GDP is $32.6 trillion. 164 million workers. $187,000 per worker. 7% earn that. Does that indicate there is a huge income in the USA?

[Kelley1]

I don't mind people a few people earning $250,000 or even $1million. However, there are too few people earning $1million or less to for the average income to be even $50,000. Unless, I am missing something, that implies there are a lot of people earning a billion or tens of billions every year and that is not possible without the government's help.

Updates

6 mo

Correction: Does that indicate there is a huge and unjustified income imbalance in the USA?

Updates

6 mo

The more things change, the more they remain the same. For thousands of years, kings and nobles owned everything. One time, there was a successful revolution, and democracy was invented. After 100 years, a few became wealthy and have purchased the media that tell people what to believe. That gave the wealthy much more money, so they bought the schools, colleges, and politicians until almost everyone believes what the wealthy wants them to believe.

[abc3643]

Congratulations!

You've discovered the income gap / wealth gap born when Reagan became President and the GOP got in power. The current crisis du jour due to this is the so-called "Affordability Crisis" which is definitely real.

Basically, it's be 45 years of fucking over those who aren't already wealthy.

This graphic summarizes it rather well:

This is the #1 reason why I chose to not have children. I predicted all this more than 40 years ago.
I wasn't going to put MY kids through this shit.

[Kelley1]

Clearly, something is unbalanced. I looked up the salaries and incomes of the CEOs of HP, Intel, and Bank of America. I don't have a problem with their salaries, about $1+ million each. However, their total earnings are 20 to 60 times their salaries. Others don't receive earnings of double-digit times their salaries. I didn't look up the income of the CEOs of other large corporations, but I suspect the results would be similar.

[abc3643]

I am not sure who this factors because I am not sure how the numbers were calculated, but keep in mind the income from investments.

Suppose you are making $100,000/year and have $250,000 (2.5x yearly income) in savings/investment assets already.
Suppose further, the investments have an average return rate of 10%.
That means your money is working for you and you are earning an extra $25,000/year.
So, after one year, you've made $125,000. If you leave it all in savings/investments and have the return rate, you'll get even more the next year: An additional $27,500.

Now, suppose you are making a $1,000,000/year and, with that same 2.5x and 10% ROI assumption, have $2.5 million in savings/investments and earned $250,000 in investments that year for a total income of $1.25 million.

Lets assume both persons keep all that investment income in investments.
The asset gap before was:
$2,500,000 - $250,000 = $2,250,000.
After one year, that asset gap becomes:
= $2,750,000 - $275,000 = $2,475,000.

So in the intervening year:
The rich person made $900,000 more than the other person in just salary income.
The rich person's assets increased by $222,500.
So, bottom line, the rich person became $1,222,500 more wealthy despite only getting the same return on investment (ROI) as the other person and both worked for 1 year although the salary differential is the big factor in one year.
But, as those assets increase, the yearly income from the investments will become much more significant and likely even surpass salary income.

(more)

[abc3643]

Of course, because the wealthy have all this extra income, they are buying more things that don't need but that others do: like houses. So, the demand for these things goes up and, from Economics 101, that drives up the prices for these things. Since the wealthy have no problem paying it, they buy it leaving fewer for the rest of us and we have to pay a higher price which is more difficult for us.

This is one reason why the rich get richer and the poor get poorer.
This is why there's an affordability gap.

Capitalism is good at doing many things, but, from a dynamical systems perspective, it's an unstable control system and that's bad. That's one reason why, until 1981, we had lots of checks and balances on the economy with regulations. The deregulation era began just before that with the airlines, but took-off (pardon the pun) when Reagan got in office. And you are now living the results of that lack of foresight.

Those who fail to learn from history are doomed to repeat it.
Examples: The Great Recession and our Affordability Crisis.

[Kelley1]

@abc3643 The income of Intel's new CEO, Lip-Bu Tan, includes a base salary of $1 million and a compensation package worth approximately $69 million, which consists of stock options and grants. Additionally, he is eligible for an annual cash bonus of up to $2 million based on company performance. That income is from Intel, not from his wealth. I would not object so much if his income was from his wealth. However, he receives extra money from Intel that other employees don't receive.

History used to repeat. Now it cannot. In 1900, half the people lived on farms because producing food required a lot of human labor. That has not changed much in several thousand years because technology had not changed much. Now, with technology, 4% of people produce as much food as 50% did in the past. In the past, it took 1000 years for technology to double. Now it doubles in 50 years, and the time it takes to double is decreasing.

In the past, every 200 years, more or less, history could repeat itself because there was little change in technology. Now, by the time people can forget so that history can repeat, technology has quadrupled.

[DryGermanGuy]

You remember the DaimlerChrysler merger? Afterwards it came out that the German CEO earned 2 million, the American CEO earned 20+ million. For the same job. :-/

[Kelley1]

@DryGermanGuy They were not the same job. They were different companies, different employees, different employment contracts the CEOs agreed to. The president of Hannah's dress shop doesn't earn what the president of Neiman Marcus earns.

[DryGermanGuy]

No, they had the same job. Both companies were similar (the German one had a bit more turnover, the American one a bit more profit) and after the merger they both worked as Co-CEOs. Still, the American earned ten times more than the German while certainly not working ten times as much.

[loveslongnails]

I'm with you there. I also chose not to have kids, but I really didn't want them no matter where I lived. I sure as fuck wasn't going to bring any into the world in the USA.

[NaultD]

So in 2019 26 of the richest individuals own as much as the poorest 50% of the population. Now it's less then 10 individuals own more then the poorest 50%.

So consolidation is happening.

[front2back]

GDP has very little correlation to actual income, even more-so in the age of AI.
To make this more simple to understand, I can have a warehouse that only needs 20 people to run, but most of our work is automated by machines and computers. A similar warehouse down the road lacks those things and has 100 people running it.
We both have $100 Million in revenue a year, we both contributed $100 Million to the GDP. However, the automated warehouse obviously is making much more use of their money generated. Due to the technological sophistication, the workers at the automated warehouse are paid more than the ones at the non-automated one, but there was not a perfectly split addition to pay to those workers vs what they contributed.

This is why median income is a better measure of wealth of a nation than GDP per capita. The median income in the US is about $80,000/yr, however the average income and GDP per capita would convince you everyone in the US was a millionaire.

Generally speaking, most in the US live comfortably with their pay, however younger people (think those under 35) often are washed out and struggle with the increased costs of living that have become a major problem the past several years.

[Kelley1]

Ultimately, the income benefits real people. Even if a robot earns $1 billion, live people end up with the money.

[MrChinaski]

Okay. Strap yourself in. I'm taking your calculations as an accurate starting point and have not checked.

1. The labour share of income is about 55% in the USA. So that gets you to $103,000. From that, people pay taxes from every level of government you can think of (bigger on average) and receive social welfare transfers (smaller on average). So that gives you after tax labour income... I don't know what that is, but suffice take home earnings are A LOT less than $103,000 after tax.

2. Yes, there is inequality. What you have done is calculate an average or mean income. But top income earners earn A LOT. So the slice of the pie left for everyone else is smaller. If you are interested in what a typical household earns then you should look at a median. Have a chart from wikipedia... not directly comparable with your numbers as it is households not workers and uses different data sources and methods etc, but hopefully it makes the point.

3. Finally, there's a joke among economists (we are pretty jovial folk) that, to the extent you want an indicator of economic wellbeing , it has three problems: the G; the D. and the P. GDP indicates production, NNI indicates income available... but that's too distracting... so let's focus on the G. G is for 'gross'. So the 45% left to business owners covers depreciation of capital, interest payments and only then profits. Is the residual profits available too large? Maybe. Either way the distribution of wealth including owning businesses is FAR more unequal than is labour income. Contextual for your question, not central.

If anybody infers any moral views in this post I have erred. It was intended to be dry and technical. But acknowledging inequality is a sensitive political and policy issue.

[lightbulb27]

Yes and that is the problem and we are now seeing it. not necessarily billionaires that are the issue but income inequality.

You know why it exists... it isn't capialism... it's crony capitalsim and printing press... management!

We have lots of history to draw from, super computers by which to ask questions and come up with solutions.

What should we do about it?

That is why there are drastic divisions now socially and politically. Some people... cannot survive.

Another layer of this is how we are trained... people are falling down from 1st world to 2nd or 3rd and not adapting to it well.

We really need a LOT more social support and retraining, community around each other at a local and global level.

More human compassion and not less.

But the world is now fragmenting due to policies.

[loveslongnails]

When you want to evaluate how well an economic system is doing, don't look at the top 30% because they do well in ANY system. In the USA, that means you earn $112,300 annually. You can make that work comfortably in most places except the biggest cities.

Look at the bottom 30%. The bottom 30% make $40,500 or less, with the bottom 20% at $28,000. When you look at the poverty level, that's a threshold set by the Government, and when you have a corrupt government like the USA does, they can move that goalpost at any time. Right now, that reads at 11%, but in reality, 18-20% is far more accurate.

If you live paycheck to paycheck and after 5 years of full time employment you've amassed no more than 3 months worth of funds to survive should you lose your job, your economy is riddled with economic disparity.

[Zack-Bann]

Is it big? Yes


Is it “unjust”? Not really


There’s a wage gap but there’s also an IQ gap.


And yes if you’re a smart and calculated person you will work and make more money than someone who isn’t


Nothing unfair about that


The only unfair thing would be handing out free meal tickets off the backs of those who do work for a living

[Kelley1]

Your indoctrination is complete. I fully support higher incomes for people who are smarter, work harder, and produce more. However, it is well beyond that when they can use the law (i. e., government) to enrich them 20 to 1,000 times what their intelligence, efforts, and productivity would justify.

[Zack-Bann]

The people you speak off, assholes as they may be, represent 1% of the top 1% as it is.

And I’m not defending them

Implying the whole system is rigged and needs to be changed just because of them is still unjust to a lot of people who aren’t in politics but do work hard / smart for what they have.

The sad reality is: power always finds a place to lay its head.
Even if you replace the current system with full on communism the outcome will be the exact same
Look at the countries who did that, total dictatorships.

There is no right or easy answer
But saying you’re being held down by a handful of greedy politicians is an excuse.
Because many other people manage to navigate their greed and still make it big

[Ariesman81]

Yeah, it's been called the fleecing of America for years. Government induces welfare, taxpayers fund welfare, welfare recipients fund billionaires, billionaires fund government. It's a cycle of socialist fraud.

Remove taxes or welfare and you'll see the gap close.

[DryGermanGuy]

It means there is an obscenely huge income gap in the United States. You can imagine how much is left for the average worker, after the ceo got 250 million dollars. 🤮

[Amur8711]

We need to get back on the gold standard so our dollar is worth more and stop printing money. I hope by use getting control of the illegal situation and getting these foreign companies out of owning the vast majority of US companies and housing will help fix this.

[genericname85]

It just shows that all the money is owned by few people. Which gets more extreme in every society over time. It's the natural course of things. Eventually societies collapse. It is what it is.

[Lynx122]

Yes the inequality in the U. S. is very high.

[exitseven]

Yes, there is income inequality. I am sure that paying off the right politicians is part of the problem. Term limits would help this.

[Miristheiss]

Well I am making 6,000 more and our investments made.18% gains last year.

I hope all hardworking Americans will get good jobs and budget and invest wisely.

[sawno]

GDP is meaningless to me because GDP growth often happens because of inflation and migration not because people have a better quality of life.

[Chazmatazz269]

You are missing a lot. You have a gross misunderstanding of what gross domestic product means. Read more. You’ll get it. It’s not that difficult at all.

[888theGreat]

Average person make $50,000 and you almost need $150,000 to not have worries with the inflation and Trump polices.

[Rangers]

Basically half of people make $75,000 or more and half make $30,000 or less, welcome to the world. Sorry to break it to you. At least you know it now and not several years later

[Friendlybro79]

I don't know but I do know most people can't afford a middle class life anymore. Trickle down economics only benefitted the ultra rich and corporations.

[beefcakebradybatson]

The overlords are stealing America's wealth.

[slatyb]

That's the total value of goods produced, not the difference between production and expenses.

[Mike_Hum]

Hi. When you get hired at a job the company offers a salary. If you take a job that means you feel the salary is worth your effort. Hope this clears it up.

[Sal_Monella]

You should learn how GDP is calculated and what elements are in GDP.

[Alex8736]

only for politicians lol

[Ben9500]

It’s rigged