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Date: 2018-10-17 Page is: DBtxt001.php L0300-Inequality


SOCIAL ISSUES
INEQUALITY
Getting worse for 50 years ... and hardly any response from powerful policy makers

Inequality in Housing

THE ISSUE OF INEQUALITY
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The issue of inequality
This issue has been the subject of analysis for several decades ... but policy approaches are mainly based on 19th century thinking and cannot work in the modern interconnected world!

It is appalling that the world's leadership has done virtually nothing for decades to halt the extraction of economic value from 90% of the world's population for the benefit of the top 10% of the population. It is no wonder that the world's masses are unimpressed with the performance of leadership whether it is in politics, in business or in academia.

The fact of growing inequality has been evident for a very long time ... at least since the 1980s.
There have been periods of inequality in the past, notably during the 'roaring 20s' and the age of the 'Robber Barrons' in the 19th century. Subsequent recession and depression after these periods reduced the inequality, but at terrible cost.

In the case of the modern growth of inequality it is remarkable that economists, business leaders and politicians and policy makers seem incapable or unwilling to do anything that will improve the situation.

There has to be a reason. But few people talk about it.

Over the past 50 years there has been a massive increase in profits that have accrued to owners, but very small increases in the wages being paid to people who work.

Innovators and investors have been rewarded, but very little of this benefit has been shared with workers. In fact, productivity gains derived from the deployment of technology have resulted in less workers being required to produce more product. The growth of profits is measured and celebrated but the reduction in payroll is not talked about and is ignored in the celebration and economic and productivity growth.

TPB commentary: The TVM / Burgess hypothesis is that the conventional ways of thinking about the performance of the socio-enviro-economic system are fundamentally wrong, and the measures of economic performance completely fail to reflect in a meaningful way the complex linkages of the system and the need for a certain level of balance between all the components of the system. By making the assumption that a growing economy and the accumulation of financial wealth correlates to a better quality of life and a better society and that depletion and degradation of the environment does not matter it should come as no surprise that that this just does not work.
Change the metrics and it is likely that a lot of decisions will be made in a much better way.
There is a lot of evidence that inequality is a problem and that far too little is being done to solve the problem.

HOW INEQUALITY MAY BE REDUCED
PAY HIGHER WAGES AND GIVE BETTER BENEFITS
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It is not complicated
People who work should be paid more ... people who own the means of production should get a good return on the real investment that is in place, but not the extremely high returns that have been engineered for them over the past several decades (especially since the 1980s).

TPB comment: In the several years when I was a corporate CFO I was very clear about the financial concept of return on investment, and the more basic ides of return on assets employed. During the 1950s and 1960s the well known business schools were developing ways to improve financial return on investment, much of which had absolutely nothing to do with the underlying efficiency and productivity of the business processes. It got out of cotrol in the 'go-go' years of the late 60s and was just another of the economic problems that had to be faced in the 1970s. Improving return on assets employed was quite basic, but very powerful, and independent of financial engineering. Applying these same ideas at the present time suggests that that the return on assets employed is very very high, with plenty of opportunity to share more of the productivity gains of the past 40 years with workers who have been almost totally denied any share at all of these gains.
Minimizing production costs
In the economic downturn of the 1970s many major companies were faced with a profitability crisis and the need to reduce production costs very significantly. For most companies the easiest way to do this was to relocate major production facilities to areas of the world where labor costs were lower and in many cases, where workplace and environmental regulations were almost totally absent. This was the major driver of the productivity and profit boom of the 1980s and to a great extent has continued to the present time (2018). All of this time the corporate profit improvement was reported quarter after quarter, but very little was reported about the state of the workers whether it was those who had been displaced or those newlly employed whose workplace conditions were appalling and pay very small. In many cases companies were able to excuse the terrible worker situation because of the way the supply chains were organized, with little or not legal responsibility for very much that happens in the supply chain.
More about the analysis and reporting of payroll Open L0700-TVM-AR-for-PAYROLL

INEQUALITY IN HOUSING
A BIG PROBLEM IS ALMOST EVERY MAJOR CITY
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Cape Town in South Africa


Another Cape Town neighborhood


The Kibera neighborhood of Nairobi Kenya


Mexico City neighborhood, Mexico


Mumbai neighborhood in India



Homeless in Oakland, California, USA


RURAL TO URBAN MIGRATION
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Inequality in Brazil ... huge wealth and huge poverty

Urban migration - v- urban opportunity
Almost every country in the world has a massive amount of rural to urban migration. Maybe there are more opportunities in the urban areas, but the reality is that many people who migrate into the cities are faced with urban poverty rather than rural poverty. There is systemic dusfunction in both the urban and the rural setting.

INEQUALITY IN THE USA
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The state of US inequality
Link to a graphic from YES Magazine from 2012 which was adapted from Hedrick Smith's book 'Who Stole the American Dream?' highlighting the steps towards a society that became more and more unequal.
Open L0300-Inequality-in-the-USA

For the period from 1980 to 2015, the bottom 50% of the US population has shared less and less of the total GDP while the top 50% has been increasing its share.
Inequality in the US
The share of the US pre-tax net income that was a benefit for the top 1% went from a little over 10% in the 1970s to being more than 20% since around 2010.
Meanwhile the share that was a benefit for the bottom 50% of the US population went from something over 20% in the 1970s to around 12% since 2010

EXTREME WEALTH and REMUNERATION
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In the USA almost ALL the increase in remuneration has gone to the people who are already the wealthiest in the economy. Essentially none for the bottom 50% and only a tiny share for the next 40%!

Peoples-Policy-Project-Top-160-Americans-Now-Control-$2-Trillion-Of-Wealth
This is a bizarre state of affairs. Interesting that the study also summarizes how the wealth of these people has changed over the year.
It would be interesting to make the comparison with how the wealth of ordinary working class folk has changed over this one year, and also over the past 40 years, or say a couple of generations. Back in the late 1960s a lot of working class families had some considerable material wealth, accumulated slowly over the years. Since then, however there has been an orchestrated effort to convert this modest wealth into consumption and immediate gratification. Bit by bit workers' wealth has been transferred to the banks and to corporations to fund the sale of product that drives profits and sustains stock prices. Worse, more and more of the products being sold were increasingly being made overseas where costs were lower rather than buying in the USA. Lower costs resulted in higher profits which was good for owners! Over time employment declined in the United States.
It is worth noting that ALL the dollars that got to China went there because the US private economy sent them there in order to enable their business model and their profits ... none of them went to China via the US Government!

'https://peoplespolicyproject.org/2018/01/02/the-top-160-americans-now-control-2-trillion-of-wealth/'
Open external link

Peoples-Policy-Project-Top-160-Americans-Now-Control-$2-Trillion-Of-Wealth.pdf
Open PDF ... Peoples-Policy-Project-Top-160-Americans-Now-Control-$2-Trillion-Of-Wealth

Hypocracy at its extreme
Open L0700-SS-Payroll

2015 IPS Report / Key Findings ... Executive Excess in the Fossil Fuel Industry
Insulated from the real costs of the climate degradation they help create, fossil fuel executives are enjoying stratospheric pay.
Beating the S&P 500 average: CEOs of the 30 largest U.S. publicly held oil, gas, and coal companies averaged $14.7 million in total 2014 compensation, over 9 percent more than the $13.5 million S&P 500 CEO average. The top executives at ExxonMobil and ConocoPhillips each earned more than twice the S&P 500 average.
Five years, $6 billion: The management teams of America’s top 30 fossil fuel giants — the CEO, CFO, and next three highest-paid officers of each company — have together taken home nearly $6 billion over the past five years.
A 32 page report of the Institute for Policy Studies (IPS)
'http://truevaluemetrics.org/DBpdfs/Initiatives/IPS/IPS-Executive-Excess-2015-Money-To-Burn.pdf'
Open PDF ... IPS-Executive-Excess-2015-Money-To-Burn


IPS-Executive-Excess-2015-Money-To-Burn

A 32 page report in 2015 of the Institute for Policy Studies (IPS)
Key Findings

Insulated from the real costs of the climate degradation they help create, fossil fuel executives are enjoying stratospheric pay.
Beating the S&P 500 average: CEOs of the 30 largest U.S. publicly held oil, gas, and coal companies averaged $14.7 million in total 2014 compensation, over 9 percent more than the $13.5 million S&P 500 CEO average. The top executives at ExxonMobil and ConocoPhillips each earned more than twice the S&P 500 average.
Five years, $6 billion: The management teams of America’s top 30 fossil fuel giants — the CEO, CFO, and next three highest-paid officers of each company — have together taken home nearly $6 billion over the past five years.

'http://truevaluemetrics.org/DBpdfs/Initiatives/IPS/IPS-Executive-Excess-2015-Money-To-Burn.pdf'
Open PDF ... IPS-Executive-Excess-2015-Money-To-Burn



720 960

623 359
.
Share of Income Earned by Top 1% (1975 - 2015)
Share of Income Earned by Top 1% (1975 - 2015)
The United States has had the fastest growth in income inequality over the past 40 years.
Canada, the UK and Germany are not far behind.
France, Italy and Japan have had far more modest growth in income inequality during this period.

Economists and decision makers have known about these trends for many years but have not seen fit to address the problem in a meaningful way. Rather, the growth of profit and stock prices has been talked about, while the discussion of the inequality of remuneration has been studiously avoided. Bottom line ... ordinary people have increasingly become 'mad as hell!'


720 960

623 359


750 531

1200 874

1157 815

A survey about inequality carried out in 2010
What Americans wanted the distribution of income to be ... what they thought it was ... what it actually was


PROGRESS / PERFORMANCE
ECONOMIC INEQUALITY
Prevailing management metrics make this outcome all but inevitable.

GENDER PAY PARITY
GETTING BETTER ... BUT VERY VERY SLOWLY
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Lower pay for women has been the norm for a long time ... and change is very slow
In 2016, women working full time in the United States typically were paid just 80 percent of what men were paid, a gap of 20 percent (Semega et al., 2017). The gap has narrowed since 1960, due largely to women’s progress in education and workforce participation and to men’s wages rising at a slower rate.
At the rate of change between 1960 and 2016 women are expected to reach pay equity with men in 2059. But even that slow progress has stalled in recent years. If change continues at the slower rate seen since 2001, women will not reach pay equity with men until 2119.
The gender pay gap has lifelong financial effects. For one, it contributes directly to women’s poverty. In 2016, 13 percent of American women ages 18–64 were living below the federal poverty level, compared with 10 percent of men. For ages 65 and older 11 percent of women and 8 percent of men were living in poverty (Semega et al., 2017). Eliminating the gender pay gap by increasing women’s levels of pay to those of men could cut the poverty rate for working women in half (Hartmann et al., 2014).
Gender-pay-inequality-The-Simple-Truth
'http://truevaluemetrics.org/DBpdfs/Inequality/Gender-pay-inequality-The-Simple-Truth.pdf'
Open PDF ... Gender-pay-inequality-The-Simple-Truth



The text being discussed is available at


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