Wednesday, September 11, 2013

Comment About Top 1 And 10 Percent Income Gains Posted On NYTimes And Wall St Journal

The comment I posted about the rich getting richer on The New York Times and The Wall St Journal in response to their respective articles on the subject:
The new data is consistent with an economy of higher than normal unemployment, high number of part-time workers, low workforce participation, and low unemployment among the college educated. Saez ignores and excludes government benefits as income, but his results are also consistent with the expansion of government benefits, such as the large number of people on SNAP (Food Stamps), extended unemployment insurance, and other income based programs (for example insurance subsidies under ACA) which are disincentives to working harder and earning more.

Saez in his paper says, “The evidence suggests that top incomes earners today are not ‘rentiers’ deriving their incomes from past wealth but rather are ‘working rich,’ highly paid employees or new entrepreneurs….”

Saez also fails to adjust for international versus domestic components of US management and entrepreneur labor. Years ago, US companies only had US employees and plants. Today, many of the larger US companies have US management employees who are overseeing worldwide manufacturing and sales. You pay one salary for a company CEO that only sells in the US and you pay a much higher salary for a CEO whose company sells worldwide. The business world is getting more global. The employees responsible for managing and attaining worldwide growth are increasing and are paid more than the employees who job is strictly domestic. [NYTimes 1500 character limit ended comment here. Next few sentences appear on Wall St Journal only.] A domestic plumber is paid a decent salary. A CEO of a US plumbing company with worldwide business will be paid more than a plumber and more than a CEO of a plumbing company with only US domestic sales. Increasing globalization is increasing the income returns to the more educated and driving some of the upper income gains.

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