When work doesn't pay for the middle class
forbes.com
forbes.com
But needless to say, that's a rather small population. The article is cherry picking this small population[3] of kinda-sorta-unfortunates (they're still making $120k a year!) and using it to argue against a bunch of government programs that provide real benefits to people with a fraction of their income.
Could things be tuned better? Yeah. Benefits programs are filled with this kind of unintended side effect. But to write this kind of blanket argument cautioning against them seems awfully partisan to me. It's a fairly typical right-wing Forbes editorial in journalism clothing.
[1] $120k per year is in the top 10th percentile or thereabouts -- it's at the very edge of what most people would consider "middle class".
[2] NOT simply a lower paying one, as the article implies. A lower paying position is still full time work, after all. The contention that making less is "bad for the economy" isn't really sound. Downward wage pressure in high-paying jobs is a good thing for the export economy and a good thing for profits (companies are paying historically high fractions to their most highly compensated employees).
[3] That is: gate the income to a small range just big enough to be affected by the loss of financial and mortgage aid, but not so big that it dillutes back to the overall tax rate of ~38%. Then pick out only the people who actually need that tuition and mortgage aid: parents with both underwater mortgages and privately-school children in the right 4-year age range. If this isn't cooking the books, I don't know what qualifies.
I think the only really valid point the article makes is about the unpredictability of these tax credits. Look at the graph for marginal tax rate for a single parent - it is sort of progressive but the rates are all over the map, rising and falling as income goes up.
I'm a strong advocate for progressive taxation as I believe it is essential for fairness but I also think the tax system should be simplified and the number of deductions and credits reduced. Ideally, the IRS would send me a bill at the end of the year and that'd be that.
There's 9-to-5 full time and there's chained-to-your-Blackberry, I'm-going-to-need-you-to-come-in-on-Sunday full time.
The point is that it's a big world with lots and lots of variation. This particular woman has a financial incentive to work less. But to argue that we need to drop (or "reconsider the effects of", as the article euphemizes) assistance programs like financial aid or mortgage relief based on her particular situation is ridiculous.
It's a regular NYT feature - The Plight of the Not-Quite-Rich-Enough. Sure it sucks for this lady, but 2/3 of the families in this country would be thrilled to have a single wage-earner making $60k. However, Mrs. Not-Quite-Rich-Enough gets NYT articles, and Joe Schmoe, who's struggling to send his kids to college at all, gets ignored.
Edit: This is a Forbes article, but it reads just like any of a dozen NYT articles over the last year. It makes more sense in Forbes, because that magazine is targeted at the people in the upper income bracket.
If 90% of the people are making less, I don't see how it can be considered "middle class".
Membership of various classes is a huge quagmire. If you want to refer to people solely on what they are paid then talk about wages and steer clear of notion of class.
Edit: not so stupid now.
I'll certainly agree that the lines are far from clear-cut, but I think it's best defined in a problem-oriented manner. The middle class gets these tax breaks because they can't otherwise afford to send their kids to good schools or own houses, while the upper-class can. They're facing different problems, and so the solutions are tailored differently for them. This causes confusion when you have income-to-SoL disparities in the country ($60k goes further in Kansas than in NYC), so people at different income levels can be facing the same problems.
I guess as class and income in the UK are not coterminous this leads to confusion. For example I earn well below the poverty line in the UK but would be described as middle class due to my education and parentage.
Beckham, for example, would probably come in as working class - son of a kitchen fitter and hairdresser (according to Wikipedia) low academic achievement, low IQ, no titled lineage.
I suspect it's a cultural difference. Here in America, people don't really care much where your parents came from or how you did in school, they measure success and class by what you have. We haven't really discriminated on "old-money"/"new-money" lines in decades at least, and we've never had much in the way of titled lineages. We don't have the centuries of cultural history of class immobility that Europeans have (I don't mean that judgmentally, I'm just saying we don't have that history in the back of our minds).
I chatted to a younger friend about it and he couldn't believe I'd be so gauche as to classify people based on their background, parenting and education but felt class was and should only be about your income.
And David Beckham is very much not a member of the middle class, indeed. He's as upper crust as they come by US measures
The ones who thought they are the middle class have to move one step down.
Paying college tuition is not tax, and student financial aid usually does not take the form of a tax rebate. Therefore, including this in their "79% bogeyman" is inaccurate.
Furthermore, paying your home mortgage is not a tax, and relief on your mortgages may or may not take the form of a tax rebate. Again, it is inaccurate to lump this into the so-called 79% tax rate.
Forbes made this even worse by applying these expenses to the top 60,000 of the person's 120,000 income, and calling the entire thing the "marginal tax rate."
By my calculations, we're talking about a 27.5% marginal tax rate on the top 60k of her income, and then whatever the tax rate would be on her lower 60k of income. I'm going to estimate the tax rate is something like 20%, which is far less horrifying than 79%.
It's still true that income differences will affect financial aid and mortgage payments, so Forbes should point that out, but it's totally irresponsible to call this a 79% tax rate.
I see the same thing in Norway: If you are able to hold a great-paying job (equivalent to 200,000 USD a year, for instance, typical for a hard-working oil industry consultant), the marginal tax greatly reduces the value you get from your extra effort. (Typical numbers here are 35% tax on everything up to 50000 USD, increasing to 55% for everything above 130000 USD). Given that you invariably work your ass off in jobs like these, the prospect doesn't seem very tempting. Why work twice as hard when you only get 50% more money? You can't even work hard one year and slack the next, because it doesn't pay.
The problem is that you want as many people as possible to do the best work they can do. The effect of tax/incentive rules such as these is that the government is telling people capable of holding high-paying jobs to start slacking. This is bad on many levels.
1. Salary doesn't correlate to "hard work". It correlates to "bargaining position vs work undesirability". It means the responsibilities will either need to be separated into more jobs, or they'll need to compensate more if they can't decrease the job shittyness.
2. If you bring home 80k about 30k of that goes straight to living expenses. If you bring home 120k, only about 35k of that needs to go to living expenses, the rest is all disposable income. So you're working for about 80% more disposable income, not a flat 50% more money. The upper middle class has an issue realizing what the term "luxury" means.
3. While there are plenty of individuals who both have the choice between a 120k and 60k job and choose the 60k job for the better quality of life and subsidies they'll get, there is yet another subsection of the population who'll choose the 120k a year job for the somewhat extra disposable income. This is not a problem, companies aren't struggling to fill 120k jobs that much I'm pretty sure.
The idea that there's such a correlation between pre-tax income and expended effort is...profoundly difficult to accept without substantial evidence.
It's a bit disingenuous to include lack of financial aid as a "tax" on her income .I assume the college is private? Regardless, she's not paying another $19,000 to the government, just not getting it in aid from another institution.
Without the financial aid "tax", her marginal tax rate is 47.5% for that $60,000. Not great, but not absurdly high considering it includes federal and state taxes (which in NY are quite high).
> Work isn't the only middle-class virtue that is getting punished. The system penalizes savings, too--not just through taxes, but also through programs that reward debtors, the profligate and college families that show up at the financial aid office with empty pockets. Yet another series of tax and benefit rules penalizes marriage.
As a non-homeowner and big saver, I agree :)
I think the real issue here is that tax code is far too complex, filled with favors and subsidies left and right that complicate matters (think spaghetti code).
I'd rather have a large supply side driving costs down and improving my quality of life than otherwise.
For example, what's the value of having a parent at home full-time? What's the value of having both parents home for dinner? A bunch of studies have shown that one of the best predictors for having successful, well-adapted children is how much time the family spends together. But how do you quantify that? You won't know what the exact payoff is until 10-15 years later, when the kids are well into their own careers and having their own children. And it varies a lot from kid to kid - someone who's performing well academically with a supportive peer group needs a lot less parental involvement than a loner with no friends who's threatening to blow up the school.
Or another example: when I went to college, I believe the fin-aid formula was that the college would take 100% of my assets, based on my age and income. That meant my gap year was revenue neutral - it didn't matter how much I worked or what I worked on, I wouldn't be able to keep any of it. But that gave me the freedom to observe and to try things out, without the stress of trying to make a lot of money, and in the process I found my eventual career.
You don't want to run an economy like this - there needs to be some accountability so that people work on things that are actually useful. But a high school grad who's time-limited to one year of work isn't going to accomplish anything actually useful anyway - instead, that gap year is an investment in perspective, a way to understand more of the world before you commit to four years in college.
The same thing often comes up in research - a short-sighted focus on increased economic output leads you to miss opportunities that have no obvious dollar value attached, but can be big economy-changers in the long run. How long did it take GMail to become profitable, and would it have existed had Google had the same quarterly bottom-line orientation that most public companies do? How about Google itself? If Larry and Sergey had done the economically rational thing in 1995, would we still be searching on AltaVista? Is Twitter making money yet?
I agree, but I'd rather put that decision in the hands of each individual and not a bunch of central planning bureaucrats. You're assuming that people aren't capable of weighing all the costs (dollars or otherwise).
I'm very much in favor of finaid working the way it does, because it also opens up the possibility of bright children from backgrounds who simply would not be able to afford it going to elite colleges. That's supposed to be the point of education - level the playing field, so that even if you're born to garment-worker immigrants, you can make it big in your own lifetime. If it means that middle class families have some skewed incentives, I don't care.
I'm less sure about the tax issues. I'd like to see the tax code simplified in general, if only because tax preparation is so inefficient now. And I think disincentives in tax rates may cause more harm than the revenue collected from them does good.
So does a mugger's threat, somewhat more starkly.
http://schiffforsenate.com/?q=media/how-government-programs-...
Synopsis:
In 1918, a factory worker at Ford Motor Company earned $5 per day and kept all of it. In 32 days he would earn $160, enough to cover the annual tuition at Yale University.
Also, Ford workers at that time were making above-average salaries. They weren't the lower-middle-class to middle-class auto workers of today, they were solidly upper-middle-class. And 32 days is like 12% of his salary, so it wasn't exactly cheap for him (though far better than the 30-40% we see now).
Finally, it's disingenuous to compare 1918 colleges to 2008 colleges. Two major events really shook up the post-high-school landscape in those 90 years: the GI Bill and Vietnam. The GI Bill sent like 5 million people to college in the 40s-50s who otherwise couldn't have afforded it. Then Vietnam made college compulsory for middle-class or upper-middle-class men looking to avoid military service. Throw in desegregation, affirmative action, and co-education, and it's pretty clear that college went from being the domain of the brilliant and affluent to being open to the majority of Americans who finish high school. This total structural shift and basic re-definition of college makes pre-70s tuitions irrelevant to today's system.
If you want, you can also toss in the degree to which the job market has changed to requiring skilled workers with some form of post-secondary education. While some of this is likely a result of the education levels of the labor-supply, at least part of it is due to our changing industrial and commercial landscape.
As long as the tax code isn't too complicated and it doesn't change constantly, then how is the government meddling? There are just free people making their own decisions; their decisions just have slightly altered outcomes depending on the environment they're made in.
Which is a reasonable assumption. We wouldn't need laws if people could rationally weigh up the costs and benefits of their actions.
I agree with almost everything that anarcho-capitalists say...but many of them don't seem to realize that under such a diaspora many (most) people will continue to live within semi-coercive organizations, because not everyone has the same preference for personal freedoms that they do. so yes, some will actively choose decreased economic output in favor of other things that they desire.
How is discouraging people to save and pay their debts good for anyone or society as a whole?
A) a disincentive to pay debts since they will be cheaper in the future
B) a disincentive to save since your money will have less purchasing power in the future
It is a somewhat unusual tax, in that your tax rate is based on what proportion of your assets are in dollars. Does someone know what the rate per year on dollar assets is and how to calculate it? You would need to know how much money the Fed prints in a year. Do they publish it or was that what auditing the fed was about?
Also for A), banks probably factor in inflation while setting the interest rate for a loan. So, the relevant variable, i guess, is unexpected inflation rather than the value of inflation itself. The debtor benefits only when the loan market makes low estimates.
(It's a semi-serious question. Credit card companies encourage people to buy things they can't afford and then carry the balance - it's how they make money. And the Federal Reserve attempts to cause continual low-level inflation, such that savings are worth less and debts are easier to pay back the longer you carry them. I don't really support either practice, but there are lots of things America is doing to discourage savings and encourage debt.)
In a time of economic slowness, it benefits the society as a whole more if you increase your marginal spending (spend more cents of every dollar), because that keeps money flowing through the system. Of course, that means we'd want to create incentives to pay debts off and save when the economy's going well (which also has the benefit of controlling growth).
In America, we've become more and more dependent on consumer spending as the engine of our economy, so we keep incentivizing it beyond reason, even in boom times. That's what's causing the personal debt levels we're seeing.
To be clear, if I can make 40% more money with at most 10% more effort, I might consider it. But after a point the extra after-tax income is not worth the time and quality of life I forfeit. The whole point of earning extra money, beyond the ability to buy "things," is to buy more time and an enhanced quality of life. If it does not accomplish that, then the extra money has negative value.
The article points to work disincentives created as unintended consequences of (a combination of) other apparently unrelated policies. Are you suggesting that since work disincentives are not bad, its okay for them to be created this way?
I'm not sure it's disincentive to work as such.
It seem more like a disincentive to make more than $60K/year if you're not going to make $200K.
There's still an incentive to work to avoid homelessness.
Perhaps it could be called a disincentive to work hard.
Going to "work" is not the only way an individual can be beneficial to society.
Don't underestimate the beneficial effect of one person being able to stay home, look after a house, cook fresh food, save on childcare, consume less fuel etc etc.
In a nutshell, it's the story of kids playing baseball and accidentally hitting a ball through someone's window. The fallacy is that by breaking the window, they've helped out the economy. The homeowner will now pay the glazier to fix it, whose wife will now have money to buy a new dress, etc.
It's a fallacy because it ignores the productivity that the money would have resulted in had it been used for its original intent. Perhaps his car needs new tires, or whatever -- but there was something that the homeowner would have preferred but for the necessity created by the ball.
By analogy, perhaps the hypothetical second parent, who is now staying home, might instead be a doctor helping people, or a teacher, or even a garbage collector. Whatever, it's something that we would have gotten had it not been for this disruption.
The broken window fallacy is usually used to highlight the importance of opportunity cost and unintended consequences. In the parable, the broken window results in some very visible benefits - the glazier has money, his wife has a new dress. But it's a fallacy because we don't know what the glazier would be doing otherwise. Perhaps he would've created a beautiful stain glass window, which causes his business to spike up afterwards as his skills increase, which means his wife can afford a series of socialite parties, which bring together people who would never have met, etc.
As Retric points out, I think the fallacy is more likely to work in the other direction here. The benefits of working are very obvious - you get more income, you can afford to buy more things, you live more comfortably. The opportunity costs are more subtle - perhaps your kid grows up hating you, perhaps they fall in with a bad crowd and start doing drugs, perhaps they never make it over the mathematical hump that prevents them from being a famous physicist. It's different for every kid, and you won't know for years.
Good economists admit that there are things that count that can't be counted, and recognize the limits of their models.
The broken window fallacy says that purely destructive actions don't actually stimulate the economy in a useful way. In no way is one adult staying home to perform "home work" logically equivalent (at least, not in my opinion).
It's not that something is destructive. It's also not that something involves monetary transactions or not.
The point is that some external agent forces someone to change their plans, foregoing what they originally intended. (Economics deals with making choices between the available alternatives; money is only the tip of that iceberg)
In the parable as I outlined it, the employment of the glazier is presented as a positive outcome, while ignoring that the homeowner is now unable to buy his new tires, and thus the homeowner has lost the tires and the garage has lost that business.
In the stay-at-home-parent scenario, there's a visible gain of a parent giving the child a close bond and (presumably) good upbringing. But the fallacy hides the fact that had someone else not meddled, that parent would be doing something else that also has a positive outcome (else an employer wouldn't be willing to pay for it).
We can see that in both examples, the person whose behavior was forced now must be satisfied with a plan that is inferior to their initial intent. And assuming that all are rational actors (as economists generally do), then we can conclude that the total utility thus delivered (over the entire economy) is lower than that of the initial intent.
How much money does a billionaire need to live from day to day? The same as any other normal person. Yes, they are likely to consume more luxury goods, but in the end, it does not cover the fact that the more money you have, the easier it is to get even more.
For examples of this you need to look no further than your local bank and see what premium rates they offer for people with high balances. Index funds offer ultra low expense rates for people with a lot of money. With a large proportion of money, it becomes possible for you to manipulate the markets by buying out competition, and becoming a monopoly: which is arguably the equilibrium state for any free-market. The monopoly is the most profitable situation for any business, and this is at odds with society.
So the more money you acrue, the higher your money/work rate becomes. This is a perverse incentive for the large corporation owners to not work as hard; and also to lay off workers during recessions. What sane company would be hiring when workers/consumers have less money to spend?
And the less work that is put into the economy, the worse off the economy is. This cruel cycle is why the economy was in a deflationary spiral and why "Helicopter" Ben is printing money as fast as he can.
This has a communist vibe, but in the end there is simply no argument that it is much better for the country to utilize the resources and wealth to stimulate the economy as a whole than letting a few people sit on it so they can get richer by doing nothing with it.
The poor and middle class can't just create their own wealth because they don't own "the means of production" or the intellectual property horded by megacorps and protected by megacorp lawyers and lobbyists.
It is analogous to not letting DeBeers sit on a stockpile of diamonds, except instead of diamonds, it is money, food, gas, homes, etc...
in the end there is simply no argument that it is much better for the country to utilize the resources and wealth to stimulate the economy as a whole than letting a few people sit on it so they can get richer by doing nothing with it.
Not only is it false that there's "no argument", but your statement is completely wrong.
If there were no argument, you wouldn't be seeing arguments from prominent economists like Greg Mankiw, Bryan Caplan, and Tyler Cowen. And indeed, they've got good arguments. The idea that burning through money to stimulate the economy comes from the Keynesian tradition -- but we know from the 70's double-shot of inflation and unemployment that the Keynesian model is wrong (the question is, "just how wrong?").
But your statement that they're sitting on their wealth doing nothing with it is the biggest demonstration that you're off base. As far as I know, nobody rich is doing this. If they're stashing it under their mattress, I don't think they'd have gotten rich in the first place. If they've got it invested in stocks or bonds or even banks, then it's not idle and doing nothing. It's helping other people finance their businesses, buy houses, whatever. But it's definitely doing something useful. In fact, it's doing something so useful that the people using the money are willing to rent it from them.
Contrast this to government spending, which according to Keynesian theory could be used by paying people to dig holes and fill them back in, so long as the government is doing this. In the Keynesian model (that Obama and the rest of the government is using), the money does not get used productively. When the rich guy rents his money to someone willing to pay for it, it's much more likely to find good use.
Whoa: way, way, way oversold. Your making a blanket argument on a very complicated subject from a single data point. What about the sustained growth in the 40's through 60's due to New Deal, WWII, and Great Society spending? Economics is hard, and poorly suited to ideological statements like that.
Anyone sane would look at the evidence and say that Keynesian stimulus works sometimes, and not others, and that the details matter a lot. Only political partisans would make a statement like yours.
Sure, and you quoted my qualifier, too. I did say that the question is, "just how wrong?" (Not that there isn't an ideology I favor, but I don't think I was whitewashing to sell it)
You'll note that some of the credit in the early 60s has to be given to anti-Keynesians. Kennedy's tax cuts broke from the Keynesian model, and were successful. And if you'll buy into Hayek a little, I'll assert that the WWII boom (no pun intended) can't be credited to following any particular school, but is simply because the economic question is easy when you can get the whole society on the same page, working toward the same goal.
You are absolutely incorrect. They aren't doing this. They are pulling out of the US economy and putting them in Euros, gold, or Chinese factories. Did you somehow forget the complaints of a credit crunch that banks weren't lending any money?
Do you really think they are dumb enough to keep investing in the US when dollars are being printed non-stop? If so you are way off base.
If there were no argument, you wouldn't be seeing arguments from prominent economists like Greg Mankiw, Bryan Caplan, and Tyler Cowen. And indeed, they've got good arguments. The idea that burning through money to stimulate the economy comes from the Keynesian tradition -- but we know from the 70's double-shot of inflation and unemployment that the Keynesian model is wrong (the question is, "just how wrong?").
Then why aren't they the ones making the decisions if they are so correct? And the government doesn't simply just spend money for the sake of spending it. It usually (not always of course) goes into projects that benefit the public for decades such as better roads, power, and homes.
And Keynesian model being wrong because of the 70's? That is simply naive. Inflation was due to fears of Opec increasing oil prices and moving off the gold standard. Inflation was already rising when Nixon implemented his limits on wage/price increases. US Debt as a fraction of the GDP was even decreasing during this period.
http://g-ecx.images-amazon.com/images/G/01/askville/4889596_...
Describing this as Keynesian is absolutely inane.
That would depend on your understanding of inflation. The monetarist views, which it seems to me have proven themselves out most successfully in the real world, say that nothing of the sort can happen. Inflation is caused by one thing, and that's an increase in the money supply. http://en.wikipedia.org/wiki/Inflation#Monetarist_view
and moving off the gold standard
Well, yes, but that's precisely the point. The end of Bretton Woods was already a done deal by the time we're talking about. We were well into the era that the Keynesians though they could play games "stimulating" the economy by injecting money, bringing down unemployment by so doing. The fact that this didn't achieve their goals is exactly what I was talking about, and one of the reasons you should be listening more to the Monetarists like Friedman, rather than to Keynes.
That is plain wrong.
Think about what would happen if the scarcity of crucial goods like food and shelter increased by 1000%. Would there be inflation? I'd put my money on it!
Well, yes, but that's precisely the point.
No, it is not precisely the point. The economy was already declining when Nixon moved off the gold standard. Why do you think he wanted to do it in the first place?
And if your theory was correct, then why did the economy recover? Last time I checked, we didn't move back to gold in 1980.
"Velocity of money is often assumed to be constant, and the real value of output is determined in the long run by the productive capacity of the economy. Under these assumptions, the primary driver of the change in the general price level is changes in the quantity of money."
Monetarists never claim that inflation is always and everywhere a monetary phenomena unless they're dumbing things down for the press. They claim that in the long run it's a monetary phenomena. There's still room in the monetarist model for short-term supply spikes like the OPEC oil crises of 1973 and 1979 that the grandparent poster alludes to.
I'd also take issue with your statement that "you should be listening more to the Monetarists like Friedman, rather than to Keynes." They are not diametrically opposed. Friedman accepted Keynes; in fact, one of the reasons that monetarism was successful was because Friedman was one of the first people to accept Keynes on his own terms and then point out situations where Keynesian economics was unable to explain the observed data. Monetarism should be viewed as a refinement of Keynesianism, not a replacement.
But it is not true when dealing with any one particular agent. You can often say what would have happened but for one particular agent.
PS: This also depends on how much the primary income is, how much time it takes, and how old the children are. If a family with three young children is supplementing a 140k primary income with a full time job that pays less than 50k it’s probably of little net benefit. If on the other hand it’s 40k and 40k and the children are in school it’s probably a significant net gain. Time is also a factor; one of the better and more common setups for families with school age children is a teacher parent. They share the same breaks, and the added stability can be a huge help.
Better to have people choose between two good options than to make one option lousy.
It's not obvious that policies intended to do X actually help X very much. In fact, there are so many counter-examples (I'm sure you can think of many yourself) that suggesting that the absence of government policy to do X would result in X not being done falls flat. Most of the time, people overall are better off without a government policy concerning them.
Anyway, I think it's pretty obvious that most people are better off if more (other) people are literate.
Note, though, that even people who want the government to do less aren't saying "we'll do nothing", they're saying "we want to choose which things to do ourselves". No one needs a law or regulation to spend their own money, it's only required when you want someone else's money spent without having to convince them they should.
As a believer in personal property rights, I think that those individuals who care about the poor should be free to give their money to the poor. But I don't think that their moral high horse gives them a right to use other people's money.
Now, if (as your second paragraph suggests) you really believe that taxation is so fundamentally evil that it cannot be justified whatever its good consequences, then of course the above will leave you entirely unmoved. But if you are prepared to consider trading off harms against benefits, then I don't think you're entitled to dismiss the possibility that some redistributive taxation is a good thing overall; in particular, you can't just say "if people want to give money to the poor then let them do so" unless you have good reason to think that the sort of situation I described above doesn't obtain.
I consider it good for individuals to engage with each other in purely voluntary ways. That is the source of happiness, wealth, health, and life. All else is a waste of my limited time on earth.
Canada pays 55% of a salary for a year in the form of Employment Insurance for maternity leaves that can be 1 year for a mother and up to six months for a father.
I would be willing to bet that at least a full year of paid maternity leave is quite standard in northern Europe.
Some countries (the Netherlands, for instance) even pay their citizens to have children.
It's the US that is different here.
Anyone ever wonders why we earn so much more than our parents and grandparents, yet we're not any happier?
Data shows that inter-generational happiness stays the same, despite the fact that within the same society during the same time period, richer people are actually happier on average.
My hypothesis is that greater material wealth in the recent past comes with serious human toll. Higher competition at all levels. Larger and larger gaps between the rich and the poor, the skilled and the unskilled, the well-connected and the commoner. These effects offset the materials comfort we gain from all these fantastic technological innovations.
Focus on and competition for material wealth does shift us away from certain communal bonds & feelings. To experience an extreme case, try visit a middle- or lower-end shopping mall in China, you can feel the intense greed and competitiveness between sellers. That's hyper-competition at work. We feel it a bit more abstractly in a developed country. But it's certainly there.
I bet many people who has watched Avatar actually want to live as a Navi'. Their lack of material wealth and powerful technologies are more than compensated for by community bonds, closeness to the beauty of nature, and minimal competition for status. Such a community actually exists. Many of them can be found in a more remote part of the world. Bhutan and certain communities of Buddhist monks, for example, come to mind.
For more on this, I recommend this TED talk by Matthieu Ricard on the habits of happiness: http://www.ted.com/talks/lang/eng/matthieu_ricard_on_the_hab... and the book Happiness: Lessons from a New Science by a noted British economist Richard Layard http://www.amazon.com/Happiness-Lessons-Science-Richard-Laya...
Most people would prefer to have higher status than higher wealth. For details, I recommend the excellent book "Choosing the Right Pond: Human Behavior and the Quest for Status" by economist Robert H. Frank. http://www.amazon.com/Choosing-Right-Pond-Behavior-Status/dp...
[1] There is no question that we are all materially better off than previous generations. However considering the 30 years of stagnating middle class incomes, whether this will be true in the future is up for debate. If the middle class starts declining relative to the super-rich expect major unhappiness.
Also, welfare isn't indefinite. Most states require you to take a job, any job, or they reduce your benefits. This is the legislation that came out of the Clinton era (when Gingrich was claiming welfare queens were living it up by having 7-10 kids). I'm glad that I'm still young and healthy. It's one thing to drop COBRA in your 20s, quite another to do it in your 40s.
http://reason.com/archives/2006/03/01/why-poor-countries-are...
it really blows your mind. I think the nay-sayers are missing the point of this article - it doesn't matter if you are sympathetic to the family. You have to remember that the higher paying job isn't creating 2x the economic output - her choice to take the lower paying job means that:
There is one fewer position making $120K
There is one more position making $60K
Now consider this: the $120K position is much more likely to be a management position, which, if done well, could create several $60K positions, lets say 3. This means that for the economy as a whole, there is one less $120K position and TWO fewer $60K positions.
In my opinion this is very scary.
This does not follow. The task of the higher paid position might be to fire people, not hire them (especially in this economy).
That deserves an award for understatement of the year. You could probably set up a five man brawl to the death for that job right now.
Forbes: Crypto-fascist puppet of the Imperialistic Elite since 1955!
I'll address one: 120k/year is a long, long way from "ultra-rich."
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Granted, I'm single and don't have kids, but even living on $20,000/yr right now isn't bad. I can't have a car, but other than that, I can make any small (<$500) purchase I want without any real worry. Tell me I only get $14,000 and I'll start to worry.
"Given a choice between a part-time or easy job paying $60,000 and a demanding, stress-ridden job paying $120,000, Lederman would be wise to take the former"
So, people making 60k a year have either part-time or "easy jobs" and those making 120k are working hard and contributing to the economy, right?