Decreasing poverty also makes rich people richer

[Recursion]

I was arguing with a friend today about inequality and I finally formed that sentence, which I think is an articulation I've been missing for a while: decreasing poverty also makes rich people richer.

We were looking at a chart that's making the rounds recently about the ratio of CEO pay to worker pay. It's something like 278:1 now, and it was like 19:1 60 years ago. But what I kept noticing was that the times that that ratio goes down is during recessions, and that the times that the ratio goes up is during expansions. As the poverty rate went down, the ratio of CEO to worker pay went up. Even during the stable times of the 1950s and 1960s, when that ratio was much lower, the poverty rate was much higher; it's 11.8% now and it was at or near 20% back in those golden days.

I think people look at this relationship backwards. It's not "if we pay CEOs well the economy will help everyone", it's that "when the economy is helping everyone, CEOs do much much better". Reducing poverty also makes rich people richer. The pie is not fixed-size.

The problem is that, if I'm right (and proving this would be a PhD dissertation, so I'm just throwing this out here as a pattern I see), there would be at some point a fundamental tension between reducing poverty and reducing inequality, because poverty reduction is going to end up enriching the richest as the economic gains spread.

Anyways, it was just one of those "ah ha" moments I wanted to share.

[SWBTATTReg]

1. Perhaps what you say is true, I'd prefer the saying that a 'rising tide lifts all boats'...

it doesn't seem to be that way anymore. It's more like CEO compensation is not tied to anything realistic
anymore, so this is one of the serious issues that some of the candidates have mentioned and that I hope does get dealt with (along w/ the stuck in the 1980s minimum wage law, $7.++ an hour still). Bloomberg does have an ad out there on this pathetic minimum wage amount still being stuck at 1980s levels, and I think some of the other candidates have discussed this too.

The republicans seem stuck on the words 'tax cut'...since they have mentioned yet again, another tax cut.

Pathetic since the 2017 tax cuts and jobs bill failed miserably in generating any new jobs but it did a heck of a job in increasing our federal deficits (and paying off their donors in the meantime too).

[Hoyt]

2. So far, we seem to be focused on taking from wealthy -- through taxation-- to

reduce inequality and poverty. That’s one way to help the situation, but misses what we want to achieve.

While we need to reduce several so-called “tax cuts” in the past, increase the Capital Gains tax, impose robust estate taxes, etc., that’s not enough.

Actually, poverty has decreased, although not enough. We are also doing better than most European countries. In fact, although not something to be proud of, our homeless rate is significantly less than UK, Germany, etc.

BTW, trump deserves no credit for this.

[Recursion]

4. Right, household income in the EU social democracies is on par with Mississippi

And, yeah, I was not prepared when I moved to France last year for the size of the homeless population, which is huge by US standards.

And of course Trump deserves zero credit for the expansion; he's come damn close to choking it off multiple times.

[Newest Reality]

3. That's an interesting way to look at it...

However, I would assume that the wealthy have a good handle on finances and capitalism to some degree and that they and their corporations would already know that and act accordingly.

Not to go into lengthy or verbose explorations of economics and such, what about the idea that capitalism requires poverty as an important aspect of the acquisition and increase of wealth, rather than your hypothesis that is more like a rising tide lifts all boats?

One example would be the cost of labor. It is not as evident here, (though we see it more and more) but it is poverty in other countries that allows major corporations to exploit and do everything they can to maintain extremely low wages to reduce their overhead. That's just one example of capitalism's need for all forms of poverty to exist in some context, there are more.

While we know that, with enough wealth, you can even take risks to the point of riding up trends and down trends while still increasing your holdings, however, there is also the now well-known vulture capitalism that we can see emerging here. That is, picking the rest of the meat off the bones of those who are low-income or sliding into poverty. Examples are paycheck and title loans, higher interest rates, etc.

There is more to it than that, but I am just holding to the hypothesis that wealth needs poverty to some extent, (there are exceptions) when the context is the form of capitalism we see in practice.

[Recursion]

5. Oh, Lord, no

I would assume that the wealthy have a good handle on finances and capitalism to some degree and that they and their corporations would already know that and act accordingly

Oh, God, no. These are not very intelligent people, for the most part. I've spent parts of my life among very rich people and they are absolute fucking morons for the most part.

[DanTex]

6. Western Europe, etc. has lower poverty and also lower inequality.

The effects of inequality have been studied, and inequality not only correlates with higher poverty, it also correlates with a lot of other social problems.

Obviously, no one chart is going to summarize the body of research, but here's an illustration.

[Recursion]

7. They have significantly higher poverty

The UK's household income is pretty much comparable to Mississippi's. Note that poverty is not an axis on your graph. In general the social democracies have higher poverty (and higher homelessness) than the US. They just make poverty much, much less brutal to live in than we do.

[DanTex]

8. There's literature and statistics about this, and the US has higher poverty rates.

That PHD thesis you're talking about has been written many times. Like I said, no one chart is going to summarize it all, but that one does a pretty good job. Here's another. The US is near the top in median income, below OECD average for bottom decile.

[Recursion]

11. The UK's poverty rate is 20%. The US's is 11.8%

France's poverty rate is 14.1%
Germany's is 15.1%
Italy's is 15.6%
Spain's is 26.1%

Their homelessness rates are also sky-high by US standards. The US has a 0.17% given-night homeless rate, generally. The UK has 0.5%. France's is 0.4%. Germany's is 0.5%. There are things we actually do better than the social democracies, and reducing poverty and homelessness are two of them.

[DanTex]

12. Not sure where your data is from. OECD has US higher.

World Bank data on extreme poverty has US higher than UK, France, Germany, etc.

Like I said, this has been studied. If you want to write that PhD thesis saying all the other research about this is wrong, that could be interesting.

[Recursion]

13. No, it doesn't. Read the link you posted (nt)

[DanTex]

14. Yes, it does. That link or any of the hundreds of research papers on the subject.

[Hoyt]

9. I bet you can't prove Western Europe has a poverty rate lower than USA.

I know UK and Germany don’t.

Now, quality of life, etc., may be better in Europe, depending on how one measures it.

I’ll admit, I’d rather live in Europe, if I thought I could adapt to new roads, language, trains, etc.

[DanTex]

10. Google "OECD poverty rates".