poor, but worked her way through school with the help of student loans and carries that debt burden. She doesn't have any savings but was able to make arrangements to buy into the orchard with her cousins with her labor. The girls were going to live by the fair standards their fathers originally intended and split the costs evenly according to their ownership portion. If they each paid 12% of their income, the costs will be covered. The orchard produced well and grew in popularity, but over time the land around it started developing and costs began increasing. The rich woman pays the most in costs because she takes most of the fruit sale proceeds, but this still feels like a fair arrangement. She is unaffected by the increase in costs as the orchard is still quite profitable to her lifestyle. She doesn't really work the orchard, just checks in occasionally and voices her opinion on decision making. Dick’s daughter, serving as the manager, pays her dues and is still able to take some home, but that portion is becoming less with rising costs of running things. She works the administrative side of things and often helps out with the labor. The poor woman operates the most physical work required to run the orchard and does a great job, but she has little left to get by on after the costs are deducted. She needs government assistance until she can find ways to improve. More people on assistance leads their local government to increase tax costs. The poor woman's tax increase is offset by the benefits she now receives to help with basic needs. Manager cousin is mad that she gets even less now after all the hard work she puts in, and rich cousin is annoyed, but her lifestyle is still mostly unscathed by the changes. The three cousins schedule a time to discuss the affairs of the orchard. The poor cousin thinks the rich cousin should pay a more "fair share" of the costs because she's still taking most of the proceeds. “If you’re taking 50% of the profits, you should be paying 50% of the costs too," she contended. The rich cousin scoffed, “I AM paying half the costs. Do the math. And, of course I am taking the most profit. I invested the most, so I deserve the most. We are all paying an equal portion for the same benefits. Isn't that fair enough?" The manager cousin knew that having the rich cousin pay more because she could would mean that she herself would be able to keep more of what she made as well. Besides, she worked hard with her contributions to the orchard as well, so she chimed in, "I don't think you could really say we all benefit equally." Nodding to the direction of her poor cousin she continued, "She and I are the ones providing all the work here too, but only receiving enough to barely make ends meet. We soon won't be able to even afford the transportation or housing to get to work here. Also, we are losing sales because the neighbor workers can't afford anything else either. They used to buy from us, but now they can't afford it since the cost increases. Listen, without your investment, we wouldn't have this big, successful orchard; but without us working it, you wouldn't be enjoying the large profits either. We need each other. Besides, it's not like you're hurting any if you pay a little more." The rich cousin was offended. "Fine. If you two are against me, then maybe I'll just sell it and leave." The other two were stunned. It was still a profitable enterprise. If their rich cousin didn't want to enjoy the benefits, then maybe splitting it with more of their other friends and family would appreciate it. They were able to get other people to split the difference and some even helped work the land as well. End of story. Ok, maybe sloppy, go ahead and poke it apart. I tried, but I hope I got at least a summation of my thoughts across. Is it unfair to require the richest to pay more just because they can do so easier? You know? I'll admit, it does look that way, but it's also unfair, in the grand scheme of an economy, when the people staffing the business that the rich own and invest in, can't even afford to live with the basic housing, food and other necessities to be able to keep working at these places. It's not fair when the rich gain disproportional influence in politics and control over markets with their wealth. See this post. Now to further build on the concept I brought up earlier about the benefits populations enjoy from taxes. What are the benefits and privileges enjoyed by the rich and poor and how does it compare to what they have to pay for in taxes? People argue that we all enjoy the same benefits and general opportunities, like the PragerU video states, but does that just mean sharing the use of public infrastructure and safety through regulations and military protection? That’s it? Seems like a pretty low bar since most countries have basic infrastructure, safety, and varying degrees of rights and ability to do business. Big whoop. What about economic power and opportunities? I consider the quality of life afforded by the country's peace and prosperity to be the most important benefit of good governance and optimal tax policies. For example, a person who owns a Rolls Royce pays more for insurance than a person who owns a Ford Fiesta. They’re both cars that drive, but one is travelling in much more prestige and luxury, so they pay more in insurance to cover it for protection. Thus, the assets of the rich are more luxurious and protected by our society’s gains, so they should be paying more in taxes to protect that lifestyle and those assets. The indirect benefits the rich enjoy include profitable investment opportunities, markets for business opportunities, a large supply of skilled and educated workforce, a thriving entertainment industry with movies, music, social media, and events, big money in many different sports industries, and the many, many luxury goods and services a wealthy, safe, and stable country provides to those who make the most money to access these. Even the poorest have a better quality of life compared to other nations, but I think it can be even better. Why it’s needed: The problems a flat tax causes come from the way it effects the poorest. There is a certain level of income needed where families no longer need every last dollar just to afford all their basic bills and then after that point people start to have savings and discretionary income where they can participate more in growing an economy. Like my example at the beginning, if a family only earning $40,000 has to pay a flat tax of 12% of their income, which is $4,800, what can they no longer afford now? What have you taken from them? Maybe 3 months’ rent. 4-5 months of food. 4-5 months car payments, etc. They are pinching every last penny just to pay for basic shelter, groceries, utilities, and a few other necessary goods. They have nothing left to save or pay into other things in an economy. Take 12% from someone who makes a million dollars a year and what necessities can they no longer afford? What comforts are denied to them? Virtually none. They still have $880,000 left over to afford almost every comfort on earth. 12% of the middle class $150,000 is $18,000, which can feel like it hurts, but they should still easily have basic needs met and a good amount of discretionary income. The cost of living creep is real where having a bigger house or more stuff because you have more money is a factor, but the poorest are already living pretty low standards comparatively and there’s not much worse they should be forced to endure just to pay the tax bill of the flat tax. Instead of going without food, healthcare, vehicle maintenance, and other needs, the millionaires and upper middle class might have to take less extravagant vacations and essentially just lose out on more frivolous luxury instead of necessity. There's a big difference in sacrifice between the two groups! The problem with going after the poorest with regressive taxes, even a flat tax which will hurt them more, is that when people have to struggle even more than they already are, resentment and unrest build. The economy becomes stagnant with more people having less resources, killing demand. Economic inequality will continue to grow apart, leading to more crime, more civil unrest, an increasingly polarized nation, and the rise of more extremism in politics. Now I'm not arguing for full equality where everyone should have the same income, but I believe there should be more equality in opportunities and at least quite a bit less inequality for a more happy and stable society. People that work hard to avoid debts and go through rigorous school programs for high-paying careers do deserve their reward, but having them pay a larger percentage in taxes after reaching high earning numbers doesn't hurt their overall well-being and contributes to a stronger society. Even when a larger percentage of their income is paid to taxes, they still take home more than everyone else and can still afford a more comfortable lifestyle than everyone else and provide for a better society at the same time. The remaining take home pay for the poor isn’t enough. People need government subsidized housing, food, medicine, and more just to have basic needs met. Some may argue we’d be better off if government just didn’t provide those because people and markets would just “figure it out.” We had that chance to see this in history before these programs were implemented. They didn’t figure it out. There was crippling poverty and suffering. Why it’s better: If you want to keep your lower wages and cheap goods, then you need to provide for the subsidies people need to live. People working full-time jobs aren’t earning enough to make ends meet. People should do what they can to get better jobs, but these are still jobs that need filled. People that do them shouldn’t be forced to endure an impoverished lifestyle. If people are keeping more of their own money after meeting basic needs, that extra disposable income goes into the economy. More people would then have the power to save, invest, and maybe start their own business ventures. I believe I have covered the reason why it is fair to ask for the rich to pay a greater share and the poor to pay less or nothing at all from the poorest among us, but If I need to clarify that further please let me know. To answer why a progressive tax is better, comes down to combatting economic inequality by providing better equality for economic opportunity and fostering economic growth. Both are done through strengthening the middle class. Building on PragerU's three brothers analogy, Harry's children in the future of the video will have much better opportunities and earning/savings potential than their cousins from Tom & Dick's families because Harry's kids are far more likely to attend good private schools, have college and/or other major expenses paid for, and receive greater financial gifts or job networking from their parents. I agree that Harry is allowed to support his children in those ways, but you can quickly see how the economic opportunities will already be different. Maybe Tom's kids had to work through college or put off college because the family needed their income for support due to rising costs. Maybe Dick's family suffers from crippling medical debt when either Dick or his wife are now unable to work due to a medical condition. Their kids will not have the same access to the opportunities Harry's kids enjoy. Yes, everyone in the next generation can work hard and make good choices, but a greater investment in policies that foster middle class growth can help even the playing field of opportunity to compensate for these differences, such as providing affordable education, healthcare, and social safety nets. The first point addresses economic opportunity. The second point for why the progressive tax is better addresses fostering economic growth. An economy doesn't grow much without demand. Businesses need customers and operating money, but customers also need money from wages earned at their own place of employment. Business is cutting costs wherever you can while maintaining or improving efficiency for profit. Employee wages are costs. Employee benefits are costs. Sponsoring community events and little league teams are costs. When the concentration of wealth is too lofty in the top, demand and growth is stifled. When the cost of living is too high and wages too low the cash flow from customers dries up and the general economy starts to stagnate or decline. Less people controlling more of the nation's wealth and investment stifles growth. It's putting bottlenecks in the cycle. Instead of hurting the well-being of the poorest as a flat tax would, a progressive tax takes a larger share from the pool at the top and, if executed properly, reinvests it into jobs, infrastructure, education, healthcare, and other social safety nets, creating more equal economic opportunities for people to take risks on their own business ventures, provide more opportunities for more people to become investors, and create an environment for businesses to thrive on new and growing demands. Nobody's overall well-being would be hurt by this. Even the richest paying the highest percentage of their income in taxes are still reaping the rewards of their industry, still have more money than anyone, and can still afford virtually every comfort on earth. If more people have money to purchase the goods and services provided by the rich, then they'll still grow richer despite the taxes. In closing, I wanted to include some comments about taxes in general that really irritate me. A big one is the notion that the rich are the "producers" and "productive" members in the economy, insinuating that everyone working for wages and earning less than...a lot, are just lazier and don't contribute very much to society. I've heard the argument that a tax on capital gains, interest, and dividends is a tax on capital and this is bad because "You're shifting from the productive sector of the economy to the unproductive. Don't tax the 'producers' and 'investors.' You're penalizing people who produce! Progressive taxes are unjust!" Then, they continue to talk about how the rich deserve everything they earn because they are "more productive" and useful to society. Yes, Tom Cruise, the Kardashians, LeBron James, Mr. Beast, and the assortment of wealthy YouTube and streamer stars are far more productive and useful than most Americans, right? I guess you could make an argument for that, but no I think they're only thinking of wealthy executives, business owners, and wealthy professionals when they are referring to people that are "productive." In fact, rich people, in their opinions, should maybe pay less in taxes because they create jobs and growth in the economy, right? If you work, you should pay more in taxes than those simply living off of investment income and business profits, not working. They've done enough for society and their wealth continues to bless us all. Let us pay their taxes for them to thank them for their service to society. Let’s give them a free ride so they can create more jobs with their great benevolence. Nonsense! This argument leads to the gist of the conservative, trickle-down economics theory and here's where I find problems with it: 1. It ignores demand. Rich people don't just open up businesses or create jobs at random unless there is a demand for their product/services to make a profit. They also don't grow and hire people unless the demand requires it because they are doing so well and need hired help to get bigger. Maybe there are niche cases of someone doing a favor for a connection. 2. This philosophy assumes businesses aren't growing simply because they don't have enough money, so their taxes are cut to let them keep more of their earnings to have more money available. Again, it's a demand issue. Not enough people are buying their products/services to warrant growth. Getting funding is easy for businesses that are doing well and want to expand. Tax cuts can often provide short-term growth by accelerating expansion plans with the extra money, but if the demand and customer base is low then they aren't likely to expand, even with the extra money. 3. This idea is that the rich, or job creators, should never pay any taxes because they create jobs with that money instead. All employees be damned. They should pay for all of society's needs, but if the employees pay more of the taxes and receive poor wages, there's less money to be used to grow business anywhere. All their money is being used up on basics like housing, groceries, utilities, and transportation. No discretionary income for anything else, no demand for other goods and services, no economic growth. This whole subject becomes a debate on finding equilibrium between supply-side and demand-side economics. "What comes first the business or the customer?" Business? Ok, where did the business come from? Investor(s) that wants to make money from a profitable business. Businesses are profitable from lots of sales and good margins. Lots of sales come from customers. We get more growth by investors putting in new businesses, right? If pure capitalism creates jobs, why can't we easily fix any recession and develop any region by putting in more car dealerships? Those create jobs, but they won't last because there isn't money flowing or a demand! Build luxury goods stores in the poorest neighborhoods to provide great-paying jobs to the poor people in need. No. There's no demand, no customers because the people don't have little to no discretionary income. Obviously, those are examples of terrible business placement decisions, but a whole mall with a variety of in-demand stores could be built during a recession or to develop an area, but the majority would still fail because customers don't have enough money and those jobs pay so terribly that employees can't even afford to shop at each other's stores. Here's the big takeaway: Supply without demand is waste, demand without supply is opportunity. That opportunity is when businesses are built. There is much more to investment than rich people and corporations just not having enough money. They already have plenty of money or easy access to more if needed. It's the poor and middle class that need more money to grow and start their own businesses. Doesn't the job have to come before demand because that's where people get their money? Yes and No. Yes, most people get their money from jobs, but the owner of my company isn't paying me from his personal money under his mattress. He's paying me with money earned from clients because of the work I do. I do all the work for the clients, but he takes a cut for facilitating the transaction by providing the business and supplies. Sure, I wouldn't have a job without his business, but he also wouldn't have a business without me doing that particular job. He can't do all of the jobs himself and THIS is why it bothers me when people refer to the rich as being “more productive.” I'm glad for people that live their dream of obtaining financial success, but don't discredit the hard work that all wage earners put in, regardless of how much or how little they earn on an hourly basis. They are the ones actually working and providing the service or product the business sells, sometimes right alongside the company owners. What many people complain about the most is how much of the money earned from doing the job is taken as the owner's cut for providing the business and supplies. I do agree it's fair for them to take a modest amount, but what really rattles people is when business owners and executives suck up all the money and "rob" employees of their earnings they provided through their work by paying them poverty wages. So the question is asked, why is it considered "robbed" if wages are fairly based on supply and demand? That’s a question I’d like to explore another time in deciding where the line is and what’s considered fair. Business owners and executives are compensated greatly when successful, but employees are most often just compensated with the same low wages, regardless of making record sales. Maybe a small bonus will be there somewhere at the end of the year. P.S. Additions Another argument made is that rich people will be disincentivized to earn another dollar if they reach the ceiling and the next tax bracket it too high, or that progressive taxes incentive laziness. People that say this might not understand what marginal taxes means. If you're taxed at 12% to $100,000, then 15% at $100,001, that doesn't mean you all the sudden have to pay $15,000.15 for 15% of all your income! No! You will pay $12,000.15 - 12% of the $100,000 and 15% of every dollar earned after that. The point is, you still earn money! I guess businesses are going to turn away customers instead of growing and making more money? Then maybe new businesses will take those customers that were turned away and the market share is spread, increasing competition, which is good for customers and employees, right? Solutions business owners could do to avoid that scary tax ceiling they're so scared of is either a)pay employees more to not make so much profit to be taxed, b)charge less for products/services, c) shut down for the year and deal with hiring seasonal employees or new people every year, or d) continue to grow and expand to make more money, but at a lesser rate moving forward. I can only understand being disincentivized to continue operations if the tax is so incredibly high that it actually is prohibitive. I’ve had to clarify this last point several time to people. I am not advocating for everyone to make equal pay or close to it. I just advocate for having the rich and richest pay more, but also not an unrealistic, impossible amount. I’m still trying to be fair and reasonable here!
Another point I want to mention is that people often say that higher taxes infringe freedom. How? Just because there's less money for you to use as you please? Ok, I guess, so then you would agree that the poor and lower middle-class people are enslaved with hardly any freedom because they have hardly any money? I guess I can maybe be persuaded to see that you have less freedom if the government is taking too much of your earnings. Again, there is a better balance that can be found.
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Getting a college degree is expensive, but practically required for any decent job today unless go a different route working in the trades for a career. I don't believe it's possible for someone to be able to pay for their own living expenses and college tuition and other expenses without scholarships or loans. I've had a few discussions and debates with people on this subject and have usually found that those who did it had their parents pay for some or all of the following: housing, vehicle, food, insurance, phone, whatever else. That doesn't count! You got hooked up by your parents, so your expenses were less. I'm doing the math to see how much it costs to cover everything on your own.
2023 Information Tuition: $4,391/full-time semester Books & Supplies: $620 Food & Housing: $5,688 Transportation: $1,248 Total: $11,947 Source for my numbers: https://www.boisestate.edu/vpfa-budget-and-planning/tuition-and-fees/ For a 4-month semester, $11,947/4 months = $2,986.75/month $2,986.75/4 weeks/40hrs means a student here would need a full-time, 40hr job paying at least $18.67/hr AFTER taxes. About $750 a week. Probably a $21/hr job needed because of the tax and benefit deductions, working full-time while going to school full-time - and this didn't even account for extra spending money or a variety of other expenses and utility costs. In Boise, Idaho a college student earning $21/hr is rare! Maybe some people get lucky and find good income to make it work or earn good scholarships to help with the costs. The overwhelming majority don't. I had a friend that would work through college, but he worked for his dad's company that paid him well and he didn't have to waste any time applying for jobs or anything like that. Scholarships are great if you can earn them. I heard all the time how there were tons of small scholarships out there for the taking by anyone, but I felt like I was just wasting my time writing and submitting dozens of essays and doing some leg for just a small chance at a scholarship. I didn't want to do all that work unless I knew it would actually produce results for me. I got tired of losing and spending hours and mental exertion for a small chance at a $500 or $1,000 scholarship. Unless you get good scholarships and/or have family pay your way, I think you HAVE to get student loans. Gone are the days one could simply work their way through it unless you get very lucky or figure out other means. Please share your story if that's the case. I'd love to know how you made it. I’ve had some conversations with people that were going against the grain saying, “things have never been better! People complaining just don’t know anything!” I come across this type of thinking once in a while and it’s just weird to me how they ignore the reality a lot of people face today with their quality of life and finances. The people saying the opposite, that’s things are better than ever for everyone, do at least try to back up claims with some economic studies and graphs though, so it’s good conversation. This was one online conversation I had with someone. They started out by stating: In the US, there's an increasing number of people from both sides that try to claim the average American's standard of living has gone down and blame it on the other side. This is simply not the case, as all economic and production figures show. So, I engaged this and said, “The average standard of living HAS gone down. It's getting harder and harder for people starting out to live a comfortable, middle-class life. Housing and education are getting too expensive too fast. Wages aren't keeping up to compensate.” I laid out my evidence for comparison to consider: Median Price of a home in 1980: $47,200 vs 2020: $391,900. Median Family income 1980: $21,020 2020: $71,456 Home price as percentage of income 1980: 225% 2020: 548% Median tuition cost of Boise State University resident 1980: $239 2020: $4,030 Tuition price as percentage of income 1980: 1.14% 2020: 5.64% “GDP is increasing, good, but the rewards aren't being enjoyed by majority of the population. GDP doesn’t mean that it’s money in everyone’s bank. It’s too concentrated in the hands of a few. Corporations enjoying record profits are also enjoying large amounts of stock buybacks - not wage or bonus increases. A strong GDP doesn't matter as much when the rewards are too concentrated in benefitting those that are already well off. I came of age to graduate university, get a decent job, and buy a house about 6 years after my brother. My brother's college tuition was about a thousand less per semester AT THE SAME SCHOOL! He got a nice, 5-bedroom house with below ground pool and hot tub for $350,000. 6 years later, that same house is worth $650,000. I had to pay $400,000 for a starter home in the same town. 3 bed/2 bath, 1,400 sq. ft., no pool or anything nice. Job wages are pretty much the same, maybe a dollar higher. I'm stuck paying more for less for the next 30 years. More for the same education and more for a lesser house. I will forever have less disposal income than people that "came of age" at a better time and less savings or opportunities because of this unless something happens, like one could argue, I could've gone to a different university or move away instead to a cheaper place. Maybe true, but this increasing cost of living is happening just about everywhere, and it's pathetic that in a country with supposedly booming stats you listed that people should have to keep moving out to the frontiers instead of life getting better for future generations as has been the case for the previous 200 years.” Here's the first response I got: I'd argue that house prices are just asset prices and therefore not a good measure of quality of life. If you, the buyer, suffers in terms of quality of life, then the seller benefits just as much. Increases in tuition prices are due to higher wages for professors and more resources devoted to research rather than just teaching, which means your higher tuition goes into increasing the knowledge of humanity as a whole. Me: “’If you, the buyer, suffers in terms of quality of life, then the seller benefits just as much.’ Obviously, I hope my ‘asset’ appreciates for me to sell and make a good buck from it too, but this still neglects the facts I laid out about the cost of living getting too out of hand for up-and-coming generations. This just reinforces the idea that everyone that got theirs sooner continue to get boosted wealth at the expense of future generations’ detriment, so again, it’s GREAT for the rich or at least those already on the path to building wealth, but for anyone starting out it’s getting more difficult. Unless you're in the very few high paying careers, it's getting tougher to have the comforts or even necessities of disposal income previous people and generations enjoyed. Everything you mentioned shows that the economy is good for everyone that already got theirs, and it's getting better for them, I think, but for everyone else starting out, I still don't see how you show they have it better than ever. There's no way! Wages are up some overall, sure, but some of the crucial expenses (stats I listed) have gone up at far higher rates, thus diminishing the wage increases. I mean, I'm still open to be proven wrong. Maybe I'm missing it. How can these stats be interpreted to say we have it better than ever, when my grandfather could pay for a college degree with a part time ‘high school kid summer job’ then work a common office or factory job and afford a nice house with an acre of land, rental properties, new cars, and lavish vacations, all on just his income, living in a big city, and acquiring these within 10 years of graduating? The same job now pays $50k-$80k. Hard to make all that happen today. It's anecdotal, yes, but there are thousands of examples like this everywhere.” Second response to me: I agree if you focus too much on housing and tuition (which seems to be your biggest focus), it may seem like a drop in standard of living; but I'm willing to suggest you grandfather's cars, which were considered ‘high end’ back then, was as good as a low-end car today. And for the vacation, weren't plane tickets much more expensive back then? And if you mean a road trip by vacation, he'd have to drive with a low-end car (by today's standards) on a worse highway than you have now. And this is not considering he didn't have access to an incredible library of knowledge like the device you're using. These are just a few examples, and there are other examples of things we have much better now thanks to technology. The conversation wound down and basically ended there, but I regret not going hard again on the emphasis of their last sentence. I should be grateful for my contributions… OK, the whole POINT of the conversation, was about why people are pessimistic about how the future is looking bleak. Instead of answering to how it’s better, we should be grateful or proud of our contribution to lining the pockets of universities, to student loan interest, and to the banks and previous owners of houses, at our expense and the expense of our ability to save and thrive. Why do I “focus too much on housing and tuition?” Because those are typically the two best steps to building wealth – an education for a better paying career and building homeowner equity wealth. If people are spending too much of their income on housing and student loan payments, there isn’t enough left to save and invest or contribute more actively in the economy. They also pivoted to the advancements in technology instead of addressing the issues. I see this happen often when cost of living challenges are discussed. I am grateful for the advancements in things like technology and medicine. I just wish I could enjoy them more if I could afford it. I think of the analogy of having to run on a treadmill for a prize. It’s slower and basic for the first contestants. New people joining the challenge get newer treadmills that come with a fan and virtual reality environment, but it moves at a much faster pace. The new contestants get to enjoy more luxury but have to work harder for the same prize. The prize of financial stability and comfortable disposable income. I might agree with this person that things are generally pretty good and improving for those that secured their middle class or higher position (good career underway, home ownership, low student loans or none), but for everyone else coming of age trying to afford the education costs, first time home buying, and other things, it feels like a real struggle and missed opportunities compared to what our peers enjoy even though they followed the exact same path, just doing it sooner when it was all more affordable. Another Conversation:
There’s some kind of data studies that resulted in the info found in these graphs. They're used as evidence to argue everyone is better off and here’s the proof. Ignore the reality of the struggles you’re facing. This chart proves you’re better off! Here’s another conversation I had with someone using this chart, but it felt like a failed conversation because this person just spouted off a whole bunch of weird stats and wouldn’t address anything I said. Maybe I was speaking to a bot: The Middle Class is disappearing because they are moving into the upper class. This is demonstrably true. The poor are also getting better over time. Then when you add in government transfers the picture is even better. 1/3 of US households now have an annual income over $100,000. I can give you the data. The error that is usually made is that people look at the middle class shrinking (It is. The data says that) but assume they are becoming poor. That’s just not true! The data doesn’t support that. That’s a political narrative. The poor have been reduced by about 10% since 1967, the middle class reduced over 11%, and the rich increased by about 20%." My first comment: “It's weird hearing (reading) people go against the grain stating stuff like this like how things are better than ever and we're all crazy for thinking times are getting tougher. I've seen this guy's presentation and exchanged an email chain of conversation with him. I'm impressed with his willingness and availability to communicate openly. One thing he failed to deliver on, though, is reconcile these stats with how the cost of living is without a doubt different/worse now than it was 40-70 years ago. This may be proof that there are more people earning higher incomes, which is good, but people in the lower two brackets are getting crushed harder than they were before. For example, university costs (in America at least) and housing costs are two of the biggest lifelong investments to building wealth. The cost of these are way higher for percentage of average income than ever. For people that got theirs sooner, great, you're doing well. For people starting out trying to pay for college and buy their first home at these astronomical prices, they're suffering, and it only seems to be getting worse for the middle- and low-income groups, even if they are, technically, becoming a smaller group overall.” Their first response to me: With Covid and the general incompetence of the Federal Reserve and Government. What we are experiencing now is not typical. It is exceptional. To take something exceptional and hold it up as typical would be intellectually dishonest. People often look at a snapshot in time. That can often be misleading. I am looking at it over time. Would you have said what you are saying now in 2018? Maybe not. I spend thousands of hours studying this kind of thing. I give lectures on it. An epistemological razor is something philosophical that whittles away something or makes it smaller. An example of this would be Hitchens’ razor. Hitchens’ razor states that which is asserted without evidence, can be dismissed without evidence. So, the goal post has been moved.  I had no idea what they were going on about COVID for or looking at why I wouldn’t be saying this stuff in 2018. They lost me and never cleared it up when I asked, but I did respond to the statements about us doing better than Europe and OECD countries. I said, “This is great! Aren't we so lucky? It sounds like you're making the case that everything is better than ever, right? And people are only manipulated to thinking the opposite, that we're getting poorer. I can understand that overall income + transfers and whatnot may show as everyone doing better and making more money than ever before, but I still don't understand how it reconciles with the cost of living for goods, especially housing and university costs, outpacing that income growth. If incomes are up, but costs up even more, than it's getting worse for the lower incomes! Is this not actually the case? There's hundreds of examples out there of buying power going WAAAY farther 50 years ago or so. There's whole threads about it like this one.” Again, they’re not addressing the difference in increasing cost of living and how it’s getting harder. They’re deflecting again now by comparing us to other nations. I've heard this argument a few times too. Comparing to similar economic countries is better, but I still don’t really like it. It doesn’t address the concern of things getting harder, and apparently even harder for other countries’ poor too. It's an irrelevant argument. Sure, we can and should still be grateful for what we have in a developed nation, but that still doesn't mean everyone's quality of life is abounding in prosperity. When we compare the standard of living of poor people in America to the rest of the American population and know the capabilities and resources the country has to offer, I know we can do better. Comparing the standard of living of poor Americans in the 21st century to people from very poor countries in other parts of the world or even comparing to the poor living conditions of past human history is a false equivalence, red herring fallacy to divert attention and focus on a separate issue that only has a minute relation to the main issue. Apples and pears are both pome fruit, but they are not the same. A poor person in America is not a fair comparison to a poor person in Burundi. Poor Americans will obviously still have a better standard of living than a poor person in Burundi simply because of the different laws, government, social safety net, regulations, national resources, and proximity to services and technology when comparing the two nations. They are both poor people, but it's not an equivalent comparison. Final Comment I took from someone else when there was an argument about conflicting minimum wage studies. Some showed the benefits of raising them, others showed the negative effects:
Welcome to economics, where it’s a soft science yet passed off as a hard science. We don’t really know what raising minimum wage will do or not since it’s humans making decisions at the end of the day. And humans can’t be quantified no matter how hard as a society we believe it’s possible. You can look at places like Texas with a low minimum wage and see the decent living standards, but across the pond in Europe you can see how a high minimum wage also has decent living conditions. At the end of the day lots of economic theories today are used as justification rather than understanding. Much to the detriment of society as a whole. If we wanted to be truthful we would understand that there isn’t one way or one right answer to approach economics, but who does that benefit? Not the people who fund these institutions and studies. It is nearly impossible to control for other economic factors, so the results of these studies are... questionable. What is the worst job you’ve ever had? The first thing that comes to mind is various retail, fast food, call centers, and other customer service jobs where people have to deal with abuse from customers, and often managers, for low wages. MY worst job was working at a tire warehouse as a temp employee. I made a whole post about it here. What made it bad was the long days of manual labor putting studs in tires with pneumatic guns that didn’t work well, then a month of wandering the warehouse, pretending to busy, and often lifting very heavy tires into stacks, for low pay as a temp. job. It sucked. Let’s look at some other answers via reddit polls:
Gross. So the worst jobs can typically be categorized as the ones with the worst customers, worst managers, bad for mental health, tough working conditions, or just gross.
On another note, why are there so many managers with personalities that are so cruel? I had a manager that believed people learn better when beaten through fear or abuse, because it sticks with you. All this made me do was want to cover my tracks better, never approach him for anything and go to, like, everyone else first when I needed something. I hated that job and glad I’m not there anymore. Once things got tense that one time, they were never the same. A manager or coworker can’t be super rude and then expect us to just forget that ever happened and go back to normal. Maybe if there was some kind of apology and change, but that practically never happens, does it? In another story shared online, someone requested to time off to leave early a long time ago, which was approved, but when the time came for them to leave, as requested, managers made a big deal out of it: “The manager says, ‘Well hang on, let's go find (other manager's name) and talk to him.’ I remember thinking to myself how stupid and unnecessary this was. He took me across the warehouse to find some dude I've never met. So, I tell this guy that I will be leaving early today for my daughter's birthday at whatever time. Didn't have to include the reason, but just did because why the heck not. He gives an exaggerated sigh, then stares at his watch for some random reason and acts like this is the biggest inconvenience of his life! It was all for show, and I don't know why.” Continuing on with the theme of management being unreasonable for no good reason, the following story was shared: “One day, our machine that taped the boxes malfunctioned and we didn't notice at first. A box made its way down the line and the item fell out of the box. A guy came down to me and said, ‘If this happens again, we're gonna have a problem.’ He looked like a redneck Andy Bernard from The Office. Like, really cool dude. That's something to get that upset over, a two-pound item falling from a box. We all took our lunch break at the same time, 30 minutes. Coming out the rest room during one break, a manager started rushing me to get back on the floor. ‘COME ON MAN, NEED YOU BACK OUT THERE.’ I had 5 minutes. Everyone had 5 minutes. He knew what time it was. It was so unnecessary and stupid.” When I first had the idea to look into this topic, I guess I was expecting…more. More unusual, more crazy stories, more outlandish behaviors or difficult tasks or something, but reading through a lot of these felt like job experiences many of us have had and can relate to. It’s sad that many hardships don’t have to exit, but people gotta be people doing things people do for some reason. Original Article. A local business has been called out on social media after towing the line of saying "Nobody wants to work," drawing cards to pick which factors they want to blame others with, without looking inward at their own problems. The article reads: "As businesses continue to deal with staffing shortages, many are offering more money per hour in hopes of finding and retaining the much-needed help. In Medford, the beloved Donut Country is offering $17 per hour after three or four weeks of training in hopes of doing just that. Jamie Stewart, a longtime employee for Donut Country and the daughter-in-law to owner Susan Stewart, explained the business has always offered more than what the state’s current minimum wage does, but they have never seen a lack of candidates since pandemic restrictions eased in the beginning of 2021.” Sometimes very small, family owned and operated businesses can be uncomfortable to work for. Employee relatives can get away with a lot more bad behaviors and also receive unfair preferential treatment. Sometimes there’s just some kind of culture established within the family that leaves you feeling on the outs all the time. Continuing with the article: “Even with the small business offering $17 an hour, Stewart said it has been a challenge to find reliable help. 'Usually, we would get 70 plus applications per one position that we would have available. Now I have had a fryer position open for four or five months now and I have maybe got a handful of people,’ Stewart said. She said there have been several times where people go through the hiring process, accept the position, and start working, but leave after only a few hours on the job.’ Stewart said she has tried several different avenues to advertising the open positions, including on social media and in one of the most seen locations, Donut Country’s drive-thru. ‘Since a lot of us are family, some us do come in six to seven days a week, because we want to keep business going and help,’ Stewart said.” Now I’ll get to the community responses:
Leslie Peterson commented: “Interestingly, I actually applied here after I lost my job in healthcare. I applied for all kinds of things. Never got a call back. I don’t know if Leslie’s qualifications were lacking somehow, but several other people also commented about not hearing anything back from this company after applying. Shayna Renae Rossi also said, “Many people on this threat have applied with 0 callback. Many I know in person have applied with no call back. Apparently, it's not a joy to work there so they keep losing people.” Yikes. Merrylee Kruger fed into the “nobody wants to work” narrative saying, “The going wage is pretty much the same at fast food and everywhere. Let's face it. People don't want to work (sorry if this offends some of you out there).” Thomas Richard tagged along on this, adding, “It’s not offending if it’s true. I don’t work fast food anymore, but I see ‘now hiring’ signs all the time at fast food places and the wages they offer. I never thought I would see the day anytime soon where fast food employees could make a wage like that.” Susan Cullop also added, “You’re right. What would happen if they were told to get a job or no more benefit?” I shake my head at this attitude, but I used to think that way too. It’s cruel and ignorant. People out there really think that other people are getting paid by the government just because they don't want to work as if we already have universal basic income. Grayson Donnahue offered some insight: “Many don’t want to give up HUD housing, Oregon Health Plan, Oregon Trail Card, and ACCESS pays people’s utility bills.” But another user clarified that Access only pays utilities like 1 or a few times. They don’t just keep paying it to the same family indefinitely. So people get benefits because they are too poor and need them survive, but it’s not a great quality of life and, as far as I know, there are a lot of steps to qualify and keep these benefits. It becomes a poverty trap where people really can’t earn more because the higher earnings would disqualify benefits, but not be enough to pay their bills. It’s a big problem, but I find it offensive to just assume it’s always because people don’t want to work. Maybe some fringe cases, sure, but not the common attitude. Alright, I’ll start sharing the comments where community members started picking apart what’s really going on. Juanita Stovall: “Fry donuts for $17, Cook at Panda for $18-20 as advertised locally, or starting pay at bank...$22 no food flipping. The truth of the matter is folks can't afford the 14% rent rate cap increase at any of those rates.” Bryce Flory mentioned that “Donut Country has had hiring issues WAY before the pandemic. They would often have job listings on Craigslist. They have a high turnover rate which makes you think after a while that it’s not just the employees’ fault. Seventeen dollars is great but they have to call people back who have applied and figure out how to make it a better work environment so they can keep employees longer than a few months. BINGO! Cheyenne Riggs added: “Going to be hard to find someone to work for $17 bucks an hour when others are paying $20-$24 an hour. Just saying. If it's been 5 months trying to find someone for this position, I would look within the company and see what they're lacking.” Julia Bott commented: “What we are willing to pay for a donut is part of this equation.” This was an interesting comment because I can understand how you can only raise the pay offered to donut shop employees so much before you’d have to raise the cost of the donuts you sell, and I know people are only willing to pay so much for a donut before it’s not worth it. Josh Ridders touched on this a little more too adding, “There is no such thing as a living wage for a minimal skill set job. The only thing raising base wages accomplishes is making everyone that much poorer…you would think that was pretty evident...” My response: Do the business owners live on the earnings of this shop? I assume so. In that case there IS a living wage for minimal skillset if the “minimal skillset” employees end up running the shop. The owners had the capital to open shop, but apparently actually running the shop only requires a minimal skillset if they pay low or minimum wages. Looks like they need to take a pay cut by hiring someone at higher wages if they’re not in there doing it themselves, but I don’t know. I don’t know all the facts. I will end with Susan Farber’s comment: “When I was in my college and early twenties I rode a bike, lived with roommates (sometimes twin beds in one room to cut costs), worked at restaurants to get a shift meal for free, ate cereal for breakfast ‘til I worked up the ladder in management - to afford a reliable used car. Paid bills on time to establish good credit so a bank would loan me $600 when my engine blew up and required a rebuilt engine in my VW Bug. It takes sacrifice & responsibility.” Good for you Susan. Hard work and sacrifices are often important to investing in improving your life later, but your profile picture looks like you also went to college when it only cost like 300 bucks. Please don’t criticize the habits of younger generations when you don’t know the economic differences faced today. There are dozens and dozens of stories of this out there. Business owners and other people in general love to complain and blame any reason they can think of for people not wanting to work, but never look inward or apply some critical thinking to figure out what the real problems are. Original Article
I read stories like these sometimes because I'm interested in stories of people that found financial success in unusual ways, but many times these stories are dull, leaving out important facts and details, or they're boring because there's nothing that unusual. Sometimes they are dull and boring because they're missing some info that would be nice to know and because there's nothing that extraordinary. In this one, the successful side hustle of this person that made her a millionaire before turning 30 is...photography. Katelyn Alsop didn't have an interest in or take any classes on photography through high school or college but was still "artistic and entrepreneurial." She credits her start to one of her friends in college suggesting they go take some pictures of students around campus together, so 6 months later she starts a business, running it out of her dorm, and 8 years later she all the sudden was making a million dollars in profit!? "Sweet mother of goose, Jack!" How did this happen?! I've known many, and I mean MANY, wannabe photographers. It's usually just a girl with a camera that knows some minimal editing software. For a time I thought every 3rd girl I met claimed to be some kind of aspiring photographer with a photography business, but when they offered to take my pictures they're like, "What do you want? Where should I stand? Ok say, 'cheese.'" Snap, minor edits, done. Ok, so you're not a photographer, you're just a girl with a camera! I met REAL photographers later that knew how to do proper posing, use of lighting and background, focus centering, and great, clean editing. The REAL photographers knew what we wanted, but they knew how to really make the magic happen. They direct US, not us directing the photographer on how to do their job to make us look good, because I don't know that stuff. The difference was huge. So reading this story, I was a little offended that someone with no real training and an overwhelmingly common side hustle, somehow became a millionaire doing this!? Ok, so how? "In Alsop's first year of business, she was still a full-time college student, but she managed to spend at least 40 hours per week growing her photography side hustle: driving to shoots, editing photos and sharing the finished albums on her blog." Who are her clients?! Who's paying some random girl with no prior background to do professional photos and how many did she have right off the bat to be spending a full 40-hours a week on this? The article gives some attention to her blog, which became a portfolio source as well as a great marketing tool apparently. THAT's what I'm more interested in now. So she quickly got busier and was able to grow and charge more for her services, probably more selective on clients too, but the real money making business came from utilizing her blog and followers to start "selling online technical courses for photographers on her website in 2015. There are tutorials on editing, posing and lighting techniques, as well as business courses, like how to market your photography business and build an effective personal brand." "Alsop credits much of her success to the people she's surrounded herself with since starting her side hustle: college roommates who cheered her on when she cashed her first paycheck, her family and friends within the industry." This makes me wonder what real influence her friends and family had. Were they her first paying customers that had other connections to paying clients? Or were they only just moral support like she leads on and this business building was a miraculous lucky success? Because it was so successful, her husband quit his job (only 5 years after she started her thing in college) to help her run her business because it was already so successful, and she now has several other relatives working for her as well. Wow. This photography gig is wildly profitable! The reason I am curious about family involvement is because family money, connections, and expertise has a huge influence behind the curtain in MANY cases. For example, I read a story about an 18-year-old in my local area that was still finishing high school, but started a company, "Reselling Secrets," which was making $100,000 PER MONTH reselling shoes! What!? Article link. He did credit his entrepreneur skills to his parents, but the article never mentioned that his parents were a successful and wealthy artist and marketer that likely had a big hand in helping to start and blow up this operation. It's still a great story about a side hustle making it big, but I want to see behind the curtains more and know what EXACTLY people did to blow up and make it big. How'd you get more customers/clients and how'd you do your marketing? These articles usually just leave it at generic “they worked hard and stayed dedicated.” There’s NO INFO in that. So in 2022, "Katelyn James Photography brought in about $240,000 per month in revenue. A majority of that, roughly $230,000, is passive income from her online courses and trainings. The rest is from her photography business: Alsop typically shoots four weddings per year, charging at least $12,000 per event." Ok. End of story. I am surprised that the boring photography business just exploded into making millions when there are millions of "photographers" out there. I would be interested in a deep dive dissection of what all took place to make this happen. I have a small example of my own with my wife's experience. She works as a self-employed esthetician and was VERY LUCKY to be able to share a booth with someone else for free. There ended up being some bad drama with that, but that’s for another time to tell. She only got a few clients in her first year through friends and word of mouth. It was slow. She didn't have to go in and work very much. We also spent a ton of money to create a presence online and on ads with google, facebook/instagram, yelp, and some local sponsorships. We tweaked them a few times to be more effective, but we were blowing money on ads and not getting enough hits out of them. At the end of the year, she had to leave and rent a space at a new location. This new location had much younger partners that also had a strong number of followers for their crafts. They referred clients to my wife because it wasn't the type of work they did themselves, but now they shared a space together and referred to each other. My wife's first month at this new place was SLAMMED! She saw her own following grow profoundly. People following the other girls were referred to her, they liked her personality and work portfolio, so they started referencing her to their circles as well. Word of mouth spread and my wife's online following grew. It's very difficult to build up a following on your own, especially if you're in a new area without a lot of friends and family. No prior starting connections. This is why I think it's worth having these articles dig a little deeper to help people understand how they REALLY made it happen, so we all can have a better chance at making a better living. The question is asked, "How is the vast income disparity between business employees and business owners/executives not exploitation? There would be no business without the owners founding, but there would also be no thriving business if there weren't employees working the business." People are frustrated with the cost of living, not making enough money, and offended by growing income inequality. Let's look at some responses of what people have to say about this subject, and I'll add my commentary. 1) First and foremost, many argue that it's not considered exploitation simply because you agreed to it. Nobody is being FORCED to work at whichever job or location you're frustrated with. However, there is a point I will highlight at the end where just because someone chooses a better deal in a job, doesn't mean they're not being exploited when the vast income difference and company's ability to pay is considered. You agreed to the better deal, even though the fairest deal is hidden under the table during this agreement and deal making. People whine that it's not voluntary because you are forced to work or starve. I think this is nonsense and I don't understand how people make sense of it. Unless you are very rich to where your investments fully fund your living (which I understand people not liking this concept), you have to work SOMETHING to survive. You have to either work to build your own shelter and grow and raise your own food or work for someone that will give you money to buy those necessities. The voluntary aspect isn't the biological needs, it's the fact that you can choose which job you work and where you live. Obviously, there are situations that can be discussed on why some people have less choice and ability to move, and that's worth a conversation, but the reality is that we still have that voluntary aspect and can increase our own market value which should lead to better jobs. Here's a response I read online: "If you think you're being exploited, get a different job or start your own company. If you don't have the skills to do so, acquire them. I think this is a good response that covers all the common tropes, but let's talk about why people are upset about their situation and don't just "get a better job." 2) There's only so much someone can do. Not everyone is cut out to be a rich professional. Maybe it's too late for big career changes. Many think it's offensive to just say, "Get a better job" because it ignores the fact that this is hard to do and has a lot of barriers to make happen. Here's one response to this that I liked: "Sure, let me just jump to a $150K salary job. Why doesn't everyone do this? Increase your market value, sure, but doing so requires a lot of time and money invested, which people don't have. These decisions are important in your early 20s when you're deciding on and building towards a career path. If you don't make it then, you are royally screwed, and this attitude insinuates that everyone DESERVES to suffer. People agree to the best they can get, and the best isn't good enough. There is a limited amount of high paying jobs. The barrier to entry is too great for the rest." So why aren't there better alternatives? Why do people feel stuck like there is no choice? I'm going to leave this open for participants to weigh in, but I'll start with my own experience. I've thought often about changing careers to make more money, but everything I look at requires more education and time to dedicate starting out. I can't dedicate to full-time education because I have a family I still need to support. I have to keep working my current jobs. Note I said jobs with an "s." Suppose I go through with it and finish the required educational background. I now get to compete for jobs with people that have already been in the industry for years, or take a pay cut from where I’m currently at to start over in a new industry with no experience. Yikes! Yeah, there's some success stories of people that made it and that's great, but what about the people that didn't? What's their story? You can work in the same general industry and still hop jobs doing the similar type of work, but in most cases you'll eventually be capped out unless you get superior title changes. In my personal example, I've used this to get raises and keep my options open, but I reach a cap. Nobody would be willing to pay much more than where I was for the type of work I was doing, but I also lacked the knowledge and qualifications to get a superior title position/responsibilities. That required time to get that. So what's holding you back? Why aren’t you out there getting a better job; or maybe you did? Tell us about it! 3) "Start your own business" is the other common retort for this income disparity or low wage complaints. Starting a business takes a tremendous amount of costs. This isn't realistic to say to people and I find it disingenuous. Even low-cost startups take a lot of time and A LOT of marketing to make it profitable enough to be better than just working a job somewhere else, unless you have some serious connections to hook you up with clients/customers. This is a distraction from the general discussion about income inequality and it sounds like, "Oh, you have a problem with something happening on Earth? Why don't you just move to Mars and do it better there than?" Come on. 4) Business owners should be given some credit when they have built success stories and people need to understand this side too. Here's where I'll go into why owners feel justified in taking a lot of the business income.
Business owners do all the work and carry the risk to set this up. Employees just come in for the job with the knowledge/skills needed for the position. Now, I welcome criticism to this list and those that wish to add to it to make sure we're all in understanding, but the above list really seems to only apply to new and small business owners. A generation later, or once the business is sold to an investor, this concept feels lost. The machine was already built, the original founder retired with their bag of money, and now the machine runs itself with employees at the helm and managers making adjustments as needed. Corporate executives typically don't have this type of personal connection to the business. They're just appointed or hired for that management role. The children or relatives of original business owners have a little more connection, but it also usually isn't their work and risk on the line; yet, these parties still consistently take far more share of the earned profits for themselves and proponents of the income inequality argument would say they are starving out and robbing the poor and middle class. I want to end with another interesting example I pulled from online: "Let’s say you paint houses on your own and you charge $15 an hour. A “capitalist” comes along and says, “Work for me and I’ll pay you $20 per hour to paint houses.” You sign on and he brings you to paint your first house in a rich neighborhood. You’re the only one working the job. You find out that he’s well known and has word of mouth recommendations in this rich neighborhood and is able to charge them $200 per hour. He doesn’t do any painting; all he does is shake hands with rich people who trust him and have them sign the dotted line. I can see how exploitation can still be found in this example. Again, the salesman business owner with connections can't paint all the houses himself, but the painter employee doesn't have those connections. Maybe they do a good job and would be hard to replace for the business to keep its integrity. The painting business needs this partnership, but one partner is taking in wildly more in income.
The very definition of exploitation is to use someone unfairly and benefiting from their work. Just because the painter is offered a little bit better deal, shouldn't mean they're not being exploited when the vast difference in pay and ability to pay is considered. The employment is agreed to, but there aren't many or any alternatives because market forces don't trend that way. Why pay more for painters when the average market value of painters in this example is $17.50/hr, even though the capacity is much higher, up to $100/hr if earnings split 50/50 between painter and manager? Maybe $60/hr if it's split 70/30. There isn’t any mention of overhead costs in this example and I understand there is a difference between the business revenue and business profit. Maybe the owner pays $150 in business expenses like supplies and advertising, then he only keeps $30/hr. and pays the painter the remaining $20/hr. I think that's a fair deal struck then. The biggest question underlying this concept is how to overcome the market forces to raise wages. As I just said in my example, the market wages for a painter is low compared to what companies are capable of in this case. They can get away with paying so low because they’ll keep finding capable people to agree to work for those wages and provide the quality of service required. In the post-COVID economy, many businesses struggled to hire. People were no longer willing to put up with low wages and mistreatment by employers. The “Nobody wants to work” phrase became popular. I see this as an example of people finally able to start pushing for higher wages. I also think unions can be that powerful bargaining tool for higher wages as well. In the end, I think we'd be better off as a society and have a stronger economy if a larger share of the vast profits companies pull in was distributed to more employees as higher pay or bonuses instead of concentrating income to the top and with stock buybacks. I understand the difference between revenues and profit. Costs pay for all the overhead, investment, and WAGES. WAGES can still be different among employees for different roles, but PROFIT should be distributed and shared more fairly among all, but I don't know if there's a way to enforce this. If the boss takes all the profit themself and counts is as their own wages, then *shrug* I'm not sure how to reconcile that, but I wish they wouldn't. So if you complain about the income inequality with income disparity between employees and employers being a problem, what are your ideas for legislation or other means that would take corrective action to the problem? “OK boomer” began as a response to older people who either refuse to acknowledge modern problems in society or the economy, failing to understand how things have changed, or make negative comments about younger generations doing things differently and having different interests. It is a condescending retort to a group that frequently misrepresents or ignores concerns younger generations raise. Millennials tried for so long to explain using facts and evidence that they don't actually have it that easy and they aren't just lazy, but it became very clear that boomers don't care about facts, evidence, or reality for that matter. So this is what has resulted. We've given up. I feel like "ok boomer" is kind of the equivalent of "wow, you're so horribly wrong, but I don't have the time or the energy to repeatedly explain something to you that you're not going listen to anyway. These traits can be summed up as "boomer mentality," which is a mentality that also includes assuming how life worked well for you should still work for everyone else today. People hate this because reality isn't the same as it was for you in bygone days and your opinions and attitude are inapplicable, outdated, and/or incorrect. "Boomer mentality" is refusing to comprehend how things have changed and/or failing to understand the reality of what many people live and experience and why the simple solutions that worked for you, don't work for everyone else. "OK Boomer" is also often used as a criticism from people believing that many of todays problems were created or exacerbated by boomer leadership such as climate change, high housing costs from bad zoning, NIMBY actions, and other factors, the massive federal deficit from Boomer politicians, increasing college costs under boomer administrations, and job market complications when applying for jobs, especially entry level positions. Here is what I think started this trend: the middle class is shrinking because of high college and housing costs being up dramatically compared to what they used to be, childcare is unaffordable for many, meaning someone HAS to stay home with the kids even though they need more income to live comfortably, insurance rates increase, wages are not high enough in general to keep up with these rising costs of living, and the amount of disposable income the middle class have is shrinking and killing consumer demand, leading to further consolidation as businesses have less customers. People don't have the spending money to shop like we used to. It's all going to just living expenses and one nice thing. Comparing the cost of living to 50 years ago, life is much more financially difficult. People aren't starting as many businesses either because the startup costs and real estate costs are prohibitively high. Even the poverty line hasn't kept up with inflation. One of the biggest problems with solving poverty in America is how poverty is calculated. When poverty was first calculated, economists discovered that the average American spends 1/3 of their budget on food. So they took the amount required to pay for basic food, tripled it, and said "this is the line where you feasibly can't live on". The problem is that food prices have not increased nearly as much as everything else, such as housing. Nowadays, the average American's food is 1/8 of their budget, but the poverty line is still calculated by tripling the food budget. It's been a few years since I looked, but I think the poverty line for a family of 4 is something like low to mid $20,000s per year. But if you correct for the price change of food and housing, the real poverty line is closer to $60,000s for a family of 4. If you look at the distribution of income, there are a LOT of people who consider themselves middle or lower middle class who would have been under the poverty line back in the 50s if the cost of living was compared. Some say our quality of life is still much better today though because of the advancements in technology. For things like healthcare and some other developments, yeah I'm pleased with that; but for everything else the costs and stress are difficult. Instead of being able to take it easy, we have to work to be able to afford and upkeep the new technology. We're running on a treadmill that is now faster, but with a show to watch on screen or virtual reality and fan as it gets faster. There's also the fact that you need more stuff to function today than before, things like internet, cell service, and a computer are almost mandatory to get by. The only thing i can think of that's cheaper now is some clothing and some consumer electronics due to outsourcing. Now let's look at some comparisons of how costs have changed a lot over the years:  Median Price of a home in 1980: $47,200 vs 2020: $391,900 source Median Family income 1980: $21,020 2020: $71,456 source1, source2 Home price as percentage of income 1980: 225% 2020: 548% Median tuition cost of Boise State University resident 1980: $239 2020: $4,030 source1, source2 Tuition price as percentage of income 1980: 1.14% 2020: 5.64% THIS is what's making people mad. THIS is what makes so many turn from capitalism to government involvement and "socialism" policies. They're frustrated with how much it costs to live compared to what it used to be. This is also a major reason for the hate for Boomers and those that think people just aren't trying hard if they aren't financially succeeding like they did. In their younger days, it seems like you really did have to just lift a finger anywhere and it could provide a comfortable life and career pathway. They seemed to have it so easy by comparison! Now, I do understand that there's never NOT been a poor class or people, even in those days, so I don't truly know how it was, but there was definitely a much bigger middle class group of society that thrived back then.  This picture was shared online titled, "My Dad Found This In An Old Locker At His Work." It's a monthly pay schedule from 1951, most likely from a union electrician worker according to the original poster, and commenters ran wild with it by first comparing the dollar amounts to what today's equivalent would be. Taking it a step further, people started commenting about what those wages would get you back then. The pay was determined to be the equivalent of about $27/hr today. An average house back then ranged from $8k to $15k ($91,600-$171,750 toady), cars typically cost around $1,500-$3,000 ($17,175-$34,400 today), and food items averaged around 25-60 cents ($3.09-$6.69 today). That monthly salary went MUUUCH farther than the equivalent does today. To further dig into this point that the cost of living differences are humongous, I found a reddit post titled, "Boomer success stories that no one would believe if they happened today." Some of the stories shared here and others I found elsewhere can still be applied to random success stories today, but they seemed to be much more common 50 years ago. Here's a few quick examples of stories shared:
 Sometimes the sentiments dig in really far into the despising of boomers, like this rant I found online titled, "BOOMERS ARE SPOILED BRATS." Love it, hate it, here is the dramatic presentation:
The names we collectively chose for the generations really sum it all up. The Silent Generation bore enormous suffering without complaint, the Greatest Generation bled and toiled for the world's freedom, but the Baby Boomers are named for the mere fact that there is an almighty swarm of them. They never earned a better name for themselves. The Silent Generation and the Greatest Generation had to deal with problems that were greater than themselves. They had to put aside their petty desires and squabbles because of events that were too forceful and lengthy to simply ignore. Boomers have had a seat at the great table of plenty and peace for their entire lives. They don't know any other situation. Their parents’ generation fought WWII for them, the single most factor that made the US a world superpower when the rest of the world was destroyed or developing. Their children’s generation provided the cheap labors when they become managers themselves. The worst things that ever happened to them in their lives were things that DIDN'T happen. The Cuban Missile Crisis was a few paltry days of terror that COULD have ended the world, but didn't. Nobody had to work extra hard, nobody had to go hungry, nobody had to sacrifice a fucking thing. They all just waited around and it turned out nobody got nuked. Compared to their parents' and grandparents' woes, it was no crisis at all. Even taking Vietnam into account, less than 4% of the boomer population served there. The other 96% didn't. Boomers of the US are the luckiest, richest generation of any people in human history. Boomers are the last generation to be able to pay for their own college by washing dishes as a part time job. After that, they graduated and became presidents/provosts themselves and made college super expensive to profit off millennials. Boomers are the last generation to be able to support a whole family by having one working adult. Boomers are the last generation to have all the jobs in the US and not get their jobs outsourced to other countries. Boomers are the last generation that you can just “walk in and get a job”. Now we have wonderful AIs that can decide to ghost your resume for reasons you’ll never know and you’d count yourself lucky if you could get 3 interviews after sending out 300 applications. Boomers are the first generation to have the mindset to spend whatever they make during their lifetime, and not seriously consider leaving anything behind for their children. Bye bye generational American homes and estates. Hello suburb cookie cutters! Boomers will probably be the last generation to have reasonable retirement and healthcare. The whole social security system and 401k will be bust after they’re gone. Now, for each struggling millennial couple looking to get a starter home, there’s some boomer “investor” who offers 50k to 200k more in cash just to get another property on his/her portfolio. With all the wealth they accumulated during their lifetime, it’ll be at least a saving grace that they pass it down when they’re gone, right? Wrong. They’ll lose everything on reverse mortgages and healthcare on their deathbed, hoping to extend their boomer experience for a little longer. Not only are they leaving their kids/grandkids nothing, but they are heading to their graves flipping us the bird the entire way. They are the locusts of humanity, eating the prosperity of the world and complaining as they do it. "I had to walk up a hill in the snow both ways," really pales in comparison to not being able to buy a home, build a family, or obtain healthcare. The most stereotypical complaint of the Boomers, was walking to school in nasty weather. In a debate on inequality and how workers should be given more, the question was asked, "Why would businesses invest in equipment to increase productivity if it all went to workers and not profit for the owners and investors of the company?" This is exactly the point that divides people with different ideals/personalities. Some view workers as just tools the business pays for to operate. Others view the employees as having a larger, fair stake in the company because they're the ones actually running it day to day. They wouldn't have a job without the company, company wouldn't exist without people working the jobs. Just like anything, you can pay for cheap quality and not maintain it, but it can still run and you should save money if it runs well enough, or you can pay top dollar and maintain the parts well. Maybe it'll run better, maybe it'll run the same. I think this type of managing is why, in America at least, we have growing inequality with a shrinking middle class (source1, source2). Rising inequality can lead to rising crime, social unrest, and political extremism. It makes sense from a capitalism perspective to only reward the owners and investors, but it also seems short-sighted as there are long-term consequences in a society from this where the owners and investors become an increasingly exclusive class of people. I blame Managerialism as the source for what kick-started the trend to growing inequality problems, then aided by various government policies that rewarded and encouraged this practice. Managerialism is belief in the value of professional management and practicing ruthless economic efficiency with control, accountability, and measurement. Decision making is done based on number reports only, about maximizing returns for owners and investors only. From a business perspective, it makes sense, but it also takes a negative toll on society. Family-owned businesses grew into giant, impersonal corporations. Managerialism ruined communities and human relationships. The boomer advice of pounding the pavement and getting a job with just a firm handshake and some gumption is almost entirely an artifact of history. Under managerialism, costs are cut everywhere, so money flows directly to the top as much as possible. Jobs are outsourced and processes are automated, including hiring processes done with computer software sorting resumes. We also now deal with annoying automated phone relays when trying to call offices, having to shout, "Speak to a representative" into the phone over and over. The need for human attendants has been and continues to be removed as much as possible. There is less community support from local businesses as they've gone under or been bought out by larger companies. Little league and high school teams have less sponsors because big companies don't care about that stuff. It's just another cost that's easy to cut. Some argue that this is good practice because it lowers the costs of goods. Combined with the development of technology, I concede that it has - in some cases; but when jobs are cut and wages stagnant from long-term managerial practices, the low prices don't matter when there's no discretionary spending money left. Owners and investors are heavily rewarded for their risks and investment, but in the long-term it's getting harder and harder for more people to become owners and investors themselves. It's becoming an exclusive class in society. Besides, is there really risk when companies are considered too big to fail and get bailed out by government anyway? Another argument is that boosting the stock market is good for everyone's retirement accounts. Money in the stock market is good if you own a LOT of stock, but the vast majority of people don't. They have some retirement accounts invested so it's good if the accounts grow safely, sure; but improving wages is far more beneficial in the long term than people's 401K savings. They can use that money to spur the economy, save even more, and upgrade their quality of life. I was surprised by this Fox News piece from 2019. It sounds like a very progressive concept for them as it discusses the negatives of how certain hedge funds and "vulture capitalism" is bad: https://www.youtube.com/watch?v=IdwH066g5lQ Again, it's this practice of ruthless economic efficiency. Outsource jobs, liquidate valuable assets, operate on a bare minimum of employees needed and pay them as low as possible while maintaining adequate, necessary staffing. Then lobby congress and buy politicians to set policies in your favor. I blame these managerialism practices and the rise of hedge fund "vulture capitalism" for destroying everything by depressing wages, killing jobs, and creating the terrible hiring practices we have today. The managers hired to cut costs and increase profits for owners and investors is peak capitalism, but destroyed the human and community connection. Another financial game being played that is important to note is with stock buybacks. Watch this Vox piece, also from 2019, titled, How American CEOs Got So Rich: https://www.youtube.com/watch?v=ylLTMYt24lA&list=WL&index=6 CEOs and executives could get a sweet bonus if the stock price goes up to reward investors. The quickest way to increase their stock price is to use corporate profits to buy their own stock. The Securities Exchange Act of 1934 cracked down on stock manipulation and insider trading, which also, in a way, forced corporate profits to be reinvested in growing/upgrading the company, raising wages and bonuses, and/or pay dividend profits to investors directly. Laws changed in the early 80s, bringing back buybacks. Companies spend majority of profits buying their own stock. It's not being reinvested nearly as much. Money in the stock market is good if you own a LOT of stock, but the vast majority of people don't. They have some retirement accounts invested, sure, but I already covered how improving wages and bonuses are more beneficial to the majority. Here are some cases that make stock buybacks look bad:
The Republican party often pushes for corporate tax cuts for companies to lower costs and keep more money to reinvest in their business and workforce. Instead, we got more record buybacks benefitting the same exclusive group. This is where we see this idea of supply side economics or trickle down economics fail. When corporations become flush with cash, they don't reinvest, grow, and boost employee pay as much as they want us to think they do. Instead...stock buyback to enrich investors. Multiplier Effect: There is a chain of damage described and a real life example shown in the video. When a big plant closes, or a large employer of any kind that serves as an anchor for the community, so do some of the suppliers feeding into that company and businesses that serve the employees working there. When the big one closes down, it kills the whole community as jobs/income dry up. This was especially prevalent in manufacturing plants that all got relocated overseas. All that money saved by moving operations internationally went to executives and investors. Sometimes products got a little cheaper for those of us still with jobs to buy it, but many just boosted profits for the buybacks. This is harsh capitalism, but I can't blame them when some companies genuinely go belly up. This is what happened to all the ghost towns when gold rush or other mining operations ended. I blame the rising inequality problems and people's growing acceptance of "socialist" policies on managerialism and the attitude of people like Bob's boss from The Incredibles when he cried out, "We're supposed to help OUR PEOPLE! Starting with our stockholders, Bob. Who's helping them out, huh?" Look, you can still make money, while also taking care of your own. It's possible. You'll keep less for yourself, but employee morale is good to keep up productivity and everyone will WANT to promote your business. Stock Buybacks Revisited I've read some feed back for more information on this after making the original post. When discussing whether this practice should be a normal thing, I was given this response:
"It should be no more or less illegal than issuing more stock to raise capital. If they no longer have the need for the capital, they should buy the shares back to gain more control of their company. Public company boards have done buybacks when they have a lot of surplus capital and the directors can't figure out a good way to invest it. Often what they want to do if they have a lot of extra cash is go buy more companies and grow their business, but sometimes they may have tapped out on that growth and don't want to go out of their industry range for a variety of reasons. Also, operating companies have to be careful about investing too much in actual securities because then they could be accidentally turning into an "investment company" which would be a legality disaster. However, directors are fiduciaries and have to do something profitable with the company's assets. They can't just let it sit there in a checking account." One idea that went along with this comment was that most companies give Restricted Stock Units (RSUs) to employees. These stock are given using treasury stock which come from buybacks. If the government wanted to make a policy mandate on business, they could say for sufficiently large public companies they need to provide a certain percentage of stock to ALL employees equally. Salaries will still be different for different roles, but all will receive equal stock compensation, increasing worker ownership. Another commenter stated that they view stock buybacks no different than, say, a restaurant with two owners. If one moves away, retires, sells his half to the other guy should it dissolve instead, or the business only allowed to be a partnership venture from then on? If it's ok for small companies to do that, where's the line and why is it different for large companies? My response is that I don't know where the line is beside maybe a public vs private company, but I do view these cases differently. In the small business, one owner is taking more control. In big business buybacks, the ownership percentages mostly remain the same. Sure some people sell the stock to the company, but since the overall number of shares outstanding is now decreased, everyone ownership percentage generally remains the same. Someone asked how stock buybacks are essentially dividends an organization doesn't have to pay tax on, so are dividends bad too? My response: No, dividends aren't bad. I can see why that would lead me to say buybacks shouldn't be bad either, but my argument is who is really benefitting the most from buybacks/dividends? If buybacks and dividends were paid out as better wages to employees instead of just stockholder growth, we'd see much less inequality and a stronger middle class. Additionally, executive compensation in stock options means executives have much more opportunity to profit from buybacks than regular dividends. In the end, I think buybacks should still be allowed, but very limited in how often and how much is bought. Here's another article from Harvard Business Review on Why Stock Buybacks are Dangerous for the Economy. One of my favorite subjects to listen in on and discuss is income or economic inequality. It is often a hot topics for debate. Is the wealth gap and income inequality a real problem or is it not? How can it be addressed? Bringing it down to a personal level, does it annoy you to hear about the stupid stuff ultra-rich people spend large amounts of money on? Do you feel frustrated seeing great opulence in the world and the ridiculously expensive luxuries that people actually buy? When contrasted with the struggling of the millions of poor and lower middle-class, some can't help but think of how more should be done to help society. People despise corporations and rich people for a variety of reasons. The biggest are probably plain envy and jealousy, but also because of the charitable heart, knowing so much good can be done for so many that need it. The other reasons generally stem from negative behaviors or apathy for the well-being of others. The negative stories I hear about rich people generally fall into one of the following:
So HOW, exactly, are they supposed to change the world? Some things get thrown out there like pay people more (not just the executives), charge less for their products/services, provide better working conditions to employees and sources (fight sweatshops/slavery), donate more to various charities, community needs, and conservation "green" efforts. Sure, it’s easy for all the rest of us to say what people should do with their money, but that's because many, or most families survive on less than $70,000/year while the people being scorned are bringing in many times that amount. If they can live on half of their large incomes, which would still be considerably more than most people, then the rest could be used to help the world while they still live a very comfortable life. Now when being asked to give away more, how much is enough and how much good will it do long-term? If a family with $20 million in liquid assets, meaning cash or investments and other assets that can easily be sold for cash, gives away half of their wealth ($10 million), that difference could provide a much needed $25,000 boost to 400 families and they still walk away with the remaining $10 million ($100k/year for 100 years)! That’s a nice windfall to help all those families, but it would only be a one-time thing. That wouldn't be effective in the long run if it's just burned up in one instance. What if, instead, the $10 million was invested like an endowment fund? For every million dollars squirreled away in investments, it is very likely to earn at least $80,000/year, every year, without even touching the original invested amount. Again, that's just one million invested. This is where we come in. Invested Alternative would only borrow the $10 million and then be able to provide an endless source of income for charity that is given to people in need and the donors get their money back to do with as they please. There are a few charities that already have their own funds, but Invested Alternative wants to make donating to help even easier. I was listening to a money show on the radio one time while driving around that was talking about estate taxes, taking money from rich people wanting to pass a large inheritance to their descendants, and the discussion turned to income inequality. The program right after was a political talk show that eventually led to the same topic. It was a hot topic based on the amount of callers. The general discussion was about how more and more people are in favor of implementing or expanding government subsidies and welfare programs such as Medicare, Medicaid, all the WIC and food stamp programs, and social security. One conversation that stood out to me, was the debate over why income inequality is bad and why it exists. In the many answers given to this, there were many generalizations and complaints made about poor people having to struggle through life and wealthy people controlling everything; but what everyone failed to answer was specifically WHY income inequality is bad and HOW it directly effects them. How is it more than just a jealousy problem? This is the main question that needed answered: "I earn $65,000/year and my boss earns a million dollars a year. How does that effect me? If my neighbor or boss makes triple the income that I do. How is that going to ruin my life?" None of the callers had an adequate answer. They all just bounced around the ethics of it being unfair and that's really it. The idea doesn't seem right with me either. How can a handful of people have such vast amounts of wealth compared to the rest of the world NOT be a bad thing? A society of two halves with vastly different economic means and less and less of a middle class CAN'T be a good thing. That has to lead to trouble, but it's hard to describe what that trouble is and what those problems are. I did a brief search on why income inequality is bad and this question is rarely answered directly. Just more random facts and statistics about how the poor have it hard and the rich have it easy because, duh, money, but none of these answers seemed more - scientific. They just seemed like more jealousy problems and the idea that it sure would be nice if people share. There is rarely a direct correlation to answering the question of why it's bad and why it matters. I was beginning to think that the idea of income inequality as a problem needing to be solved is not really a "problem" in society, but really just a desire to improve the quality of life for more people by taking from others through government law and force. Below is my summary of some articles I found and how they don't actually address the issue: 1) https://money.cnn.com/2013/09/25/news/economy/income-inequality/index.html A. "'Rich people are actually living longer than poor people. In the early 1980's, wealthy Americans lived 2.8 years longer than the poor, according to the Department of Health and Human Services. The wealthy and poor were defined as the top and bottom 10% on a number of different economic measures...by the late 1990's the rich were living 4.5 years longer, and the gap has only widened since then,' HHS said. 'The increasing disparity is a result of a variety of reasons including "material and social living conditions" as well as access to medical care', according to HHS." My Response: So my neighbor will live longer than me because they have more money to pay for healthcare and maybe retire earlier in a life of luxury. Must be nice to have nice things in life, but it's still not their fault that I can't afford these things for a better life myself. B. "For Americans born in the early 1960s, 5% of poor people went to college and 35% of rich folks did, according to the Russell Sage Foundation. They defined rich and poor as top and bottom 25% for income. Only one generation later -- Americans born around 1980 -- the number of rich people going to college jumped by 20 percentage points. For poor people, it rose only 3 percentage points." My Response: This argument is saying, "My boss and neighbor make more money than I, so their kids are probably going to go to college, likely tuition free with parents paying for them, and mine will probably have student loans if they go at all." Why is this someone else's problem? Colleges offer grants and scholarships to low income people all the time! Must be nice to have nice things in life, but it's still not their fault that I can't afford these things for a better life. However, there are some economic opportunity issues attached to people paying for college that I will get to later on. 2) Read this list of cultural problems:
After all the searching nothing seemed to be addressing the real issues. It's all just jealousy and rage that some people were getting more than us. Many of us have had those bad bosses and company owners we worked for that made us upset. We were doing all this work making money for them and receiving mediocre wages and little to no respect in return. These abundant arguments I kept finding against income inequality were poor. They only addressed the issue as being bad because poor people can't afford nicer things to improve their quality of life. To me that's more of a personal issue, not something society should fix by forcing business owners to pay more to their employees. However, I did eventually find some things that actually started making sense about how society as a whole is effected and how it can be fixed. https://ideas.ted.com/the-4-biggest-reasons-why-inequality-is-bad-for-society/ Below are the things I found and agree with:
I think besides the housing market stuff the rest of this is less likely to be a cause of issue, but still have potential problems. Part 2) High income inequality starts making it difficult, or impossible, to have equality of opportunities. Kids that have college paid for, especially to prestigious schools, have a much easier time getting a good job and have much higher earning potential. Wealthier people tend to have larger and more influential networks for job hookups and "taking over dad's business" scenarios. There's also a few at the top that receive large inheritances. Once you have such large sums of money in your possession, that wealth can live on forever and even grow further through investments. People with few assets and connections will find it much more difficult to access opportunities, such as dealing with loans and fighting to be on top of the resume pile of job candidates. In short, high income inequality leads to shrinking economic mobility opportunity. The Income Inequality Debate Rages On over the rate of increasing economic inequality in our society. Inherited & accumulated wealth increasing among the rich, how much company income goes towards employee wages and benefits and company growth investment vs how much goes to executive bonuses and stock buybacks, and whether or not any of this is a problem, and how to address it. There were some YouTube videos I came across produced by Jamie Johnson from the Johnson & Johnson family company. The two I viewed were about the lives of those that have inherited vast fortunes typically only because they were born into families whose wealth was created generations ago and is passed down, increasing continually. The Johnson movies were interesting, but I didn’t really understand the purpose of them. They do seem to foster a push for more income equality, but not much, if any, indication as to how that should happen. I think they were just eye openers for that world and life style. This great country professes equal opportunity and “anyone can make it rich,” which I do still believe to be true, but it's becoming harder and requires a lot more luck than hard work. I also don’t believe it right to insist that people struggle miserably in the rat race if they can’t figure out. Corporate Welfare: Socialism for the rich, capitalism for the poor. Privatize profits, socialize losses. Another common source of grief among the masses fighting against income inequality is the belief that the holdings of the rich are not legitimate if they are acquired through competition from which others are excluded, and made possible by laws that are shaped by the rich for the benefit of the rich. Government bureaucrats and politicians being bribed with lobbying are to blame! As written in this article which I will then summarize: In the conservative mind, socialism means getting something for doing nothing. That pretty much describes the $21bn saved by the nation’s largest banks last year thanks to Trump’s tax cuts, some of which went into massive bonuses for bank executives. On the other hand, more than 4,000 lower-level bank employees got a big dose of harsh capitalism. They lost their jobs. My Response: You get the idea from reading this that the super wealthy are "cheating" because of their ties with government bailouts and tax laws, and I agree. However, I also understand that governments sometimes court relationships with large, influential businesses and industries as an attempt to strengthen or protect economies. The fear with the big banks and very large businesses is that their failures would exacerbate a failing economy by having even more people lose jobs and financial systems fail. There's gotta be a happy balance to this in someway. I just don't know what that is and welcome those that want to discuss this in a future conversation. I received a response to this conversation already that I want to inject here. This person commented that executives are not owners and continued to say, CEOs are generally employees who do not own the corporations they run. You need stop confusing management with ownership. Top athletes get paid millions even if their team doesn't make the playoffs. Top actors get paid millions even if their movie flops. Top executives get paid millions even if the company fails. They are employees." I'll admit, the statements about CEO's being an employee make sense, especially when compared with athletes and actors like they said. That actually makes sense; but they and their fellow executives ARE part owners, since they usually hold a lot of the company stock themselves! I also have a problem with this line where they say, "Top executives get paid millions even if the company fails. They are employees." Why should they? The vast majority of employees get nothing! No cushy severance check. If the CEO of a failed company is just collecting the remaining checks from their contract deal as they depart then I get it, but I am still on the side of executive pay being way too high in general. Again, commenting that some people being rich doesn't make me poor goes back to that original question I heard on the radio that we struggle to answer. If them being rich doesn't make me poor, then is income inequality really a problem at all? How I Think It's A Problem Why does it matter that my boss/neighbor makes more? The answer to this question is not just a short, simple statement. The answer is that it matters because over time, if income inequality continues to grow apart there will be more civil unrest, an increasingly polarized community and nation, and a rise in more extremism in politics. Why would these things happen? Because despite trying to do everything right, the cost of living continues to go up and the quality of life continues to go down as people struggle to keep up. In a smaller setting, especially resort towns, we see exactly how income inequality is negatively effecting these communities. When the rich move in and start buying up all the property, housing costs balloon up to cost so much that the working class literally cannot afford to live and work there anymore. This is one of the big reasons people hate short term rentals. Rich investors buy up the housing inventory to rent them out and profit, but this causes all the housing prices to go up so high that locals and employees can't even afford to live there. All the touristy and small town businesses can't even stay open and operable at normal hours because there's no staff. These businesses can't pay enough for the employees to actually live in the same town. Here's an example of how the rich get richer and the poor get poorer, and how economic mobility becomes increasingly difficult with increasing inequality. In a poor family where the parents, or more often today single parent, are barely making ends meet and weighed down by debts, and the high cost of living, paycheck to paycheck lifestyle. They can’t support their children much more than themselves. Even worse is when their child or children get jobs and have to help pay bills for their own parents & family. Sure there are opportunities for them to get scholarships for schooling or government assistance if they know how, but this is still a struggle to improve their economic situation. Even if they get a college degree, these kids coming from these kinds of situations will then be competing for jobs with the kids that grew up in wealthy families that have business connections and, usually, a padded resume from working for Mom & Dad's business and maybe already experienced in running parts of it. So again, to try answering the question of why does it matter that my boss/neighbor makes more? On a micro scale, it probably doesn't matter; but in the macro setting, society deteriorates when there is far too much inequality. There will be less of a middle-class and there could be problems rising like those previously mentioned. Solutions? A little inequality is good for competition and investment. A moderate amount leads to public strife and small amounts of protests and class warfare. A large amount starts becoming detrimental to a society and economy. However, it's not about everyone making the same, or really close to the same, there needs to be a strong middle class.
One idea I saw floated that I thought was interesting was requiring profit sharing from companies with more than 5 employees, where employee wages/salaries are still different, but at the end of each quarter, a certain portion of business profit is distributed equally among all employees. Even down to prorated by month or weeks an employee has been with them if under a year. As already mentioned above, profit sharing is already being done, but very heavily to the top executives only. Another idea is requiring corporate boards to have 20% representation of the employee interests for the company. I don't know all the details of how that works, but it can be another discussion. The solution is more than just taxing the rich more and redistributing their wealth artificially through cash payments and free government handouts. How the tax money is used and how the wealth is redistributed is key. Find the problems directly associated with wealth inequality, such as those previously stated, and remove those barriers that prevent equal opportunity. America should be a nation of true economic opportunity, not economic equality of outcome. What are your ideas for reducing income inequality? |
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