Study Finds Rich-Poor Income Gap Growing (Cafe Hayek Debunk: Please Do Your Job)

Cafe Hayek ^ | 27 January 2006 | Russell Roberts

[Stultis]

Same author wrote a six part series on income inequality. Here's a link to part six (which has links to the preceding parts):

http://cafehayek.typepad.com/hayek/2005/05/inequality_vi.html

[Stultis]

CH ping

[1rudeboy]

Nice round-up of the usual suspects. Too bad Public Citizen or Common Dreams weren't mentioned, or else we would've hit the jackpot.

[xcamel]

...Brought to you by your local Socialist Workers Party chapter....Have a commie day!

[Alien Gunfighter]

I believe that the gap between the rich and the poor is increasing. After all, the new poor are only doing the jobs that Americans won't do at the slave-wages the rich are offering.

Uncontrolled illegal immigration is destroying the American economy. Today it's manual labor and child care, tomorrow it will be computer and automotive repair, nursing, and other specialized tasks.

We're in a race to the bottom, and we're all competing against the people who can do everything and the people who will do anything. And no dollar amount is so low that 'no one' will do the job (no one outside the welfare system, that is).

We are one ineffectual crowd-pleaser away from becoming an unemployed, second-rate world power.

[randog]

Mark, call someone else other than union-backed economists or business lobbyists. Call someone at a university.

No, please don't--you'll just get enthusiastic agreement with the analysis, a call for a "worker's revolution", and blame placed squarely on George Bush.

[staytrue]

Nice analysis.

Here is a good example:

Sergey Mihailovich Brin (Russian: Ñåðãåé Ìèõàéëîâè÷ Áðèí) (born August 1973 in Moscow, Russia) is an American entrepreneur. Born in Russia, Brin studied computer science and mathematics before co-founding Google with Larry Page. Brin is the President of Technology at Google and has a net worth estimated at 11 billion U.S. dollars

So 20 years ago, Mr. Brin was a 13 year old kid with an income most likely in the bottom 20%. Also due to the recent tripling in value of google, I suspect his net worth is about 35 billion.

[staytrue]

Uncontrolled illegal immigration is destroying the American economy.

Yep, Mr. Brin certainly helped ruin the US economy.

Sergey Mihailovich Brin (Russian: Ñåðãåé Ìèõàéëîâè÷ Áðèí) (born August 1973 in Moscow, Russia) is an American entrepreneur. Born in Russia, Brin studied computer science and mathematics before co-founding Google with Larry Page. Brin is the President of Technology at Google and has a net worth estimated at 11 billion U.S. dollars

[Stultis]

Thanks. I admire those willing to argue with the crypto-socialist, right-wing-populist, protectionist-isolationist, psuedo-conservative, anti-market types. I don't have the patience myself, but I enjoy watching!

[infidel29]

The rich are getting richer and the poor are getting poorer...so what? The poor are getting richer, just not as quickly as the rich. The rich are the investors, the employers, the entrepreneurs. Who has ever gotten a job from a poor person?

...and what does minimum wage have to do with the disparity? How many people actually work for minimum wage? Not even those who work at Wal-Mart or McDonald's.

If this is true, the rich getting richer etc. Then my W-2 says I'm getting poorer, and trust me I'm not real worried about how much Bill Gates is raking in, I'd be more worried if Gates, Allen and Trump were getting poorer.

[jennyp]

Great, now I've got Johnny Lydon ranting in my head...

Dis is world distruction, your life ain't nuttin. De human race is becoming a disgrace.

Da rich get richa, da poor ah geh-in poora...

[Drango]

the global frog population plummeted

Just Damn! I love frog legs.

[Alien Gunfighter]

Yep, Mr. Brin certainly helped ruin the US economy.

I said nothing about Brin, and wouldn't have included him anyway. He is an entrepreneur who helped create a market; those are the kind of people we need.

My arguement is this--say you work in construction. You make $10 an hour (for the sake of arguement; I've never worked construction, I have no idea how much it pays).

Now your employer, ConstructCorp, decides they need to cut costs. They find Pedro, who will work for $4 an hour. You're out on your ass, because there is no way you can work for just $4 an hour--you have a mortgage, the kid needs braces, you need gas for the car, etc. Pedro can, because he is used to living in 2-bedroom apartments with 12 other people. Illegal immigration fans also provide him with free health care (emergency rooms) and point out where he can get other services for free or at a reduced cost. Also, immigrant communities tend to be tightly knit--everybody knows everybody, or knows somebody who knows somebody. You can get nearly anything else you need.

What are your choices? You can learn to live like Pedro (12 to an apartment, "free" social services, the Hispanic hookup), or you can do what most other Americans are doing; they're going back to school, gaining new specialized skills, etc. You're doing this to maintain the lifestyle to which you have become accustomed--you know, silly things like owning your own home, buying your own groceries, etc. Maintaining your dignity and independence.

Now you're happy at your new employer--times were tough at first, but now you make even more money (let's say $20 an hour) and you like your new job better. What happens when your new employer (lets say, a computer firm) decides to go look for someone with the same skills as yours? Chang will work for $4 an hour too, and once again, you're out on your ass. And it will keep happening--you can only go to school for so long or improve your skills so much.

Employers have a trump card; they can hire anyone they want, and pay whatever they want, and someone somewhere will take the job. Paying lower wages = higher profits.

Illegal immigrants and outsource labor have the other trump card; they don't need as much money as you do to maintain the lifestyle that they are accustomed to. They'll get your job every time, because it costs less to hire them. You with no job and Pedro working your own job for less wages = lower income for the "non-rich."

Higher income for the wealthy + lower income for workers = wider wealth gap.

[Stultis]

They find Pedro, who will work for $4 an hour.

I worked for a construction company for several years. Mexicans (actually El Salvadorians in our case) got paid the same as anyone else. A couple with us for years worked up to foreman and got paid the same as other foremen. Several were equipment operators, and got paid that rate. Basic laborers, btw, started at $8.00 per hour minimum, and most made $10 with some experience.

But let's say Pedro USED to be willing to work for $4.00 per hour. If so it was only because he was doing seasonal work and would head back to Mexico in the winter where the cost of living is cheap (and where he might capitalize his earnings by buying building supplies and working during the winter on his retirement home in Mexico, or a house he can sell for profit).

However that's not the case anymore, since we've listened to isolationists like you (although I agree it's necessary in the circumstances) and tightened the border.

(Yeah, yeah. I know you still think the border is like a sieve. It's still too open objectively, but to pretend there has not been a huge relative tightening since pre-911 is simply delusional. "Coyotes" -- people smugglers -- that used to charge around a hundred dollars now typically charge thousands.)

Now it's too iffy, dangerous and expensive for Pedro to dependably cross the border twice a year or more (going back to Mexico in the Winter and coming back to the U.S. in the Spring or Summer).

Now Pedro decides he has to stay in the United States year round. He might not be able to get back in if he leaves. Now low paid seasonal work is no longer suitable. He needs to work year round and he needs to work at a higher wage job because his cost of living is higher. He's going to compete for jobs that he wouldn't have tried for before. And he's going to be in more direct competition with American blue collar workers than he ever was before.

We could solve this by instituting a sensible work visa program, so that labor can flow back and forth across the border in direct and proportionate response to demand as it did (albeit illegally) in the bygone days of loose borders. Or we could massively increase legal immigration (which would be a huge help btw with our looming demographic crisis since immigrants are overwhelmingly young working age people). But you nativist/isolationist types oppose any reasonable foreign workers' program, and massive immigration increases. So you're going to have to compete with Pedro for high wage jobs, and Pedro won't be there to pick your fruit. But he will be there, year round, to consume public services. You better hope he finds a job.

[Stultis]

Great, now I've got Johnny Lydon ranting in my head...

I think I'm glad I don't know who that is.

I had a similar problem last week with [**title of intolerably puerile yet horribly infectious song DELETED for your safety**] and found that It's A Shame by The Spinners is an effective brain cleanser. I speculate that the sonic harmonies of the falsetto sections help drive troublesome songs from the gray matter.

[Mase]

Now your employer, ConstructCorp, decides they need to cut costs. They find Pedro, who will work for $4 an hour.

It's interesting that you chose the construction industry for your example. From 1995 to 2005, we created almost 2 million construction jobs in this country. The average earnings for a construction worker went from $14.73 per hour in 1995 to $19.72 in 2005. This increase easily outpaced the rate of inflation. Pedro may be working but he isn't doing it for $4.00/hr.

They'll get your job every time, because it costs less to hire them.

I guess you don't believe the old axiom that you get what you pay for?

Higher income for the wealthy + lower income for workers = wider wealth gap.

If you look at this graph showing the income gap between rich and the poor you'll see that, even though the gap is wider, everyone is becoming wealthier because both the top and bottom are rising to levels much higher than before.

From the Freedom Keys website:

If the rich weren’t free to "get ever richer," developing or investing in ever-increasing productivity, the poor would NEVER have any chance to improve their conditions at all, let alone to obtain their ever-increasing access to the latest tools of that expanding productivity, making every hour of their labor ever-more valuable.

Wealth is based on productivity, and productivity is expandable. In fact, productivity is fabulously expandable." -- P.J. O'Rourke

If you want to get rich and/or stay that way, or if you want your kids or other loved ones to do so, you'd damn well better stand up for everyone else's right to do so too." -- Rick Gaber

[Alien Gunfighter]

Funny, that's not the way I hear it.

[Toddsterpatriot]

Funny, that's not the way I hear it.

That's right Mase, forget all the facts you posted, Alien Gunfighter has some good anecdotes for you.

[Stultis]

Funny, that's not the way I hear it.

Or maybe that's just not the way you perceive it. Your previous post makes it pretty clear you don't believe there's such a thing as a labor market (e.g. that the employer side all but exclusively determines wage rates, that workers will willing provide their labor for a fraction of the market rate, etc). When your assumptions are wildly unreal, your conclusions are likely to be the same.

[Little Ray]

The gap is irrelevant - socialist propaganda. Are the poor getting poorer or richer in real dollars? Are there more rich people than ever before?

Besides, the rich keep getting richer 'cause they keep doing what made 'em rich in the first place and have more money with which to do it. You would expect the gap to keep getting bigger.