# Growing wealth inequality



## Purple (25 Jan 2021)

"Printing money" generally leads to an increase in equities and capital appreciation with the hope that there will be a trickle down into the consumer economy and the pockets of average citizens. The actual result has been a massive increase in inequality and an appreciation of capital assets which had further disenfranchised the non property owning middle classes. 

Is there a better way of injecting money into an economy? 
Wage increases last forever and are skewed towards those on higher incomes. Would it be better to copy the Americans and give cash to everyone? 
Should we introduce a wealth tax which actually taxes wealth; pensions and property or is this beyond Ireland and other small nations?

We now have an increasing concentration of wealth among older people and increasing levels of inter-generational wealth. That's great if, like me, you are on the right side of that divide but it's not fair or just and it certainly won't help societal cohesion.


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## NoRegretsCoyote (25 Jan 2021)

For Ireland, this is simply not true.



> The Gini coefficient for net wealth, (a statistical measure of inequality), dropped from 0.75 in 2013 to 0.67 in 2018, *indicating a reduction in wealth inequality* over this five-year period_ (see Figure 8.1)_.


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## Purple (25 Jan 2021)

NoRegretsCoyote said:


> For Ireland, this is simply not true.


Did you read the summary in the link you posted? We are seeing big an increase in property wealth and other asset classes and an increase in inherited wealth. 

Capital asset inflation over the last 20 years has massively outpaced wage inflation. 
Returns and growth in equity markets has massively outpaced wage inflation. 
Money has always made money but it's never been more true.


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## NoRegretsCoyote (25 Jan 2021)

@Purple 

You can have increases in asset prices and a fall in wealth inequality.

It depends on the distribution of assets and debt.


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## Purple (25 Jan 2021)

NoRegretsCoyote said:


> @Purple
> 
> You can have increases in asset prices and a fall in wealth inequality.
> 
> It depends on the distribution of assets and debt.


Exactly. That's not what's happening now.


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## Zenith63 (25 Jan 2021)

I found Thomas Piketty's 'Capital in the Twenty First Century' really thought provoking on this topic, really could not recommend it highly enough. I felt I came away from it with an altered world view.

It reads a bit like an academic textbook, so is a bit more accessible as an audiobook if you’re not big into economics.

Bit of a summary and analysis from the Harvard Business Review here if even the audiobook sounds like too much work - https://hbr.org/2014/04/pikettys-capital-in-a-lot-less-than-696-pages



> The argument
> Capital (which by Piketty’s definition is pretty much the same thing as wealth) has tended over time to grow faster than the overall economy. Income from capital is invariably much less evenly distributed than labor income. Together these amount to a powerful force for increasing inequality. Piketty doesn’t take things as far as Marx, who saw capital’s growth eventually strangling the economy and bringing on its own collapse, and he’s witheringly disdainful of Marx’s data-collection techniques. But his real beef is with the mainstream economic teachings that more capital and lower taxes on capital bring faster growth and higher wages, and that economic dynamism will automatically keep inequality at bay. Over the two-plus centuries for which good records exist, the only major decline in capital’s economic share and in economic inequality was the result of World Wars I and II, which destroyed lots of capital and brought much higher taxes in the U.S. and Europe. This period of capital destruction was followed by a spectacular run of economic growth. Now, after decades of peace, slowing growth, and declining tax rates, capital and inequality are on the rise all over the developed world, and it’s not clear what if anything will alter that trajectory in the decades to come....


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## Purple (26 Jan 2021)

@Zenith63, Yes that's what I was trying to articulate, though in a far less coherent way. 
I'll read that book.


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## joe sod (26 Jan 2021)

The unequal distribution of wealth is a global phenomenon and has been accelerated by big tech and winner takes all. Look at the valuations of the big tech companies like amazon and now tesla and their ceos. If you are going to tackle wealth inequality then that's where it needs to start. Amazon is more dominant now than the standard oil of a century ago. Look at the effects of the pandemic, most small businesses shut and Amazon and big tech bigger and more dominant than a year ago. How much of the pup  payments which we will be paying back for decades has gone straight to profits for big tech


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## NoRegretsCoyote (26 Jan 2021)

joe sod said:


> The unequal distribution of wealth is a global phenomenon


I am not so sure. 30 years ago a billion Chinese people had basically zero private wealth. Now they have quite a lot. Shouldn't this reduce inequality at a global scale?


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## Zenith63 (26 Jan 2021)

> Over the past two decades, China has seen a sharp reduction of poverty, but also a substantial increase of inequality. As the result of more than two decades of rapid economic growth in China, millions have been lifted out of poverty, resulting in an impressive decline in the poverty headcount ratio. However, economic growth has not benefited all segments of the population equally or at the same pace, causing income disparities to grow, resulting in a large increase in income inequality (which appears to have peaked around 2008).
> Inequality in China – Trends, Drivers and Policy Remedies, IMF, 2018


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## NoRegretsCoyote (26 Jan 2021)

Zenith63 said:


> China has seen a sharp reduction of poverty, but also a substantial increase of inequality.



In 1980 China had pretty much perfect wealth equality: no one had any  


Anyway the claim was about global wealth inequality which should fall if a large % of the world's biggest country accumulates private wealth from zero.


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## Purple (26 Jan 2021)

NoRegretsCoyote said:


> I am not so sure. 30 years ago a billion Chinese people had basically zero private wealth. Now they have quite a lot. Shouldn't this reduce inequality at a global scale?


Yes, that's very true. The wealth inequality we are seeing is more in rich countries than poorer countries. The distribution of the wealth that is held among working people globally has definitely leveled out considerably but the concentration of wealth in capital is also a global phenomenon.


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## Sadim (26 Jan 2021)

joe sod said:


> The unequal distribution of wealth is a global phenomenon and has been accelerated by big tech and winner takes all. Look at the valuations of the big tech companies like amazon and now tesla and their ceos. If you are going to tackle wealth inequality then that's where it needs to start. Amazon is more dominant now than the standard oil of a century ago. Look at the effects of the pandemic, most small businesses shut and Amazon and big tech bigger and more dominant than a year ago. How much of the pup  payments which we will be paying back for decades has gone straight to profits for big tech



Did I read somewhere (can't remember the source) that the ratio of  Fortune 500 CEO pay to the average worker in the CEO's company has gone from something like 20:1 in 1950 to 205:1 in 2020. Maybe it is distorted with share options and while I don't envy a CEO of a major MNC, the comparison does seem to indicate a higher concentration of wealth in the top 1%.... hardly a sign of lowering inequality??


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## Zenith63 (26 Jan 2021)

Interestingly the UK brought in regulations last year to try and highlight that very issue.  Pretty remarkable thing for a Conservative government to be doing!



> New regulations coming into force today (Tuesday 1 January 2019) mean that, for the first time, the UK’s biggest companies will have to disclose and explain every year their top bosses pay and the gap between that and their average worker.
> 
> The pay ratio regulations will make it a statutory requirement for UK listed companies with more than 250 employees to disclose annually the ratio of their CEO’s pay to the median, lower quartile and upper quartile pay of their UK employees. Companies will start reporting this in 2020 (covering CEO and employee pay awarded in 2019).
> 
> ...


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## AlbacoreA (26 Jan 2021)

Some analysis here. 









						Why has income inequality fallen in Ireland?
					

Ireland is one of the few developed countries that has seen high income growth and falling inequality in the last 30 years




					www.rte.ie


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## Protocol (26 Jan 2021)

Note that income and wealth are different, although related.

Wealth data here:





__





						Household Finance and Consumption Survey - CSO - Central Statistics Office
					






					www.cso.ie


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## Zenith63 (26 Jan 2021)

AlbacoreA said:


> Some analysis here.
> 
> 
> 
> ...


That's a good read and I think Ireland does have something to be proud of in-terms of income inequality.  However I think the author has been more than a little disingenuous by focusing just in income inequality, not even mentioning the world wealth in the article.

Some info on wealth inequality (the subject of this thread) in Ireland -


> The results show that wealth is highly concentrated (in Ireland), with 72.7% of net wealth held by the top 20%, which is higher than the Euro Area average of 67.6%. The bottom half of the distribution has around 5% of wealth (4.9%). When looking at the concertation at the top, the results show that the top 10% have more than half of all the net wealth in Ireland (53.8%). The Top 5% have 37.7% while the Top 1% has 14.8%...
> 
> Only 10% of households own any land and thus the value of land assets is highly skewed and is highly concentrated amongst the wealthiest households. The Top 20% owns more than 90% of all land (by value), while the Top 10% owns 82%.
> 
> The Distribution of Wealth in Ireland, TASC, 2015


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## NoRegretsCoyote (26 Jan 2021)

Zenith63 said:


> not even mentioning the world wealth in the article.



That's because in Ireland it's only been surveyed consistently twice: in 2013 and 2018.


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## Zenith63 (26 Jan 2021)

NoRegretsCoyote said:


> That's because in Ireland it's only been surveyed consistently twice: in 2013 and 2018.


Ah now. Lack of data is not a valid reason for ignoring the existence of something. That TASC report was written 5 years before the RTÉ article.

Anyway my point is the average person may not spot the nuance between inequality broadly, income inequality and wealth inequality. The article would lead many to think that Ireland is doing marvellous on inequality in general. In reality we’re doing well on income inequality, but more poorly than most of Europe on wealth inequality. The former may solve the latter over time of course.


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## NoRegretsCoyote (26 Jan 2021)

Zenith63 said:


> Ah now. Lack of data is not a valid reason for ignoring the existence of something.



The only evidence-based article on wealth inequality in Ireland would say that it's falling


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## AlbacoreA (26 Jan 2021)

I wonder how the numbers on some form of support from Govt, be it housing, or income payment, skews this. Maybe it doesn't.


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## AlbacoreA (26 Jan 2021)

I see the figures in these stats. I find them hard to reconcile with what I see though. I see people living at a level that seems at odds with their income. Mostly at the low and middle earners. Anyone I know at the top end of earners, is relatively, frugal, in context of that they earn. Its not just that people are living beyond their means, or its all on credit, or very good at making the most of their money. 

I would see AAM reflects some of these. You have people on low incomes struggling. You have people on high incomes mainly future planning, or investing. Well off people being frugal. That makes sense. You don't really get the people living way beyond their means or a credit bubble.


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## Purple (26 Jan 2021)

Protocol said:


> Note that income and wealth are different, although related.
> 
> Wealth data here:
> 
> ...


The main difference is that in this country we tax the bejasus out of income but leave wealth alone, thereby making it harder to turn income into wealth.


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## Purple (26 Jan 2021)

AlbacoreA said:


> I wonder how the numbers on some form of support from Govt, be it housing, or income payment, skews this. Maybe it doesn't.


From an income point of view we are amongst the most unequal in the EU before State redistribution but amongst the most equal after State redistribution. When people claim that the country is run for the benefit of the rich I point out that if that is so then they are doing a terrible job of looking after themselves.


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## Purple (26 Jan 2021)

AlbacoreA said:


> I see the figures in these stats. I find them hard to reconcile with what I see though. I see people living at a level that seems at odds with their income. Mostly at the low and middle earners. Anyone I know at the top end of earners, is relatively, frugal, in context of that they earn. Its not just that people are living beyond their means, or its all on credit, or very good at making the most of their money.
> 
> I would see AAM reflects some of these. You have people on low incomes struggling. You have people on high incomes mainly future planning, or investing. Well off people being frugal. That makes sense. You don't really get the people living way beyond their means or a credit bubble.


If I can pay all the bills, run a nice car, pay the mortgage and socialise but still have a surplus then it's easy for me to do a bit of future planning with the surplus. It's also more attractive as my capital assets appreciate far faster than my income increases.


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## Purple (5 Mar 2021)

The risk of inflation, led by wage inflation, running to 5 or 10% is discussed here.
Without the massive levels of global government debt that could be a good thing but given the post crash and post Covid world we are in it could be a disaster.


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## Protocol (14 Dec 2022)

New data on transfers of wealth:






						Intergenerational Transfer of Wealth 2020 - CSO - Central Statistics Office
					






					www.cso.ie


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