Employment and Income Inequality

George Rebane

[This piece is the last of a four part series on taxes, jobs, and income that includes, in order of posting, 'The Administration Discovers Shortage of Engineers', 'Higher Tax Rates = Lower Revenues',  'More Green Companies Heading for Greener Pastures', 'Employment and Income Inequality'.  It was motivated by two articles, one that appeared in the June 2011 IEEE Spectrum and the other in the 23jun11 WSJ on the need, disposition, and importance of technology workers to our country’s economy and future - a future which is being compromised by progressive politics and policies in the name of the misguided notion of ‘social justice’.]

Predictably when the economy is in the dumps, the usual voices on the left unlimber their class warfare guns and launch another assault on capitalism as the evil that has caused all the world’s problems.  Even a pseudo-free market has what are known as business cycles, always have and always will have.  A market is a dynamic complex system that is hard to control, and more so when centralized control is attempted.  Appropriately trained technologists know that distributed adaptive control is the best (and nature's) way to achieve semblances of stability – even Adam Smith taught us that back when we declared our independence from Britain.  The collectivist is forever ignorant of this, and sees vindication in his distorted belief in every slowly failing socialist economy – but the dots are never connected when crunch time comes, and blood is in the streets as we see in Greece and the countries now enjoying Arab springtime.

To convince ignorant audiences, the easiest targets for the socialists are the high earners in a capitalist economy.  Free market capitalism is a ruthless meritocracy that has constantly witnessed creative destruction – the new replacing the old as we distance ourselves from the cave.  Conservatives and libertarians celebrate this process in proportions equal to the energies progressives expend in their attempt to stifle it.  It is only in the ironic juxtapositions of their names that confuses the ideologically innocent – there is nothing progressive about the progressive.  To the socialist, the railroad brakeman’s job is socially just and forever.

But in the real world of technological advance, those with the brains, vision, and courage to invent and build things and methods that deliver to humanity products cheaper, quicker, and more capable, to those belong inordinate rewards.  And the more their products and services can be scaled, the more inordinate are such rewards which come from newly created wealth, and not, as claimed by the class warriors, from the pockets of the poor.  But the result is there for all to see, the people who can and will are the high earners, and those who can’t or won’t will be at the other end.

Today this saga is playing out between the technically able workers and those who aren’t.  Even in our Silicon Valley, in the throes of a long-term decline, there is an ongoing demand for engineers and scientists who have left the bigger/older technology companies as these continue to move their operations out of California.  The region’s creative talent is snapped up by the new domestic giants like Google and Facebook, and also foreign high flyers such as Ericsson, SAP, Nokia, Alcatel-Lucent.  Did I say ‘creative talent’?

In our land most people think of a rock star or a painter or a writer as being of the ‘creative types’.  They haven’t a clue as to what real creativity is.  They know nothing of the impact of an insight that enables whole new domains of electronic switching to come into being and change the lives of billions (yes, with a ‘b’) around the world.  The creativity infused into an AI approach that will dig out your early cancer while your life can still be saved; a new way to connect and cool thousands of server blades to save enormous amounts of energy.  And yes, the mobile app delivering a new paradigm that will command the attention of millions as they enter a new world of social networking.  That’s what some of us call creativity.  And we only seek to reward the people who can deliver it reliably.

In the American labor market these people have been in demand for at least the last fifty years.  They are sought after by every company and entrepreneur that wants to profit from contributing to the world’s quality of life.  These are the creative talents that our universities still pump out, talents for whom large corporate campuses are built to house them in comfort and convenience.  They work hard and are coddled with on-premises shops, restaurants, fitness and rec halls, … .  An example to how such creative talent is valued can be seen in the ‘chef war’ between Google and Facebook now in progress.  Each company is trying to attract the other’s world class chefs preparing the finest foods for the geeks that deliver.

But the greater wonderment here is that so many of these creative techies have the itch to leave behind such grand corporate comforts and high wages.  They scratch that itch by resigning and striking out on their own with an idea and, perhaps, a like minded, equally talented friend or two.  They start their own ‘Kitchen table top Inc’, working what seem like 30-hour days for months, living off savings or a pittance in angel capital, in the hopes of catching their own golden ring.  And their motivation is that in America that golden ring is still there for those who can.  But socialism is working hard to replace that golden ring with one made out of more modest pot metal – after all, we must have social justice.

On the other end of the labor spectrum we have the commodity workers - people with highly replicable skills.  The least of these can only maintain an above market compensation when they band together and threaten disruption or violence if their demands are not met.  And these demands, as we see from today’s NLRB intervention with Boeing’s new plant in South Carolina, are not related only to the workplace, but can serve political objectives which know no bounds.  That such replaceable workers receive lower wages and thus contribute to the country’s wide spectrum of compensation (wage inequality) is seen as a social injustice by the class warriors.  The class warfare idea here is that mix-and-match manpower should receive additional wages that is made up from dunning those who successfully and extraordinarily contribute to the country’s wealth and well being.

And since such forced unionization states are already economic disasters in waiting, the socialist class is doing their best to level the playing field with the right-to-work states, and thereby make misery uniform across the land.  This kind of solution has always been the solitary tool in the collectivist’s economic tool bag.  Income must be limited, or better, ‘equalized’ regardless of the cost to society – it is only ‘fair’.

Comments

[Account Deleted]

This is all well and good, George - but can we still make sure that the President Of The United States can be paid a living wage?

[George Rebane]

Not to worry Scott, anyone in that position becomes automatically a ward of the state in perpetuum.

[Douglas Keachie]

"But in the real world of technological advance, those with the brains, vision, and courage to invent and build things and methods that deliver to humanity products cheaper, quicker, and more capable, to those belong inordinate rewards."

Says Who?

You?

What would you say if one man invented a robot that was capable of inventing even better robots and better devices in all areas, so good that suddenly only his stuff was on the market?

What if soon he owned everybody and everything, including all the food you buy and all the gas you use, etc., such that nobody else owned anything?

How would you feel about that situation, since you too would be owned, as soon as he was in a position to control the water you drink, and the prices you pay for everything else?

You argue for inordinate rewards, and the current top 1% owns 20% of the country already, thanks to the tax cuts running from Reagan onwards for the wealthy. How much of the country would you say they should be allowed to own before you would cry "Uncle!" ?

50%? 80? 100%?

[Barry Pruett]

"Free market capitalism is a ruthless meritocracy that has constantly witnessed creative destruction – the new replacing the old as we distance ourselves from the cave." I could not have said it better.

Meritocracy. You work hard; you succeed - and you should give back to those less fortunate. Where the right and left differ is this - why should one who is successful be forced by government to give back to others? Giving back should be one's free and personal decision, not coerced by government.

[Ben Emery]

An email forward that everyone should enjoy, the point is in the last paragraph.

A cowboy named Bud was overseeing his herd in a remote mountainous pasture in
Montana when suddenly a brand-new BMW advanced toward him out of a cloud of dust.

The driver, a young man in a Brioni suit, Gucci shoes, RayBan sunglasses and YSL tie,
leaned out the window and asked the cowboy, "If I tell you exactly how many cows and calves you
have in your herd, will you give me a calf?"

Bud looks at the man, obviously a yuppie, then looks at his peacefully grazing herd and calmly answers, "Sure, Why not?"

The yuppie parks his car, whips out his Dell notebook computer, connects it to his Cingular RAZR V3 cell phone,
and surfs to a NASA page on the Internet, where he calls up a GPS satellite to get an exact fix on his location which
he then feeds to another NASA satellite that scans the area in an ultra-high-resolution photo.

The young man then opens the digital photo in Adobe Photoshop and exports it to an image processing facility in Hamburg ,
Germany . Within seconds, he receives an E-Mail on his Palm Pilot that the image has been processed and the data stored..
He then accesses an MS-SQL database through an ODBC connected Excel spreadsheet with an E-Mail on his Blackberry and,
after a few minutes, receives a response.

Finally, he prints out a full-color, 150-page report on his hi-tech, miniaturized HP LaserJet printer, turns to the cowboy and says,
"You have exactly 1,586 cows and calves."

"That's right. Well, I guess you can take one of my calves," says Bud.

He watches the young man select one of the animals and looks on with amusement as the young man stuffs it into the trunk of his car.

Then Bud says to the young man, "Hey, if I can tell you exactly what your business is, will you give me back my calf?"

The young man thinks about it for a second and then says, "Okay, why not?"

"You're a Congressman for the U.S. Government", says Bud.

"Wow! That's correct," says the yuppie, "but how did you guess that?"

"No guessing required." answered the cowboy. "You showed up here even though nobody called you; you want to get paid for
an answer I already knew, to a question I never asked. You used millions of dollars worth of equipment trying to show me how
much smarter than me you are; and you don't know a thing about how working people make a living - or about cows, for that matter. T
his is a herd of sheep.. ...

Now give me back my dog.

[Ben Emery]

This email describes Congressman Tom McClintock perfectly, a career politician that represents a blue collar rural district he has never lived. Since exiting college he has worked in government in one capacity or another. I went to the Rood Center meeting with his staff, a woman made the comment towards the end that the staff was just telling us reasons why we were wrong when we didn't agree with the congressman's positions.

We are our representatives constituents, we don't have to agree but they should listen to what we have to say, which was clearly not happening.

[Todd Juvinall]

Tom well represents the district. You liberals just are a minority and rightly so. If you were elected with your views of socialism then you would be defending your positions. So, get elected and stop telling the majority how bad it is, we like him and his views.

[Mikey McD]

George, extremely well written, logical and true. The progressive conveniently perverts economic laws to suit their propaganda. Wages (and benefits) for "commodity workers" would rise as either demand for such labor increases or supply of such workers decreases.

Demand increases along with economic activity. The more shiny the "golden ring" the more economic activity. The more economic activity the higher the demand for "commodity workers"; higher wages (benefits) result.

A thriving economy (employment begets lower supply of 'excess' labor), education (graduating a "commodity worker" to a non-commodity worker), etc also decreases the supply of available "commodity workers"; higher wages (benefits) result.

It is economic activity, not central 'social justice' planning that favors the employment (and wage/benefits) of "commodity workers."

The emotional based progressive will gladly accept a musician/actor creative type making tens of millions a year while the biotech creative type who has found methods of extending life is labeled 'evil' or 'unjust' for such compensation.

[Ben Emery]

George,
The top marginal tax rate is only one aspect that needs to change. The fact that capital gains/ dividends are the way most top corporate administrators are paid these rates need to match income rates unless it is on long term capital gains a.k.a. primary residence acting as a retirement investment.

There are dozens of loopholes and policies that need to shift to recreate the incentive of keeping money and jobs in America. TMTR is one of many. I believe that America and American jobs/ workers are worth protecting, you guys seem to think America is here to protect the profits of transnational corporations and international banking. I couldn't disagree more.

[Sore Loser]

Sore loser?

"Congressman Tom McClintock perfectly, a career politician that represents a blue collar rural district he has never lived... "
Posted by: Ben Emery | 24 June 2011 at 07:55 AM

[Mikey McD]

Nowhere has anyone here (especially George's post) said "America is here to protect the profits of transnational corporations and international banking." Please don't stoop to Keachie's level of 'reading non-comprehension.'

Nothing, absolutely nothing will create and protect American jobs better than a booming economy.

Did you read Rebane's post?

[Mikey McD]

Only when the progressive acknowledges the fact that economic activity is essential to the employment/wages of the masses can the real debate begin.

How to foster robust economic growth?

Does higher or lower taxes foster economic activity?
Do regulations help foster economic activity?
Does political uncertainty foster economic activity?
Does right-to-work foster economic activity?
Does unlimited legal liability foster economic activity?

[D. King]

Simple and concise George; it’s a shame that some still won’t get it.

[Todd Juvinall]

Apparently the revenues pouring into the Feds is the most ever. Yet, that is still way short of the demands made by the politicians on the people. I think the Federal Robin Hood has been defeated in America. Even he can't steal enough.

[Douglas Keachie]

"Nothing, absolutely nothing will create and protect American jobs better than a booming economy. "

Unless, of course, those economies are overseen by USA corps, and are located overseas.

[Mikey McD]

Keachie, looks like you will have to wait for the fall to get a seat.

https://ssbprod.sierracollege.edu/PROD/pw_sigsched.p_process

[Douglas Keachie]

That link don't hunt.

[Mikey McD]

Sierra College: ECON 0001A - Fundamentals of Economics- Summer course: FULL.

http://www.sierracollege.edu/

[Douglas Keachie]

Took it at UC berkeley,many moons ago. Have done plenty of post grad study in the School of Hard Knocks. Life Long Learner and Observer.

[Douglas Keachie]

"Berkeley" Am typing without my glasses.

[Account Deleted]

Well - My first post was a joke, but after reading the other posts, I'll have to weigh back in. Douglas Keachie does a good job of letting us see the inner workings of the progressive mind. He believes that the wealthy possess what they have because the govt doesn't take it away fast enough. 'You argue for inordinate rewards, and the current top 1% owns 20% of the country already, thanks to the tax cuts running from Reagan onwards for the wealthy.' Have the progressives ever asked where the wealthy get their money? They earn it - just as anyone can. If one man goes to the gym every day and works out and eats a healthy diet, he will get fitter and stronger. His neighbor lies around all day and drinks beer. He doesn't get stronger, he gets sicker and weaker. Why are we supposed to try to stop that? Not once has any of the brilliant progressive lights that post here been able to explain how private enterprise or the free market can take one dime of money from any free citizen in this country, with out the citizen voluntarily giving it up. I'm now, of course going to have to say "other than Obama care" - but that is not Constitutional or free market in any sense. If you don't want to give Bill Gates any money, then don't give him any. It has been my observation over the years that lower and middle class Americans are very good at blowing huge wads of their incomes on: cheaply made junk that doesn't last, going out to eat a lot, making a lot of interest payments on credit cards and time payments, laying out large sums of money on entertainment, generally not saving their money or investing in lasting goods or useful goods. If the middle class of America lived within their means and invested, they would own a great deal more than they do. I watched a great number of refugees from Asia come to this country with nothing and as soon as they had an income, they started investing and saving. One family of several brothers and sisters helped each other build their own home. They now all own their own homes and have invested further in commercial real estate. Even in the down turn they are doing alright because they never extended themselves out on a credit limb. They have no college degrees, can speak only passable English, have had no special program to help them, save the one that got them to this country. Yet they have, in one generation, overtaken most of the people living in this country in wholly-owned assets. Once, I was asked by a former Vietnamese why our tax code favors debt and punishes asset building? He pointed out that it hurts the ones that build the country and seemed at odds with our so-called free enterprise system. I had no answer.