You realize $7 an hour is $95,000 a year in 2019 cash? If i were offered that for hangover quality work burning rods at a good union job i would not think twice. id be able to afford the median home price in 1970 which was $23,000. These numbers seem to support the idea of the wealthy welder. Its entirely possible fossilized republicans are thinking in 1970 dollars.
Fast forward to 2019. auto mechanics START at just shy of 22,000 a year and thats assuming you keep track of your time and work for a shop that doesnt engage in the rampant practice of wage theft. master mechanic? depends, maybe $28 an hour in 2019? but nowhere near the $46 an hour a twice convicted tombstone welder made back when the Love Boat sailed.
The problem is not trade, or college, its the seemingly endless wealth gap between people who do work, and people who just seem to collect mansions and yachts.
You realize that he said the machines were first made in the mid-70s?
If he stopped welding around the time that the Internet was taking off, that would mean that it was $5-7/hour in the early to mid 90s NOT 1970. The "now 20 years later" later in the comment backs this up.
$5-7/hour in the 1990 is $20-30k in 2019 money, which is about what your example mechanic is making.
You're right. 1990-92 is "about the time I quit" building vans for quadriplegics to drive and that's what I was referring to in regards to the $5-$7 per hour those companies I sub-contracted from were paying. And that was at most and it was not a "living" wage in Los Angeles back then.
Inflation was rampant in the 70s though. He says mid-70s. $7/hr in 1970 would be $95K today, but $7/hr in 1975 would be like $68K. And that seems comparably the high end of pay given in the article.
"when the internet started taking off" was the late 90s. Not the mid 70s when he started.
Even if he meant $5-7 (average $6) in 1975, the $95k doesn't work. bls.gov inflation calculator gives $12,000 a year in January 1975 (2000 hrs at $6/hr) as $59k for August 2019.
The last sentence really hits the nail on the head. Just to add to that, during the 2008 recession I saw my portfolio swing pretty wildly going negative one day and positive another but the amount was more than I made that day or maybe even that week. It was then it dawned on me, American capitalism rewards ownership, not labor nor time devoted to a task. Those changes in my net worth would have happened regardless of if I worked or took the day off. Time and labor can get you to ownership but that's not guaranteed nor probable in some fields. I don't want our country to discourage property ownership and accumulation of wealth but the paths leading to that from working hard seems increasingly fewer and narrower.
This comment shouldn’t have been downvoted because it’s completely accurate, and provably so: tax rates for earnings on capital are by and large less than earnings on labor. Warren Buffett has complained for years that he is taxed at a lower rate than his secretary. The system we have rewards trust fund babies, and punishes hard working people.
I get that Piketty's work isn't without controversy or criticism. Summers and others have criticized it, but their critiques haven't seemed very strong.
One article [1] (which discusses Piketty's shortcomings) claims the biggest reaction to Piketty is silence:
"But perhaps the greatest rebuke of Piketty to be found among academic economics is not contained in any of these overt or veiled attacks on his scholarship and interpretation, but rather in the deafening silence that greets it, as well as inequality in general, in broad swathes of the field—even to this day."
...
"The economics elite, it seems, answered by stonewalling Capital in the Twenty-First Century, so it would not have the impact on economics research agendas that it merits."
Anyway, it's not clear to me that Piketty's fundamental thesis is wrong. Happy to follow a link or two, thank you.
Even if it wasn’t wrong in the past, it can certainly be wrong going forward. With all the governments printing money to cause asset prices to inflate, of course ROI of capital will be > ROI of labor, since price increases for labor will always lag price increases of capital.
Piketty looked at like ~200 years of econ data (wages, asset values, rents) and allowed for inflation and even depreciation.
His thesis is actually that r > g, wherein r = ROI of capital and g = the rate of economic growth (gdp).
This has to be true, because rich people exist and we can measure that they get richer and richer faster than others. You can gauge faith in the likelihood that it will continue to work that way given that funds like Y Combinator exist and are successful, and because activities like buying and maintaining rental properties "works" in terms of creating personal wealth faster than the rate of economic growth.
The research has shown multiple other ways to reach the current results without r>g (housing stock is one method, if I recall) and authors have shown r>g leads to results we do not see.
Thus it’s not true to claim existence of rich people implies r>g. If it were that simple people before Piketty would have reached that conclusion earlier.
The papers linked in this thread show the flaws.
It’s also the case the rich don’t get richer, if you mean a rich person gets richer. For any dataset where you can track rich individuals over time, pick a level you call rich, track everyone meeting that definition, and you find they get poorer, reverting to mean. That is why most millionaires are first gen. It’s why the Forbes 400 is mostly first gen; the rich that were top 400 lose wealth. It’s why St. Louis Fed has papers showing the majority of the top quintile or the top 1% are not there 10 years later, or from generation to generation.
Sure some rich keep wealth. But for any level called rich, if you track all those in it, that group mostly falls out.
>If it were that simple people before Piketty would have reached that conclusion earlier.
Perhaps you've heard the expression, "The rich get richer while the poor get poorer"
What Piketty did was put extensive data and a pretty rigorous methodology to work to explain why. I've not read a critique that undermines his main conclusions in a meaningful way.
It's no secret that if you already have a pile of money or capital assets you can put those to work for you which will also generate income and you will come out ahead and faster than someone without the same pile of money.
> price increases for labor will always lag price increases of capital
Let's also keep in mind that that is a policy choice, because it's necessary to dislodge workers off their sticky wages and some sort of mumbo jumbo about the Phillips curve.
I don't really understand what was special about Picketty, though, so I can understand the silence. It's been recognized for a very long time, amongst certain economists, that capitalism rewards capitalists - that is, those who own things. Mainstream economics is mainstream because it ignores these economists. It doesn't matter how you come to this conclusion, no economics department is going to give it the time of day - and those that do can expect to become targeted by politicians, as hotbeds of 'left wing academic bias'. Which is a very good way to shrink your department.
So amongst those that are not professionally immune to this kind of argument, Picketty get's a, 'well, duh'. Amongst the rest (mainstream economists) it gets a resounding silence. It isn't really relevant to the field, because the field is constituted by a kind of professional avoidance of politically charged topics.
> We find evidence of pervasive errors of historical fact, opaque methodological choices, and the cherry-picking of sources to construct favorable patterns from ambiguous data.
> I conclude that Piketty’s data for the wealth share of the top 10 percent for the period 1870 to 1970 are unreliable.
The values he reported are manufactured from the observations for the top 1 percent inflated by a constant 36 percentage points. Piketty’s data for the top 1 percent of the distribution for the nineteenth century (1810–1910) are also unreliable.
> A key observation in Thomas Piketty’s Capital in the Twenty-First Century (Piketty 2014) is that the share of aggregate income accruing to capital in the US has been rising steadily in recent decades. The growing disparity between the income going to wage earners and capital owners has led to calls for government intervention. But for such interventions to be effective, it is important to ask who the capital owners are.
> Recent research has shown that the long-run rise in the net capital income share is mainly due to the housing sector (e.g. Rognlie 2015, Torrini 2016 – see Figure 1). This phenomenon is not specific to the US but has been evident in almost every advanced economy. This suggests that it is not entrepreneurs and venture capitalists that are taking an increasing share of the economy, but land owners.
> The results from at least four studies were compared for three measures of income change: change in median incomes, share of growth captured by the top 10 percent, and the changing income share of the top 1 percent. In all cases, Piketty and Saez (2003) were the outlier, showing the most increased inequality. And in all three measures of income change , Piketty, Saez, and Zucman (2018) found much less growth in income inequality than Piketty and Saez (2003).
The counter-argument is that Piketty's models and data are at least as credible as the standard models and data used in policy econ.
For example Magness & Murphy prefer the UK's Office of National Statistics to Piketty's figures - because it's supposed to generate gold-standard objective economic data.
In reality the ONS produces the UK's unemployment figures by considering anyone who works one hour a week as employed. Similarly anyone who labels themselves self-employed for tax purposes is considered "employed" even if they do no work at all.
It says this clearly on the ONS site.
It's quite strange to accuse Piketty of cherry-picking and distortion when these egregious - even comically obvious - distortions pass for official economic "fact" at the national level.
Hell, raising kids and taking care of disabled/elderly people is an investment in the economy too. Those folks and their caretakers are consumers just as much as you and me.
Why does there need to be a privileged reward to invest? Everyone and their dog knows if you keep your money stuffed in your mattress it’ll lose value over time from inflation, and who doesn’t want to have a nest egg to retire on? Nobody needs an additional incentive to invest their capital beyond the bare bones basics of personal finance.
> American capitalism rewards ownership, not labor nor time devoted to a task.
It's in the name, after all. One performs labor to (ideally) incrementally increase ownership. The concept thrives in the public mind as go-pay-off-a-house but (ideally) would also stick as go-buy-some-equities too.
One performs labor to enrich the bourgeoisie. The only way anyone was able to “work hard” to increase any kind of ownership was through supportive government after WWII. It’s no coincidence that the middle class is shrinking and wealth is being accumulated in fewer and fewer hands.
Indeed, capitalism rewards those who own the means of production at the expense of the people who labor to support it. A lot has been written about this.
Fast forward to 2019. auto mechanics START at just shy of 22,000 a year and thats assuming you keep track of your time and work for a shop that doesnt engage in the rampant practice of wage theft. master mechanic? depends, maybe $28 an hour in 2019? but nowhere near the $46 an hour a twice convicted tombstone welder made back when the Love Boat sailed.
The problem is not trade, or college, its the seemingly endless wealth gap between people who do work, and people who just seem to collect mansions and yachts.