There is a peculiar mindset for many people about the distribution of wealth. There is a feeling that those that have it must deserve it — or have earned it. Those without it don’t deserve it, haven’t earned it, won’t work to get it. But, in reality, that is not how wealth works.
Let’s use the name “capital” as a parallel to “wealth” to fit in better with the dominant economic system in the “West” — capitalism. When we work, we get paid according to the amount that our society has determined. If we have more than we spend, we can save it as “working capital” or “savings”.
The following discussion primarily applies to the United States but there are aspects that apply to other countries and systems. Only you know how much and where.
Within a capitalist (not officially feudal) system, people can be separated into three groups.
The poor (group 1). This group is always struggling to achieve the “standard of living” for where they are. Note that the precise income boundary will vary from location to location, country to country, area to area. In the US, those in this category must forego something(s) that many consider “normal, everyday” items — such as permanent housing (ie., they are homeless), clothes that fit, healthy food (junk food is cheaper), a car (public transit in the US, where available, is useable but not convenient, or easy, as it is in many other countries in the world), and so forth.
For the poor, any savings needs to be set aside for emergencies (flat tire, car accident, faulty tooth, …). There are many working for minimum wage (in the US — even assuming a higher state minimum wage rather than the sub-livable federal wage) who have NO extra. Each week is a matter of what they must forego. This percentage of “surviving working poor” has increased each year since 2009 when the U.S. federal minimum wage was last raised (for most people) to $7.25/hour. Living expenses have gone up 53% since 2009 and this means that “rags to riches” story has become more and more of an urban legend. In the US, about 11% of the population are at the official poverty level but there are many more “working poor” doing without and living payday(s) to payday.
So, the reality is that people who earn less than a certain amount (greater than official minimum wage) often have no savings above expected living needs. Is this what they deserve? They worked, they earned, they just don’t have any “extra”.
Middle income (group 2). This group can meet the “standard of living” for their area and have some extra. The extra, however, is often reserved for making retirement more enjoyable.
Working the way up the wage ladder, we get to the vanishing segment called “middle income”. In this case, there are truly choices. Any “extra” income above needs is called “discretionary” income. People can CHOOSE how to spend it. They COULD save it as “working capital” but there is always the temptation to enjoy life at present rather than save for the future and the attractions of a consumeristic society makes it easy to find something to do with the “extra” income. There are also desires to help the members of the family — paying for schools, degrees, vacations, cosmetic work, … .This group may not work any harder (perhaps even less hard) than the poor but, because of the higher wages allocated for their job positions, they have extra capital.
It is very difficult to move from group 1 to group 2 but much easier to move from group 2 to group 3 as long as they have good financial and investment skills and reduce their discretionary spending as much as possible. No second home, no boat or rv, no special catered vacations,
The rich (group 3). They have so much that they don’t even know how much basic living expenses cost. Considering oneself rich, or not, is subjective. People threw themselves out of windows during the Great Depression because they lost 80% of their wealth — putting them back into the rank of middle income. And, after having had all of the excesses of being rich, they were scared to death (literally) to have their income reduced so far and to lose their cook, maids, butler and so forth.
In this group, income is primarily via unearned salaries and bonuses or dividends/capital gains from investments. Earned income is not a substantial part of their income. (Bringing in $500,000+/year ($250+/hour) can, in no manner, be justified as having been earned in my opinion.) And their requirements for living are such a small percentage of money available that costs aren’t even considered when making purchasing decisions.
Thus, wealth is concentrated in group 3. Group 1 is being made larger and larger via mandated lower wages in comparison to living costs. Group 2 is getting smaller each year. And group 3 stays about the same size.
How is the ability to gather wealth determined? The first factor is salaries. It is fantasized that salaries are market determined. In other words, they are paid what they are “worth”. This isn’t really the case. There is a lot of “lip service” about this but teachers still start off with very low pay (because of unions, they may leave their careers, upon retirement, with a decent income level). The low end is determined by legislation and not the market. The higher income levels for “blue collar” workers is dependent on education, certifications, and experience — often with a union interceding with management. The gradation of what experience and what education is “worth” is a crystal ball type of situation.
In some instances, “appropriate” wages and benefits are determined by comparisons to how much money in sales per employee is achieved For example, if the company figures that an employee, in a specific job position or category, brings $300,000 into the company, then allocating $200,000 for salary and benefits is “reasonable” for the company. But this works only as long as the need exceeds the number of qualified employees (“market driven” — paid what they are “worth”).
In the US, about 21% of all millionaires had inherited money as part of their foundational wealth. About 60% of all billionaires started with inherited money. The other 79% of millionaires built up their worth by saving, and investing (sometimes starting successful companies), for many years.
How could we spread more fairly and equally? First, the starting point needs to be set at a living salary (meets some predetermined minimum “standard of living”), with automatic increases based on cost-of-living. Next, salaries need to be more transparent so that, eventually, comparative salaries will seem more in keeping with our official beliefs in freedom and equality. Last, the non-material (cash, stocks, bonds, and so forth) transfer of inherited wealth (transfer of properties, intellectual properties, or unrealized collections need to have special acknowledgement and allowances in order to preserve family farmers, children of artists, and so forth) must have much higher taxes. “Progressive” taxes need to come back into fashion — with a severe closing of loopholes. (Social Security and Medicare taxes should have no “cap” on wages — everyone should contribute and, later, get their investments back.)
Changing the status quo is dependent on the wills of those who presently benefit from the existing status quo. Women being able to vote depended on the males who already had such rights. Blacks got the ability to vote via the ballots of approved voting people. The voting age changes arose out of protests during draft registration and a reflection of rights associated with responsibilities.
It is very difficult to change any system from the status quo. But it needs to happen to have a society that cares for, and honors, each of us for the spirit which resides within.
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