10 responses to “Wealth Inequality and Distribution in the USA”

1. 

   Matt NY

   December 17, 2013

   It really puzzles me why the stockholders and the CFO put up with such high salaries to the CEO. It drains the company dry, so a company with a frugal CEO has that much more money to spend to compete against his/her competitors. You could build and pay for a whole factory full of workers for what many CEO’s make, and you cannot tell me that the CEO contributes as much as that to the company’s bottom line.

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   1. 

      save. spend. splurge.

      December 18, 2013

      They’re looking out for #1. It can be a very easy, slippery slope down into justifying why you are paid what you are paid.

      Reply
2. 

   Chris

   December 17, 2013

   I don’t disagree that a lot of “regular” working people waste money making poor decisions (expensive house, car, vacation, phone, etc) and don’t put enough aside. However, I also think that the wages paid to most CEO’s are often ridiculous. It especially irks me when the company/stock is not doing well, yet the CEO is cashing in, but there are either cutbacks or no money for the working Joe/Janes of the company. If a company is growing well and doing well, then all employees should benefit, as should the shareholders. If things are not going well, the CEO should feel the pain before anyone else, as they are in charge of the ship and obviously are not performing in a manner that deserves the compensation they often get. Finally, this idea of comparing the compensation against a peer group and then increasing to at least the average and more often the 75 percentile is flawed, as it results in an endless merry go round of CEO pay. Coles notes – CEO pay should be “high” due to the responsibility and work required. However the current system often seems out of balance, with pay/total rewards completely out of touch with actual contribution and performance. My 2 cents.

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   1. 

      save. spend. splurge.

      December 18, 2013

      I am with you. CEOs should not be paid what they are paid especially in the U.S. The wage gap is what kills the country, as evidenced by research (wish I bookmarked that article…)

      Anyway, they did a comparison once of the wage gap between CEO and worker in different countries and found that it resulted in UNHAPPIER countries if the gap was too big (like in the U.S.).

      Countries like Japan were happier because the gap was smaller. It has more of a social impact than we think.

      Reply
3. 

   tomatoketchup

   December 17, 2013

   The average United States workers that I know tend to make exceedingly poor financial decisions that keep them in a perpetual cycle of debt. Most of the average American employees that work in our office who make about 10 to 20% of what I do in a year drive more expensive cars than anything I’ve ever owned or ever will own. Yet they contribute close to nothing to their retirement funds, turning down free money in the form of a company match year after year.

   The average American isn’t interested in slowly growing their money with index funds. They want a big house and a $30,000 Hummer to show off to the neighbors.

   I do think that the tax code in the US needs some adjusting, and the super high income folks most definitely should pay a higher percentage than they do now. An equally important issue is how to fix the financial incompetence that is all too common among the middle class.

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   1. 

      save. spend. splurge.

      December 17, 2013

      @tomatoketchup: Hear hear. Very well said!

      I think one of the main issues is that we are way too exposed to how others live, and there is a real TV culture. What people see on TV is simply NOT realistic.

      I mean I always use this example but I watch HGTV a lot, and I see couples who make $75,000 a year, put down 5% on an $800,000 house and think that this is perfectly normal.

      As someone who now averages LESS than $75,000 gross a year in terms of income (after not working a lot and traveling instead), I can’t even fathom paying those kind of prices.

      My price range is more $300,000 which is basically how much I can afford to pay for a place, 100% in cash right now (with my partner doing the other half), and that’s from being lucky from having a good job and saving all that cash in the first place, which is not what most folks do from what I gather.

      .. so as you said, how can middle class folks think that paying almost a million for a place is totally normal?

      It’s those little details that add up to a picture that makes no sense.

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   2. 

      Anonymous

      December 17, 2013

      @tomatoketchup:
      I have to agree with tomatoketchup. I have known people that are healthy, grew up in middle-class households but make really dumb decisions with their money and that keeps them financially poor.

      I once had a friend whose dream was to be a singer, but they didn’t do anything to advance their goals so they would go and work in low paid jobs but they didn’t want to get trained in a vocation or go to college. I have lost contact with this person but I suspect they are still working low paid jobs.

      I once tried to talk to them and tell them to get training at community college or go to university. They declined and I know they don’t like working low wage jobs.

      Another one wanted to be an actress but wouldn’t take acting lessons or go to auditions. An acquaintance got a bachelor’s degree in the humanities, the student loans they got for this bachelor’s degree, not only did they use it to pay for the bachelor’s degree but took out far more than they needed to support a lifestyle that was beyond their means.

      This same person then decided to go to ITT tech after they got their bachelors. Got a huge student loan and at one point told me they regret ITT tech, not sure if they are still there or dropped out as I’ve lost touch with them as well, but last time I talked to them they got offered full-time positions by several companies and turned them down.

      One friend of my boyfriend got jealous because my boyfriend makes really good money without a college degree. But the bf didn’t go out partying like his friend did, instead bf is self-taught in the IT field.

      Bf worked full-time jobs and learned on his free time instead of taking out student loans. He also did take some classes at the local community college but has no certification or degree from community college. However he is able to find work in the IT industry.

      His friend did a lot of partying, ignored school, took them 10 years to graduate and when they did graduate, they just barely graduated, the friend is in debt, like to buy cars every 2 years and them comes over and shows them off. Used student loans to live beyond his means.

      Not that there is anything wrong with buying cars if you can afford them, but my parents taught me you buy one car with your own money and drive it until you have the money to pay for your next one.

      This friend makes very poor financial decisions and then complains when other people didn’t especially when they aren’t college graduates. My bf tried to explain to his friend that he can make as much as he does, but all advice seems to fall on deaf ears.

      I knew an assistant manager at popular chain video store back when those were still around in the early 2000s, her husband and she got into $12,000 in debt, her in-laws paid off their debt they were busy paying back their in-laws for the $12,000.

      This chain video store used to offer tuition reimbursement or some type of tuition assistance, and she had worked for them back when she was 16 so she could have qualified, as she was in her early 20s when I met her, and she hated that job but still worked there and didn’t take up the educational assistance package.

      I can give more examples but in my experience the healthy and poor people I have known are honestly poor because they choose to be. Also if you earn $20,000 but spend it all, you will probably spend it all if you get a job that makes $50,000 and what about if you get raises and work up to making $80,000 or even six figures?

      If your habits are poor when your income is low and you don’t improve them, then you will also drive yourself into the poor house when you make a larger salary. Poor habits explain why lotto winners end up broke, and why a lot of inheritances don’t last past a third generation.

      Also I don’t think it matters if a CEO makes $400,000/year and I make $40,000/year. I don’t think a CEO works harder than anyone else. But if I’m able to work a job that say pays around $40,000 and am able to save, invest and live within my means, why do I care if the CEO makes $400,000?

      I chose a career that is very middle-class and I knew the trade offs I was making when I chose it, but I love the flexibility of this career. I have a lot of passion for this field. It’s fine with me that I don’t make six figures, have a private plane, a yacht, or a flat in Fifth Avenue. I don’t live in an expensive city so $40,000 here goes a long way.

      From my experience with the rich, they have the same amount of problems as anyone does…problems with family, friendships, problems with health, sometimes drug problems, sometimes problems with self-image and confidence, etc.

      The only thing is that they are rich, that’s it and having money doesn’t solve every problem as many people like to think it does. Anyway sorry I wrote a novel.

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      1. 

         save. spend. splurge.

         December 18, 2013

         What a fantastic comment. I recommend everyone read this..

         Highlights:

         If your habits are poor when your income is low and you don’t improve them, then you will also drive yourself into the poor house when you make a larger salary. Poor habits explain why lotto winners end up broke, and why a lot of inheritances don’t last past a third generation.

         Also I don’t think it matters if a CEO makes $400,000/year and I make $40,000/year. I don’t think a CEO works harder than anyone else. But if I’m able to work a job that say pays around $40,000 and am able to save, invest and live within my means, why do I care if the CEO makes $400,000?

         I always did think that if you wanted to have the drive to make money and become successful on your own terms, then you’ll end up finding a way. Even a guy out of high school, working at Wal-Mart at a cashier who is smart, can work his way up to be a General Manager without a degree.. or they’ll PAY for his degree!

         Stuff like that does happen, but if the drive and ambition is not there, and you’re relying on a piece of paper or are making silly decisions, it will never happen.

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4. 

   Gillian

   December 17, 2013

   This is what makes me think we are all doomed.

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   1. 

      save. spend. splurge.

      December 17, 2013

      @Gillian: Not totally doomed. If you read personal finance blogs, you’ll also know to avoid the trap of lifestyle inflation and so on which will put you far ahead of the game.

      It’s also on us to be smart money managers as tomatoketchup pointed out.

      Reply