Tuesday, May 17, 2011

Rich really are getting richer

Pay gap widening to Victorian levels

Interesting article and a data set to go with it. Around 1990 the top 1% earners' share of income began to rise in the UK, along with the US. But not in Sweden.

Posted by letthemfall @ 02:05 PM (1966 views)
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24 thoughts on “Rich really are getting richer

  • “Pay gap widening to Victorian levels”

    House prices and production to follow suit.

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  • I agree with the bulk of the article but not the headline. In Victorian times an upper middle class person could build 8-foot brick walls around several acres of their properties. The labour costs of doing that now would be far too prohibitive. Also in Victorian times an upper middle class person would have a few domestic servants. At best they could now only afford an au pair, on pocket money wages.It’s a shame that the gap has started to creep apart again but we are still a country mile from where we were 120 years ago

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  • 2. flashman

    We have trillionaires now with countries as servants.

    You keep forgetting that I, along with other informed bloggers read here.

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  • Upper middle class. lol

    They don’t count mate. The game has moved on since. No comparison.

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  • What Crunchy says. It’s the rich getting richer, not the (upper) middle classes.

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  • drewster: The upper middle class has been getting steadily richer. I think the problem might be that you don’t know how to define “upper middle class”.

    For example, most city boys these days are upper middle class and most ex-public schoolers are upper middle class

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  • the number cruncher says:

    I think the middle class and upper classes where a lot more exclusive in Victorian times than what people assume today, although that is just my inference. Many people think they are middle class when in reality they are the equal of an artisan in Victorian times

    Saying that the removal of the welfare system would quickly return us to the Victorian system where starvation sent you cap in hand to work for a substance living to feed your kids.

    More important than wages/income is access to the ability to create wealth and it is that access to land and inelastic capital that is returning us to ‘Victorian levels’ and is fundamental to the growing wealth gap. Because public policy has been captured by those seeking to entrench their monopolistic control over land and other forms of inelastic monopolies, inequality can only get worse.

    Blair and Brown made a pact with the devil when they looked at buying off the asset owning classes by reducing taxation on capital gains on owning such monopolies, promoted BTL and helped big business for more complex monopolies. They threw the bone of tax credits to the poor, but that money was only ever going to be partially siphoned off to landlords in the long term. It was always going to end in tears as those with natural & inelastic monopolies, such as houses and land, increased their stranglehold and charged Joe public ever higher rents to access them.

    The picture is complicated but in essence it brings us back to our old friend Ricardo. I think Winston Churchill summoned up the problem of giving welfare by tax credits, analogous to doles of bread in his day, very well:

    “And a friend of mine was telling me the other day that in the parish of Southwark about £350 a year, roughly speaking, was given away in doles of bread by charitable people in connection with one of the churches, and as a consequence of this the competition for small houses, but more particularly for single-roomed tenements, is, we are told, so great that rents are considerably higher than in the neighbouring district. All goes back to the land, and the landowner, who in many cases, in most cases, is a worthy person utterly unconscious of the character of the methods by which he is enriched, is enabled with resistless strength to absorb to himself a share of almost every public and every private benefit, however important or however pitiful those benefits may be.”

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  • ontheotherhand says:

    This also becomes a problem for tax and spend. In good times any government becomes overly reliant on the income tax receipts from the top 5%. This wouldn’t be a problem if they saved some of it for recessions. HA! But when the economy tips into recession and income tax receipts go down, they try to make it back from VAT or corporate tax, or lump it on the next generation by borrowing.

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  • drewster: Here’s a cut out and keep guide to the social classes of Britain

    Upper Class: Titled
    Upper Middle Class: Posh and usually loaded -been steadily getting richer
    Middle Class: Big step down from Upper Middle Class. Not posh and at best comfortably off – probably getting poorer
    Lower middle class: Hyacinth Bouquet – probably getting poorer
    Working class: Everyone else

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  • the number cruncher says:

    I do not buy into this expansive middle class idea, My alternative simple guide to class:

    If you work for a living you are working class.
    If you relay on assets or the hard work of others to provide your income, or in a protected profession, own a business etc you are middle class – many stratifications
    if you can phone up Dave Cameron and tell him what to do, you are upper class
    If you are poor and do no work your are the underclass

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  • Flash,

    The article is about the super-rich; those with telephone number salaries. The city boys might be getting richer, but is anyone outside London getting richer?

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  • lordsandwich
    16 May 2011 8:46AM

    ‘here is what I fail to understand about the super rich.

    Would Britain be that attractive of a place to live if it moves toward a Third World standard? A strong middle class is what keeps a society going and progressing.’

    ~ You’ll find out why soon enough mate.

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  • drewster: “The city boys might be getting richer, but is anyone outside London getting richer?”

    That’s the whole point of this article. Only a very small percentage of people are getting richer

    In my experience, upper middle class people (remember they account for only a very small % of the population) have been getting steadily richer for years. Most telephone number earners fall into this category (Alan Sugar excepted). I have not noticed a pause in this ‘getting richer’ process, even during the recent recession. Everyone else has not been making the same rate of progress and we suddenly have a situation where they might be going backwards. The article projects this scenario forward to see where it will end up, if things keep going at the same rate. It would have been more useful if the projections had covered about 1% of the population (rather than 0.1%) because in my experience, that’s very roughly the % of people that have been getting steadily and noticeably richer

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  • Whilst I agree that executive pay is outrageous, why does no one criticise footballers, rock stars and “celebs” who earn obscene amounts?

    Oh, I forgot, most of them consider themselves “working class” so that makes it OK to be paid big bucks for doing nothing.

    Come on, be even handed in your criticisms, these people are every bit as parsitical as the bankers and execs!

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  • mr g,

    People choose to pay £87 a ticket to see Chelsea. Nobody’s forcing them to – they could watch rugby or cricket or tennis for less, but they choose football. Same applies to the high ticket prices to see top musicians perform live. It’s your choice. Besides, if you tell Lady Gaga that you’re imposing a 90% “high earner” tax on her earnings in the UK, she’ll just do fewer concerts here and more in other countries.

    Bankers on the other hand…. we have little choice which banks we use (there’s an oligopoly), and companies have very little choice of which investment bank they use. The most profitable services – things like IPOs, Mergers & Acquisitions – only happen once or infrequently in the lifetime of a company. There’s little incentive to seek out competing bids, and there’s greater risk in choosing a less well-known bank for a tiny saving compared to the overall transaction cost. It’s like estate agents – you don’t care about saving 0.5% in fees if the agent can get you a 5% higher sale price. Network effects, trust, and reputation are important here. It’s why people still use eBay, despite all the complaints.

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  • 13. flashman said…drewster: “The city boys might be getting richer, but is anyone outside London getting richer?”

    That’s the whole point of this article. Only a very small percentage of people are getting richer

    In my experience, upper middle class people (remember they account for only a very small % of the population) have been getting steadily richer for years. Most telephone number earners fall into this category (Alan Sugar excepted). I have not noticed a pause in this ‘getting richer’ process, even during the recent recession. Everyone else has not been making the same rate of progress and we suddenly have a situation where they might be going backwards. The article projects this scenario forward to see where it will end up, if things keep going at the same rate. It would have been more useful if the projections had covered about 1% of the population (rather than 0.1%) because in my experience, that’s very roughly the % of people that have been getting steadily and noticeably richer

    ~ You’re very clever flashman, but you will need to be yet more subtle with your positional shifts.

    I do appreciate your skill, for what it’s worth.

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  • 14. mr g said…Whilst I agree that executive pay is outrageous, why does no one criticise footballers, rock stars and “celebs” who earn obscene amounts?

    ~ Because their not a threat to humanity and our planet.

    obscene amounts? Chicken feed to others.

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  • @Drewster

    Agree with all your comments, I’m certainly no lover of the banks or financial sector generally.

    I’m not opposed to anyone earning big money if they are genuinely worth it but footballers, rock stars etc, are simply not worth their money and are of no more social value than bankers. These people must form quite a large proportion of the new ultra rich, landed aristocracy and should surely attract the same contempt as bankers and the old landed aristocracy that some HPC’ers enjoy complaining about.

    With regards to how much people are prepared to pay to watch football or top musicians, then this proves how stupid, or well off, people really are. If it’s the latter then the argument that the gap between the rich and poor is widening does not stand up.

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  • Yes footballers have snapped up a lot of property. Hence the chant: “We’re all living in a Robbie Fowler house”. No joke!

    If people genuinely enjoy Chelsea or Lady Gaga then let them spend their money on it. I know people who save for weeks or even months for tickets to big events like these. It’s no more ridiculous than smoking or drinking, is it?

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  • @Drewster

    It’s still a free country (just!) and therefore I agree, people should be allowed to spend their money as they see fit.

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  • letthemfall says:

    drewster: “People choose to pay £87 a ticket to see Chelsea”

    I’m don’t entirely go along with that argument. It is a question of the extent and the reality of one’s freedom of choice. Yes, no one has to go to a football match, buy a record, or spend money on all the other expensive things, but people at one time went to football matches for a modest ticket price; saying they can just stop now is similar to telling people they should not drink, smoke, borrow money, etc. People do these things anyway; the issue is whether someone is taking advantage of this, and football and other celeb areas are doing so.

    True, it may be easier to avoid football than banking; but really this is about one section of society wringing as much as they can from another irrespective of any concrete measures of “value”, just as the money lenders in India are squeezing what they can from the very poor (Radio 4 last night), who can in principle avoid borrowing if they so choose.

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  • @LTF ” People do these things anyway; the issue is whether someone is taking advantage of this, and football and other celeb areas are doing so.”

    “this is about one section of society wringing as much as they can from another irrespective of any concrete measures of “value”

    Surely you’re saying that footballers etc are in the same mould and are as worthy of the same contempt as the banking fraternity then?

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  • letthemfall says:

    Well, I suppose one could say that footballers play football on the day rather than promising to play at some time in the future, or don’t give the illusion of playing football when they’re really playing hockey. So they are not contemptible – at least not in the same way. But after watching a typical England match, one may feel it scarcely matters.

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  • Nicely summed up LTF!

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