Summations Only

Reagan's term only began in 1981, which means that even if the first thing he did in office was cut taxes, it wouldn't take effect until 1982 (tax law changes usually take effect for the next year) and therefore the results would not be apparent until 1983. So there's no defensible "focus" on 1981, since economic conditions in that year would reflect the Carter Administration's policies. Again, this appears to be the "slope blindness" you earlier referred to. Productivity consistently rises throughout the entire range of the graph, it's as plain as day, and that's the point - broad increases in the productivity of the American worker which before 1970 were equitably distributed among all income classes began to be captured almost completely by the top 5%.Your graph, again, amply demonstrates my point: I'm not sure if you're deliberately misrepresenting me at this point, or I've genuinely failed to communicate with you.The increasing income of the rich represents the increasing rewards of productivity that they've been able to capture, not in and of itself the increase in productivity - which has always been increasing. Your own data incontrovertibly demonstrates it. They didn't wait, they were prevented. Those restrictions were lifted with the predictable result that the middle class suffered. Your graphs show "trickle-up" in action - an enormous transfer of wealth from the middle class to the already-wealthy.Edited by Admin, : Reduce image width.

I haven't said that anyone is "stealing" anything. Now who is being emotive and hyperbolic? My point here is exceptionally simple.If the wealthiest few at the top are receiving more wealth than they are creating then wealth isn't trickling down. It is trickling up. This simple statement is inarguable isn't it?Now have a look at our much cited graph again and ask yourself to what extent the proceeds of growth are being received by the wealthiest. Now ask yourself how much of that increased productivity has been created by the wealthiest.According to this graph we would need to attribute practically ALL of the growth to the top 5% for trickle down rather than trickle up of wealth to have occurred over the last 30 years. Personally I think technological progress is the main factor in increased productivity over the last 30 years. But I certainly don't think the wealthiest 5% of Americans are almost entirely responsible for technological progress over the last 30 years. Do you?In summary - I put it to you that since the introduction of trickle down policies about 30 years ago the wealthiest have received a greater portion of increased wealth than they have created and that wealth has therefore trickled up rather than down.If this is the case trickle-down economic policies obviously have not worked.

The Reagan tax cuts were passed by Congress in the summer of 1981 and took effect on October 1 of the same year, so the Reagan tax cuts affected the last quarter of 1981 and all of 1982. Changes in financial behavior of those in the top 5% income category would have commenced as soon as the law was passed, and planning even earlier, and would have been reflected in that year's figures. The tax cuts began in 1981, and the rise in the top 5% line began in 1981. Except that the slope doesn't rise consistently "thoughout the entire range of the graph." Here's the graph again: Now, click on the graph to blow it up to full size and put a ruler on the part of the line that begins in 1977 and ends in 1983. The ruler is horizontal. What restrictions are you imagining were lifted?Summarizing the problems with your position:

1. The rise in top 5% income began during a period when productivity was flat.
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2. There was nothing to prevent top 5% incomes from taking advantage of productivity gains prior to the Reagan tax cuts.
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3. Productivity gains are the result of investment in technology improvements, process improvements, etc., not commonly of workers working harder because that's not sustainable. When companies benefit from productivity gains it is not something that they're taking away from employees.

--Percy

Sure, let's do that:Not seeing the flatness, here. Productivity in 1983 is up from where it starts in 1977.The increase in productivity is consistent throughout the graph. Obviously there are small flat periods - statistical noise, it's hard to estimate productivity - but I don't see how that's relevant. Over a short enough time period you can get statistical noise to say anything you want it to say. Except that it did not. Except that there were. Workers "working harder" is what produces technology improvements, process improvements, etc. Paris Hilton was not responsible for the introduction of computers in the workplace or the widespread adoption of email. Why should she enjoy the lion's share of the reward?I'm surprised to see your pushback on this, I guess. That the top 5% have largely appropriated the productivity gains of their workers is a nearly-universal conclusion among sociologists and economists. You're going to need more evidence to dissuade me from the consensus than telling me that a slanted trend is horizontal. I have eyes, I can see.

Try a region that ends at the beginning of 1983, not the end. The flat region under your red line is readily apparent anyway.But even taking the chart as you prefer to see it as a continuously rising line argues against your interpretation. Productivity was rising before top 5% income began rising, and it was rising after. What caused the top 5% income line to take off when it did? What was keeping the rich from appropriating the productivity gains to themselves before? Gee, what could it be? Was there some big repeal of the law against false appropriation of productivity?Or could it be due to something significant economically that happened around that time, like, oh, I don't know, the Reagan tax cuts? Workers just doing their jobs, not working harder, is what produces the improvements. The workers producing the first generation of computers worked no less hard than those producing the 2nd generation who worked no less hard than those producing the 3rd generation and so forth. Productivity gains cannot come from workers working increasingly hard because that is simply not sustainable. According to the chart workers today are a couple hundred percent more productive than they were 30 years ago, and it obviously can't be because they're working 200% harder. I'm sure the previous generation was just as hardworking as we are. You make it sound like sociologists and economists believe that productivity gains belong to the workers. Are you really saying that that's what they think, because that would surprise me a great deal.In any event, it isn't true. Productivity is a measure of output per dollar. Workers can increase output by working harder, but only for so long. An auto plant, just for example, can increase productivity in a number of ways. Time/motion studies were very popular in the 1950s and 1960s as a way to improve productivity with no increased investment in technology or infrastructure simply by improving efficiency and teamwork.So if a worker becomes more productive because his company has him doing things in a different order, who owns the benefit from this increased productivity?Or if the auto company does invest in infrastructure and installs automatic welding machines and begins turning out twice as many cars with half the people, who owns the benefit from this increased productivity?Workers who improve their personal productivity get raises.--PercyEdited by Percy, : Typo.

We do?

Hi Straggler,Your ideas about how wealth is created are upside-down. The worker's contributions to wealth creation is in their wages and other compensation because the value of anything is what is willing to be paid for it. The value the company derives from their contributions belongs to the company, not to the worker.If the worker wants to participate in his company's contribution to wealth creation then he should buy stock.--PercyEdited by Percy, : Grammar.Edited by Percy, : Grammar again.

What absolute drivel.That's bordering on Not Even Wrong. It's so wrong I don't even know where to begin.

He really is John Galt.Wouldn't want to work for him.

I'd say that the value of anything is what you're willing to do for it. You have to do something to get the money to pay for it. So the source of wealth is the doing - the labour - that goes into getting it.

Hi Mr Jack,Like most in this thread I agree that the concentration of wealth at the top is a very serious problem, but blaming convenient scapegoats while ignoring simple, even foundational, economic principles won't lead to rational discussions or the exploration of practical solutions.Probably the most serious misunderstanding I see in this thread is that workers should share in the wealth created by the companies they work for. The misunderstanding is even worse than this, for many appear to believe that the wealth created by companies is actually created by their workers.The reason the wealth a company creates belongs to the company and not to workers is because the company takes on all the risk to capital. It would be nice if the workers' wealth increased at a company on its way up, but the flip side to this is that their wealth would decrease at a company on its way down. Workers risk only their jobs and salary, not their wealth.If one wants to participate in the success (and failure) of a company then one must risk capital. That means buying stock.--PercyEdited by Percy, : Punctuation.Edited by Percy, : Typo.

Sure, that's another way of saying the same thing, though a bit indirect. You see something in a store, you look at the money in your wallet and think about how hard you had to work to earn that money, and based on that you make your purchasing decision.--Percy

So you do actually believe that the 5% wealthiest in our graph are responsible for practically all of the technological progress and associated increases in productivity over the last 30 years?That is the only way to reconcile their huge gains from this increased productivity with the notion that wealth is trickling down rather than up. Science is the main driver of technological progress (and thus increased productivity). Do 95% of the population not contribute to publicly funded scientific research? Has publicly funded science not contributed to the increased wealth of the nation?If instead of implementing policies to make the wealthier even more wealthy we had instead spent that money on funding scientific research would technological progress and productivity really have suffered? 1) How productive do you think the nation would be without 95% of it's workforce?2) If you distributed the gains that the top have seen from increased productivity amongst the middle classes they might well buy stock. Less of it per person than the richest. But in greater numbers. Or they might well increase their spending. Thus increasing the profits of companies and thus their ability to invest. Or we could invest directly in research as mentioned above. There is no inherent reason why we have to make the wealthy wealthier to get investment is there?So the entire premise of trickle down economics is false on two fronts. We don't need to make the wealthiest wealthier (rather than anyone else) to get investment to increase productivity. And when trickle down policies are implemented we get trickle up rather than trickle down (unless you assume that virtually all productivity increases are due to the very top %s)Trickle down is busted.Edited by Straggler, : No reason given.

Do you work for a living, Percy?If I lose my job, or my salary decreases (hint - both of those have happened to me in the past when the company I worked for did poorly), my wealth does decrease.I live paycheck to paycheck. I have only very recently (within the last ~3 years) been able to afford making even a small contribution to my retirement.If my company does poorly, I lose benefits and salary, and eventually can be laid off, at which point I start using my accumulated wealth (what little there is) just to survive to find another job...until it runs out, and then I'm homeless.Yet curiously you suggest that the worker carries none of the risk in a company, unless that worker buys stock. If a worker buys stock, then magically that worker is now entitled to a share of the profits of that company, where simply performing his job was not good enough, even if he was exceedingly good at his job and made or saved his company millions of dollars.Blood, sweat, and tears don;t matter. Neglecting your family to work more uncompensated overtime doesn't matter. How much you make or save the company doesn't matter. According you you, Percy, the worker is nothing more than a cog in the machine, a dog who deserves a little pat on the head and nothing more.Without the workers, there is no corporation. The management and the owners are not the foundation of the business - the employees are. The engineers who create new designs, the marketers who sell the product, the laborers who work the factories and construction sites, and the support workers who let everyone else do their jobs efficiently.

No, of course not, but you have to understand how wealth is created before you understand why that isn't a valid conclusion.When a company sells a widget for $1000 they haven't created wealth of $1000. They've created wealth of $1000 minus the expenses they incurred to design, manufacture, market and sell the widget. One of those expenses is worker salaries and benefits, and this comprises the wealth created by workers. It's a direct one-to-one relationship. The workers' salaries and benefits that are provided as compensation for the value they have contributed to the widget is exactly equal to the wealth they have created.If total widget expenses are $800 then the company has created wealth in the amount of $200. This wealth belongs to the company, or more properly, to the company's shareholders. If the company devises a way to reduce widget expenses to $700 then that represents a productivity improvement of $100/widget and it belongs to the company, not to the workers in general or even to those personally responsible for implementing the productivity improvements. Their compensation comes in the form of salaries and benefits rather than in terms of equity in the company, though it isn't uncommon for companies to issue stock grants or options for jobs well done on a project important to the company's success.The advantage of companies is that they can mobilize and focus the effort of many workers so that the end result is much greater than just the sum of the contributions of the individual workers. Tax policies that discourage risk and investment act as a damper on the economic activity upon which we all depend for our jobs. Capitalism isn't a magic fountain, it requires capital, and devaluing that capital by putting a high tax burden on it is counterproductive. The key question concerns what level of taxation is optimal, and therein lies a truly debatable issue.--Percy