Why do we have huge income disparities?

Posted on: September 20th, 2010 by ecthompson md No Comments

Emptywheel has highlighted a series of articles that I agree needs more discussion.

From Emptywheel:

Tim Noah’s great series on the causes of income inequality got a lot less attention during its second week than its first week. So I thought it worthwhile to focus on what he concluded was causing the dangerous new income inequality in America.

Here’s how he described the relative importance of each of the causes of income inequality he looked at:

Here is a back-of-the-envelope calculation, an admittedly crude composite of my discussions with and reading of the various economists and political scientists cited thus far:

  • Race and gender are responsible for none of it, and single parenthood is responsible for virtually none of it.
  • Immigration is responsible for 5 percent.
  • The imagined uniqueness of computers as a transformative technology is responsible for none of it.
  • Tax policy is responsible for 5 percent.
  • The decline of labor is responsible for 20 percent.
  • Trade is responsible for 10 percent.
  • Wall Street and corporate boards’ pampering of the Stinking Rich is responsible for 30 percent.
  • Various failures in our education system are responsible for 30 percent.

Most of these factors reflect at least in part things the federal government did or failed to do. Immigration is regulated, at least in theory, by the federal government. Tax policy is determined by the federal government. The decline of labor is in large part the doing of the federal government. Trade levels are regulated by the federal government. Government rules concerning finance and executive compensation help determine the quantity of cash that the Stinking Rich take home. Education is affected by government at the local, state, and (increasingly) federal levels. In a broad sense, then, we all created the Great Divergence, because in a democracy, the government is us.

Here’s Noah’s installment on executive pay, in which he argues that things like technology make it easier for entertainers and top execs to maximize their pay, while deregulation allowed the banksters to command huge salaries.

And here’s the one on educational problems. Largely, Noah describes, the problem is that K-12 education isn’t preparing students as well for today’s job market as it used to. In addition, between college costs and the removal of incentives (like the draft) to stay in school, educational attainment stalled for a number of years. As a result, the value of a college education is much greater, so those without a degree do worse by comparison.

I don't think that these articles really stress the constant pressure that conservatives have put on government to cut taxes. The pressure directly impacts our schools. (more later)

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Dr Thompson wrote:"It is the truth"No, it is your opinion that these people 'make too much'.You are completely unable to define how much is 'too much' for them to make.You pretend that you have referenced 'the truth' like it is some universally acknowledged standard instead of your subjective opinion.Go ahead, tell me how much income is 'too much'.If you tell me "1 million dollars" , then my question is "how come $999,999 income is ok, but 1 dollar more is too much"You can't begin to defend your notion that these people 'make too much' because you won't even say how much that is.And then you need to explain why it's your business, since it's not money.If someone's boss feels like they are worth $10,000, then that's how much he should pay him. If he feels like the employee is worth $10,000,000,000 then why can he not pay him that without you getting all covetous and self righteous about it? Why is it evil for the employer to do what he wants with his own money?You need to figure out the difference between 'the truth' and your opinion and give the envy train a rest, Dr Thompson.You have no business telling an employer how to spend their money, and the govt has no business telling individuals how they must spend theirs.Liberals claim they want to let people alone to live their lives freely, but your actions show the opposite.

Melissa wrote:"Really, you want me to lower my salary"No. Really I don't.Neither do I want others to be attacked for the salary that they make.The Democratic agenda of covetousness and envy and class warfare sickens me, and should be abhorrent to all Americans.

I have never envied anyones salary. People should be paid fairly for the work they do. If I did then I would have gone to school for something entirely different. You attacked the salary of doctors and nurses. This isn't a democrat vs republican issue. It's an American issue. You are right, class warfare needs to stop.

Melissa,What you are missing out on here is the context.Dr Thompson and I have had several discussions about executive salaries (in particular insurance company executives). And he doesnt seem to get that it's none of his business how much another man chooses to pay his employees.It's difficult to convey sarcasm in a blog post, so I apologize if you didn't catch the sarcastic nature of my proposal to lower the salaries of doctors and nurses.I don't want to lower your salary at all.The causes of medical cost inflation are not to be found in the salaries of doctors OR insurance executives.But Dr Thompson, faithfully representing the views of elected Democrats in Washington (but not so much the views of rank and file Democrats on Main St), consistently plays the Covetousness Card and the Evil Rich Guy Card when he runs out of logical defenses for Democratic policies (which is often).I'm proud of your work in the medical profession and I would give you a raise if I could.

I don't understand the conservative rant that Congress should not force people to buy medical insurance. These same folks say people should spend their money the way they want and the economy will be great. They shouldn't have to pay for others. But what happens when that guy who chose not to buy insurance gets sick (or a family member)? He runs out of money and relies on the government safety net. Those costs are huge and the "forced" insurance only helps government (and thus the conservative taxpayer) save money. Or do the conservatives say we should just let them die a miserable death? If so, lets put them on the street corner for the world to see what compassionate conservatives we are.

Dataguy7 wrote:"what happens when that guy who chose not to buy insurance gets sick"uh, hmm, here's an idea, let him pay off his bill himself. what's wrong with expecting him to pay it?

Oh Joe how unrealistic. Have you seen hospital and doctor bills lately? Do you expect them to hold an uncollectable bill open forever waiting for Mr. Uninsured to try to pay it? Multiply this by thousands and you have bankrupt everyone. As I've seen you say to Dr. Thompson, please reinsert your head into that hole.

yes I know several couples that have gone into the hospital for a maternity delivery and walked out with a baby and a bill, which they paid over the next several years. I dont think it unrealistic that someone should pay their bill.

So, out of the 37 million Americans you know a couple who have arranged payments. You have a tale and so do I. 17 yo male in a mvc (motor vehicle crash) requires 7 emergency operations over several weeks. He is on a ventilator for more than 6 weeks. The father has been laid off. The mother works as a nursing assistant in a local hospital. His bill is over $250,000 & he is still in the hospital. How do you make payments and pay this off?? What about a 40 yo who works at Wal-Mart part time and is hit by a car while he was driving his scooter? He has major back fractures and requires surgery. Without surgery he will not be able to walk and work again, so now what? Deny him surgery or perform a surgery which he can never afford? Sure you friends can afford an uncomplicated pregnancy but what if there was a complication that shot the cost of care into the hundreds of thousands of dollars? Would they be able to make payments on what amounts to a house payment? Errington C. Thompson, MD Sent from my iPad

If the alternative is being dead, or paying a hospital bill for a long time, I would choose to pay it off. Most people would agree, I think.Am I advocating that people not buy insurance? No. I think they should but we cannot mandate it.I think people should eat fruits and vegetables too. But we cant mandate that by law either.If we nationalize the health care system, as you want to do, then we make all health care workers de facto employees of the government. In effect we say we have a right to their labor at a price that we shall dictate by law.That is slavery.What is then to stop us from nationalizing food production so that all farmers and food processors are government employees?Isn't food MORE vital than health care?If we make farmers de facto employees of the government and demand their labor at a price which we dictate by law, then we have a whole new class of slaves.Then there's housing...... very important. Vital, some would say......Where does the servitude to the government end, Dr Thompson?

I think Joe just wants people to take care of their own. Which if someone in your family has a serious illness and they had chosen not to buy insurance. Then the family would choose whether or not to pay the bill and keep that family member alive. Now if you choose to go ahead and take on the debt and you lose your job then your kids will inherit the debt. I think it is called servitude. They practice this in some of the countries overseas. The people never get out of debt. They always have free servants. Now if everyone has to have insurance doesn't it unburden the families from having to make that decision on whether or not we kill grandma? I am sure your family would inherit a huge medical bill and not because of the greed of the physicians and nurses. But by the drug companies and all the companies that provide any kind of necessary equipment. America is better than that and we care about others. It is the American way.. The poorest state in the union Mississippi just so happens to give more to charities than any other state.

Dr Thompson wrote:"Physicians are not deciding who lives and dies that is up to God. We don't have that power. "I am glad to hear you change your tune because you were blaming conservatives and businesses. Remember you wrote: "Conservatives believe that business can and should tell individuals who can live and who can die."If physicians don't have that power , then neither do conservatives and businesses.You need to be consistent, Dr Thompson.

Dr Thompson wrote:"But it isn't a contract willingly entered. That's the flaw in your argument."It was until Obamacare. People had the choice to buy insurance or not. Now they won't, thanks to you. Dr Thompson wrote:"This isn't like buying a stock oyour second home in Colorado. You need health insurance. If you don't get it through your employer then the average American can't afford to get it on the open market. So you are stuck."Actually millions of Americans DO buy it on the open market. Dr Thompson wrote:"Also, the terms of the "contract" aren't clearly described to customers. HR will hand you a benefits sheet not the contract that the insurance company signed with your employer. How can you make an informed decision based on a "summary" of benefits. You can't. So we (Americans) guess and hope."Now you are switching gears , because the people you are describing have not bought insurance from an insurance company. They have bought insurance from their employer. This is called a 'self insured' plan where the employer is actually the insuring party, carrying the risk, and the insurance company is only providing technical and admin assistance (it's called an ASO contract, Administrative Services Only) and selling an amount of reinsurance to the employer. But the insurance company and the consumer are not contractually bound at all.Most people dont understand this, and so they end up vilifying the insurance company when it is their employer that actually is the insuring party. Employers in this situation are really good at playing dumb and pointing the finger at the insurance company, but the insurance company has no contract with the employee in these cases. It is the employer that has sold the product to the employee and should be liable, but here's the catch: Congress has exempted most 'self insured' plans from the state insurance regulations that govern real insurance companies.I have talked about this numerous times, but you didn't seem to get it then, and I dont know if you understand it now.Congress understands it. They created the confusion and capitalized on it to pass Obamacare to 'fix' the problem they created.The exemption for self insured plans should be done away with. Employers would quit 'playing insurance company' and buy real insurance for their employees. Then all consumers would be protected by their state insurance laws. Right now they aren't. Only people who buy real insurance from a real insurance company are.

If you have to have a product and can not afford the "free market" how is that your free will? The health insurance company is holding you hostage. Errington C. Thompson, MD Sent from my iPad

Health insurance isnt as vital as food. Let's apply your reasoning to that.What if you cant afford food? Are evil greedy farmers 'holding you hostage'?Should the government force you to buy a certain amount of fruits and vegetables? Should the government institute a 'single payer' system of food production and distribution and make farmers and food processors de facto government employees?If not, why not?

Healthcare is different. It ain't food. It aint clothing. It is healthcare. Errington C. Thompson, MD Sent from my iPad

That's simply a copout.Food is more vital than healthcare, so why won't you make the argument that we need a 'single payer system of food production and processing'?Why won't you demonize greedy farmers for 'holding you hostage' until you pay their price for food?You are inconsistent because your arguments are politically driven and not logically driven.Democratic politicians have made it socially acceptable to use covetousness and envy as motivators against 'evil CEOs'.But any logical examination of your arguments and they fall apart.You cite junk studies claiming 45,000 die from lack of health insurance. You mis-state census bureau statistics that '47,000,000 American citizens don't have access to health care'. You completely abandon your scientific training and post bogus arguments supported by bogus info.Government is in the process of socializing the industry you work in, and medical workers of the future will have it much worse because you cheered them on.One citizen has no right to demand the labor of another citizen using the force of law.There is no 'right' to healthcare.There is no 'right' to food.There is no 'right' to shelter, or clothing or a job.These things are earned, and they come at a price.The moment you claim it as a 'right' , you enslave the laborer that provides it for you.Why do you support this new slavery?

Not a copout. It is the truth. As far as I know there are no farmers buying their own planes. Farmers incomes have been flat. I'm targeting those how are raping the system. Make a living. Make a profit...that's fine. As usual you ignore things that I have stated in the past but that's your deal. Healthcare should be a right. Thanks for pointing this out. To compare universal healthcare, to kidnapping and forced labor is a remarkable leap. Errington C. Thompson, MD Sent from my iPad

Joe needs to find a country he likes. One that he doesn't have to pay for anything he sees unnessary. But he would need to start someplace without anything. Which Gilligan's Island would be a paradise for me I know. Although I never bought the coconut battery for the radio. Joe I am sorry about you mother in-law. I wish she had made it clear what she would have wanted. I know it makes it harder trying to decide what to do. The so called death panels would have brought this to the surface and maybe made it easier for more people.

Actually, she made it very clear what she wanted. She had a living will and her husband has power-of-attorney.If it became a situation where she was dependent on extraordinary means to maintain biological life, she did not want that.The problem was we were nowhere near that point and ICU staff were pushing the family toward pulling the plug and actively opposing the surgeon's orders, as well as treating both the patient and the family in a demeaning way.She was moved out ICU yesterday and should be checked in at a fine rehab hospital sometime this week to continue her progress.She is recovering well but slowly, and is in full possession of her faculties and is quite thankful for the surgeon who cared for her.In the past year she has come thru open heart surgery, lung cancer surgery, a subsequent procedure to clear congestion from the lungs that left her with a massive infection, and a procedure to repair and clean up after a food tube came loose spilling food into the body cavity.

I hope you make a formal complaint to the facility then. They maynot realize what was going on with their staff. I speak up where I can and people don't realize how they come across. I am glad she is doing better. I have the genes of a family that gets dementia really bad. I tell my son all the time what I want him to do after watching my my mom deal with my dad. And my uncles deal with my grandparents.

what a coincidence!a lefty 'studies' income disparity and 'finds' that lefty causes are being neglected and causing the 'problem'.The problem is that the 'problem' is only a problem if you have a problem allowing people to spend their own money as they see fit.If my employer decides to pay me $10,000,000 a year for my ability to pick earwax out, that's his right. It's his money he is spending.If Tim Noah wants to decide someone's income, then Tim Noah should hire that someone, and then he can decide how much that person's service is worth.

As usual, you miss the point and make your own. The point of the piece and your story is that use it is the employer's business if he pays you to pick earwax but his decisions has consequences on the rest of our society. That's the point.

Dr Thompson wrote:"his decisions has consequences on the rest of our society."Of course it does. Every decision has consequences for society. That should go without saying, although I suppose to some liberals it might come as a profound revelation.The question is: is it proper for society to dictate how one spends their own money?Democrats have decided that government should tell citizens that they must buy certain products (insurance) whether they want to or not, or whether they feel like it is the best financial decision or not.Democrats think they know what is best for everyone and that they should be able to tell everyone how to order their affairs.Conservatives believe that individuals and businesses should be allowed to spend their own money without the government micromanaging their decisions.It is a stark difference in philosophy, the Democrat/totalitarian vs the conservative/libertarian.

Democrats never said that but you keep on believing.

Conservatives believe that it is okay for insurances to drop coverage on someone because they don't want to pay for a procedure. Conservatives believe that business can and should tell individuals who can live and who can die. Conservatives believe that if you don't have with health insurance your just have to work harder. If you who only try harder you can get a job with health insurance that's why conservatives believe.

Dr Thompson wrote:"Conservatives believe that it is okay for insurances to drop coverage on someone because they don't want to pay for a procedure"No, conservatives believe that insurance is a contract , willingly entered into by two parties and that both parties should honor that contract.If the insurance contract specifies that a company should pay for a procedure if certain conditions are met (i.e. the premium is paid and no fraud has been used to obtain insurance coverage), then the company is legally bound to pay for the procedure. If it doesnt, it should be held liable.Insurance isnt required to obtain health care services. You can pay for them yourself.Why don't you, as a physician, lead the charge to lower the salary of all physicians and nurses , in order to make health care more affordable?Why should doctors and nurses make so much money? Aren't they just ripping people off and making health care unaffordable?Physicians are deciding who lives and who dies by the high salaries they demand.Doctors are deciding who lives and who dies by the price tag they put on their services, aren't they?Why don't you do something about it? Put your money where your mouth is, lower your own salary and encourage (or force) your fellow physicians to do the same.

But it isn't a contract willingly entered. That's the flaw in your argument. This isn't like buying a stock oyour second home in Colorado. You need health insurance. If you don't get it through your employer then the average American can't afford to get it on the open market. So you are stuck. Also, the terms of the "contract" aren't clearly described to customers. HR will hand you a benefits sheet not the contract that the insurance company signed with your employer. How can you make an informed decision based on a "summary" of benefits. You can't. So we (Americans) guess and hope.Physicians are not deciding who lives and dies that is up to God. We don't have that power. Physician salaries have been stagnant for the last 20 years. I have talked about this over and over again but no amount of data can penetrate your brain or so it seems. Physicians don't have corporate jets..wait a minute, what's that sound...It's my jet. I'm out and I'll be on Yacht in the south of France cuz that's the way that I roll. Cheerio.

Really, you want me to lower my salary. Peoples lives are in my hands daily. But I should make less than the 26 dollars an hour I make now? Or what about my friends in Kansas, Oklahoma, and Iowa who make 19 dollars an hour. I have coworkers who are maxed out at 30 dollars an hour and they have been nurses for 25 years. Are you kidding me? I have coworkers who are in foreclosure after their husbands lost their jobs. I have a coworker who had to take a second job delivering mail. I personally have a second job. I have another coworker who took a second and a third job, one teaching and one selling clothing. All just to make ends meet. But, yep, sure cut our wages. I don't know any doctors who are living much better than myself. In fact, I live with a therapist who makes less than I do yearly thanks to insurance not covering mental health for more than 3 eap's. People can't afford their copays. Ironically, people assume we are so wealthy because of what we do. Meanwhile, the guy across the street from me who is in construction makes more than us. Yep, this is fair.