The allocation of profits in startups, at least, feels... problematic.
I was the #2 engineer hire when I was hired five years ago. Since then, we haven't become super successful -- yet -- but we're at least at breakeven. We have three engineers and we're working on a huge new project that hopefully will really grow the company.
I have 1.8% equity.
Sometimes when I'm working late or working on the weekend, which is often, I wonder: Is this really worth it?
I'm totally fine with taking a pay cut to build something new, in order to have the chance at making life changing money. But at the equity I have, we'd need to be quite successful in order to get that.
The VCs who funded our seed and series A (the only funds we've raised) will see the lion's share of the profits. Emotionally, that feels odd. We've thrown a significant percentage of our lives, and they've only thrown in money -- and a pretty small amount of it, really. I know it's supposed to make sense from a financial perspective or whatever, but emotionally it doesn't feel fair.
But hey I guess it worked, I have what feels like a small percentage and yet I'm throwing everything I have at this company. I'm likely an outlier, though. I suspect that if VCs and founders gave employees a bigger piece of the pie, they'd have a much more motivated workforce.
It sounds like you are unhappy with the amount of late nights and weekends you’re spending.
If you’re still spending backbreaking hours even after the product has been going for awhile, or simply used to like the idea but are not liking it anymore, it might be time to have a heart to heart with your boss. Different companies have different expectations, but at my own company, we’ve always had a strong desire to avoid that sort of intense and demanding work schedule. We’ve thankfully not needed to ask people to come in on a weekend... ever, I believe. We’ve had to fight a fire or two here or there, but it was typically a pretty quick troubleshooting session, and then taking a thoughtful approach during the workweek to figuring out a way to avoid that emergency scenario in the future.
Life is more than work, and it sounds like you’re feeling resentful of your employment situation. Life is short, so do something about it, whether better work life balance, requesting money that will make you happy (if that amount exists and the company is willing to pay it), or something else.
This is a common discussion item here at HN. Really it only makes sense to work at a startup in the following scenarios: you are founder, you are new and need experience, you are getting paid very well, or you don't care about money and love the work. Trying to get rich as a non founder is a fools game.
Well, this isn't completely true. Founders are much more likely to make ten or a hundred million than first hires, but first hires are at least as likely to make $500k to $3m as founders, especially in net present value accounting terms, and not even adjusting for risk adjusted returns or opportunity cost differences.
Most startups don't get to first hire. Most startups have founders that don't just make nothing, they lose money. First hires don't lose money.
I'm seeing a lot of these irrelevant moral arguments thrown around. The fact that the founder is taking as much or more risk than you does not mean you should forgo better opportunities to work for him. You should work for him if the combination of salary and equity is competitive, and nowadays it often isn't, even for early hires.
Which makes the argument that being an early hire at a startup doesn't make sense at the current low equity and salary commonly offered.
> first hires are at least as likely to make $500k to $3m as founders
I know too many startups where early hires failed to make anything close to $500k, and in fact didn't cover the difference between their salary and market rate even for a single year.
Exits in which early hires make even just $500k are very rare nowadays.
> First hires don't lose money.
But of course they do! They lose the difference between what they could make elsewhere, and what the startup is paying them.
Non-technical founders have far lower opportunity cost.
Based on your comment elsewhere[0], I seem to be among the crowd you believe is throwing around irrelevant moral arguments when in fact I did not and 3pt14159[1] to whom you’re replying here did not. I was discussing valuation and 3pt14159 probability.
The founder owns a chunk of equity, an asset with some value. Given the ups and downs of reaching a point where people are kvetching about equity allocation — and 3pt14159 reminded us about survivorship bias — the founder may overvalue her stake. If bad news has recently hit, she may undervalue. Regardless, the question is what will persuade the founder to give up a piece of what she owns, and what will she accept in exchange?
Looking backward does not generally make for wise business transactions. The entrepreneur’s role in the market economy is looking ahead to make forecasts and allocate capital accordingly. Comparing past exposure to loss is a pointless exercise. Giving away resources with no hope of repayment or increase is gifting. Spending with the expectation of regaining what was paid plus an additional return is investing. This is still not a moral question but one of philosophy.
Many people miss this when looking at the situation as though it were an undeserved windfall for the founder, a gift from Santa Claus. Assuming the founder is primarily interested in increasing the value of her equity, accepting a smaller percentage of the pie will not achieve this purpose unless the individual slices become more valuable because the grant of equity was an investment, and “Well, I’m going to continue doing the same job I’ve been doing for the compensation I already agreed to” is not a strong business case.
Looking at it from the employee side, of course don’t agree to below-market pay with zero or insufficient equity on the mere hope that big blocks of equity will fall out of the sky later. (This would be an opportunity cost for the employee, but that is still different from out of pocket cash loss to which the founder may have been exposed.) Employees who want more have to either negotiate for it up front or increase their value to the business. On this, I will make a moral argument: yes means yes. Ask for what you want, and agree to what is acceptable. No one is a mind reader.
This is true, but there's opportunity cost as well: those same first hires would be significantly more likely to make that 500k-3mil over a few years at a FAAMG-type company, anyway.
First hires are not at least as likely, they may be rewarded with a portion of the company out of the goodness of someone's heart or they may not be, until you actually have a stake in the company don't mistake your seniority for a share of the profits.
We've thrown a significant percentage of our lives, and they've only thrown in money
Money saved, borrowed, or inherited represents a significant percentage of someone’s life. Even if you deny this, the money in someone’s pocket in the present represents an enormous percentage of that person’s future life.
Put yourself in the shoes of the owner who took risk up front. Yes, you took some as well, but at any time you could have walked away and accepted another job. If the owner put on chains of debt, walking away means losing a house, other significant assets, or payments for years into the future. If the company is at breakeven and debt was involved up front, not much of it has been retired. The debt may be gone, but memory of the burden and stress is not.
Everyone wants equity. Lots if not all employees feel like the deserve it, even the person who answers the phone and could be most easily replaced. The owner presumably took the risk up front with the objective of making money. To make sense, giving away equity should come with an expectation of adding to the owner’s wealth, not subtracting. Employees and consultants who clock out at the end of the day do not fit this criterion and are already being paid in exchange for their time and effort. The people who will add to the owner’s wealth are the people who will bring in new customers, sell more to existing customers, and generally work on the business — not just in it — to make it more valuable.
> Everyone wants equity. Lots if not all employees feel like the deserve it, even the person who answers the phone and could be most easily replaced.
This is not a moral question of who deserves what. Compensation is a business issue, not a moral one.
The question is whether OP is getting as much as he could get elsewhere, and the answer is likely "no".
If startups could compete fair and square with non-startup comp, employees like OP wouldn't be discovering that their equity stake is tiny and they are therefore underpaid after 5 years of working for the same startups every day.
> Put yourself in the shoes of the owner who took risk up front.
Why should he? Is this "would-be millionaires sympathy hour"? You're saying the founder took more risk. Maybe he did. That's actually not always the case, when you factor in opportunity cost for a non-technical founder vs an engineer - I've seen founders earn as much as they would elsewhere in base salary, without factoring their enormous equity at all.
But even if the founder took more risk, how does that compel OP to work hard to make him a millionaire, while foregoing fair market compensation for himself?
You are implying it's OP's moral duty to compensate the founder for the supposed risk he may (or may not) have taken.
OP's only duty is to do what's best for himself. The founder and investors are certainly doing that by making OP work weekends for what is likely below-market comp.
Nowhere did I suggest any compulsion or moral duty. In fact, I wrote the opposite, namely that employees may walk away at any time.
The point of looking at it from the owner’s perspective is to elevate thinking above “It’s so unfair! Harumph!” that is so often the case. As you wrote in your reply, it’s a business decision. Imagining oneself as the owner makes this plain.
Equity is just a point system which gives people the ability to make decisions and influence our world.
They could earned the equity, been given it or just been plain lucky and found it. It literally doesn't matter. They have it now, and we all accept these are the rules.
It's just a sorting algorithm we come up with to help efficiently allocate resources.
That's not what the Fed chair is talking about. Nobody is concerned about wages in tech. Tech is one of the few industries that has the opposite of a stagnant wage growth problem.
We are paid a lot but I heard somewhere that even though we should have crazy bargaining power we still are capturing less of the profits than would be expected so tech isn't fully immune to it (especially if you aren't working at one of the more famous tech companies)
>We are paid a lot... even though we should have crazy bargaining power...
While you are likely correct, what pembrook says is mostly true. The tech scene is often used by economists and the like as a cudgel against any talk that U.S. wages and the general economy are lackluster. (To be clear, I am basing this on actual discussions I have had, not theory and/or scholarly papers.)
Yeah, I mean you're absolutely right. I'm in an incredible position, and yet, it still feels unfair. I'm 90% sure that it's just that I'm petty and greedy.
And yet, like, at the end of the day the engine that drives the economy forward -- and humanity forward -- isn't cash. It's individual human beings sitting down and putting in the hard work in creating something new and nurturing it for years.
It feels like our economy gives most of the rewards to the people who put in money, and not enough to the people who put in the actual hard work. Even here, where things are amazing for employees.
Why? Because the founders gave you 1.8% pre-dillution equity, vesting over 8 years, and told you that's "very generous"?
You're an engineer in a market where engineers are in high demand and short supply. Being one of 3 engineers developing a product and getting just 1.8% of the equity - coupled with high demands and (I would bet) under-market pay isn't such a great deal.
You're shouldering quite a bit of risk spending your best working years in a place that likely will never be able to promote or pay you fairly. Your potential reward for that is very limited.
Yet after all this time, you still think you're getting an "incredible" deal...
He basically agreed with your skepticism in his first comment, but he also believes that his situation is comparatively very fortunate, when looking at many other people in this country.
Both things can be true - your comment is comparing up, as he did in his first comment, while his second comment compares down.
I can understand the feeling. In certain cases--like compensation--the economy trends towards inefficiency due to an imbalance of power between capital and labor.
However overall, the economy is a mechanism for rewarding risk, not hours spent in front of a keyboard. "Hard work" in general is a meaningless concept. What drives humanity forward is risk taking.
The system is designed to encourage holders of capital to risk losing it for the potential reward of even greater wealth. Without incentives for owners of capital to take risk, our society and technology doesn't progress.
Speak for yourself. Wages in tech is highly consolidated into tech owners, tech engineers, and then tech support. Anyone on the periphery is not getting their fair share whatsoever.
If the company has millions of dollars in not just revenue but profits and a significant number of its employees are below poverty level and/or on welfare, is that fair? No, definitely not.
If the company's profit per employee is more than a certain percentage of a given employee's salary, is that fair? No, probably not.
If the company were to distribute a 10% salary bonus to all employees, would that bonus eliminate profits?
If the company were to distribute 10% of profits to all employees equally, how much difference against their salary would that change be?
If you don't need the money, then don't take it. Problem solved. If it's such a small amount of money, then self-fund.
The VC is thinking "I'm paying this guy's salary to work on something that may or may not ever pay for itself", and he's got dozens of companies that he's funding and they won't all hit it big... or even survive.
Or, another option, don't throw everything you have at a company -- join a later stage startup where the work-life balance is better, but you can still expect a decent payout if it succeeds.
1.8 is non trivial (assuming no shenanigans) back in 2000 I had .5% in a uk vc backed company if we had been taken out I would have been a millionaire IRL not just on paper :-(
The "if we had been taken out" is the key in your statement. Odds are very good your startup won't ever "be taken out" in a way that results in you getting the money you lost by not working for a big tech company.
The risk adjusted returns on startup stock options are so close to zero you might as well classify them as "winning the lotto".
Personally, I'm done with startups. They simply don't pay nearly what you'll get from working at the big boys.
Well it was a worker coop so there are some stronger laws governing that sort of company ie the employees directly owned the controlling interest.
Re being taken out if the coop movement was not stuck in the 19th century and embraced .coop properly it could have played out - and if ICANT weren't a bunch of xxxxx :-(
I agree with this. Every offer I've gotten from an early-stage startup was market salary and <1% equity, often when I was engineering hire 1-5. I had conversations with founders and told them that if they couldn't meet my market rate, they had to give me 3-5% of the company. They all said no, so I did to. Then I'd get my market rate from a bank or a security company or went back to contracting for multiple clients.
Unless the company is going to be the next Google, those kind of deals don't make sense at all. But thats' generally lottery so you can keep that aside.
The other part is I have seen people fall for titles. 'Senior VP of X', while in reality you neither good exposure into org management, and let your tech skills go down the drain at the same time.
Often because of these things people lose their prime years. In most cases working for a big company, and then having a good savings and investment driven lifestyle will put you ahead of most of this kind of work opportunities.
> Sometimes when I'm working late or working on the weekend, which is often, I wonder: Is this really worth it?
The key problem in your (all too common) story is that you're only waking up to reality now.
I'm guessing that like most startup employees, you were swayed by initial aggressive courtship by the founders / chief-execs, with lots of vague handwaving and hyperboles telling you that you'll definitely become a zillionaire with your "generous" equity.
After 5 years (!) of hard work you finally crunched the hard numbers, and realized your best-case exit might cover a bit of what you lose in one year of overworking yourself for a below-market salary. Your founders and managers forgot to tell you this, and probably stuck to hyperboles without divulging much real info about your equity. Far from making it easy for you to understand your equity value, they probably made it hard or impossible.
I wish your story was some dysfunctional exception, but unfortunately it seems to be the rule nowadays. In fact, I know all too many engineers who faced this sad music only after the exit, for which they got shockingly modest returns.
I can also tell you to forget about your equity being 1.8%. It's incredibly unlikely you'll actually get 1.8% of whatever monetary value your startup exits for - if any. Like most startups, certainly in your position, you are looking at more funding rounds. The investors will get additional shares, you will get diluted. Of course, the founders will tell you nothing about this, you'll just see it in your bottom line - if there ever is any.
In fact, in your place I wouldn't be so sure you actually have that 1.8% right now.
You should do one of two things:
1. Ask for a lot more equity, with transparency into the amount and valuation.
2. Start quietly looking for an employer that will pay you better, and work you less.
From your perspective, you are already fully vested. There's no reward for you taking additional risk. No sense in staying to be underpaid and overworked. Even you want to stay in startup-land, find a new startup to diversify your equity portfolio, which currently consists of one tiny slice of a risky startup.
Your current startup likely won't collapse if you leave, so you're not risking your existing equity. If your departure would be so devastating, they should give you a lot more equity.
Either way, do a clear cost-benefit analysis, and do what is right for you. Your founders are doing what's right for them, and so are the investors. Follow suite.
From your perspective, you are already fully vested. [...] No sense in staying to be underpaid and overworked. [...] Your current startup likely won't collapse if you leave, so you're not risking your existing equity.
Employees usually have to buy their vested options if they leave or lose them. That means you have to raise the cash for the options there and then and you might incur a tax liability for the capital gain (in some jurisdictions it's actually taxed as income!). This doesn't usually make sense if the company isn't near being acquired or IPO'ing (and who does that any more?).
As an early employee, his strike price should be low, so the cost of buying his stock shouldn't be prohibitive. I'm not sure about tax laws, but I'm very sure that paying some tax should not be a reason for OP to stay where he's being overworked and underpaid.
I doubt the tax burden is so bad, but if it is, then the decision to join the startup in the first place was even worse than it seemed before. OP should just treat it as a sunk cost, cut his losses and leave.
Staying just escalates his investment and near-certain losses.
I haven't worked for startups in a while, but if the tax situation got to a point that it's compelling employees to stay put, then working for a startup is even less sensible than I thought.
> From your perspective, you are already fully vested
So, um, about that. I should not have said I have 1.8% in the bank. I actually just have about half of that vested so far. I won't be fully vested until three years from now.
I don't really want to quit. I'm excited about what we're working on and I think it could be really useful for people. I just wish that the upside was a little bigger. I also really loathe the idea of walking away from something that isn't finished, you know?
Plus, all the intangibles are nice: I like my co-workers, I like our full-remote office.
Did you do a bit of searching, and failed to find anyone who would pay you substantially more?
Are you OK with working hard, including these weekends you mentioned?
If the answers to all these questions is "yes", then by all means - stay.
Otherwise, you may have a reason to leave. This is your decision. Think about what is best for you.
> I just wish that the upside was a little bigger.
Either take action, or just forget about it.
If you have a realistic chance of getting more, for example by threatening to quit, then go ahead and do that. I saw below you already asked your founder, who declined with a BS excuse ("the board won't like it" - read: I don't want to give you more equity).
There's obviously risk in pushing it, especially after you already got denied twice.
So either accept it and stay, or push for more, taking the risk you'll be denied again and possibly they'll look to replace you since they'll realize you're not happy.
> I also really loathe the idea of walking away from something that isn't finished, you know?
Man, this is software. Nothing is ever finished :)
Always that extra feature, another platform to support, that other scaling target you wanted to hit...
Here's an idea. Expect some differential vs the biggest cashflow established companies vs a middle/small company, but don't take a paycut vs a reference of an established company. The equity should be an bonus attractor, but odds are it will be worth nothing. So the opportunity cost is the cut x number of years, and for that you're buying 1.8% equity with pays out in a 1/10 instance (and maybe not in any significant amount even if it does pay off). If the non-financial aspects appeal, then fine, but realize you're paying for that difference.
Honestly, the risks for early employees are closer to the investors risks. Early employees are just as subject to the whims of the founders as investors are. It would be much more balanced if early employee options were from the same class of preferred stock that investors are granted. That way they at least get something out of a low-value buy-out they had no control over.
I'm pretty sure the equity I have is already incredibly generous for an employee. But yes, I did bring up the issue a couple weeks ago. He doesn't believe we're in a position to go to the board and make any changes to stock compensation at this time. He thinks we should first figure out how to accelerate (with this new project) and then we'd be in a better position to ask for more stock for employees from the board.
If the founders control the company, then they can dictate the terms of employee compensation. To a degree at least... I guess they cannot unilaterally make decisions that completely piss-off and alienate their investors, or good luck with series B.
If the VCs control the company, then I'm sure their response would be "we offer industry standard x% of equity, so there's no reason to offer more".
Chicken and egg problem. It won't change until someone changes it.
Another thought: Where would the increase in employee equity come from? Would the founders dilute their share, or expect all shareholders to dilute? If it's just the founders deciding to be more generous, then why should the board have a problem?
The board should be absolutely in favor of founder-only dilution, since it costs other investors nothing, and ostensibly results in a more motivated workforce.
So your description of his response really struck a nerve with me. The founder is the leader of the company, not the board, and the founder(s) regularly give up equity in order for a company to be successful. Yes, it might require board approval, but passing the buck to the board like that is inappropriate.
The matter at hand is: does he believe you deserve more equity at this point in time? If yes, then commit to fighting for you (and if equity is somehow impossible, explore other options). If no, explain why & how to improve.
To be fair, nobody is perfect in every interaction, and there are a million rational reasons why a founder would sidestep a question like that (terrible board relationship, you or others at the company have a hard time hearing negative feedback, distracted that day, etc.). If you feel like the matter wasn't resolved to your satisfaction, it is worth bringing back up.
Your equity isn't "incredibly generous" for a startup in your position, where you are the 2nd engineering hire, the team is still a handful of engineers, and you're likely going to see more dilution (unless you close shop before).
Practically, from what you describe (startup not doing very well after 5+ years of active development), I'd be very surprised if you see any serious money from that 1.8%.
> He doesn't believe we're in a position to go to the board and make any changes to stock compensation at this time.
The board isn't some harsh unreasonable committee. They would quickly grant you equity if they thought it was important enough to do so.
This really is a BS excuse. He basically told you "I don't want to give you more equity, and I'm going to blame it on some external entity rather than own up to it".
That 1.8% figure I gave includes shares that have not vested yet. My original stock compensation was significantly smaller. I've received small stock option bumps over the years, including a significant one last year. I have about half of my total shares vested today, and I won't be fully vested until 2021.
the ingenuity and curse of capitalism is boiling all of human value down to a number. when someone uses the phrase "business decision", that's shorthand for "let's use monetary value in place of the messiness of the human condition".
this generally isn't a malicious act--meant to make the task more manageable--but it does set up the board to be advantageous to the capital holder (in this case VCs, and to a somewhat lesser extent, founders). the capital holders aren't bad people per se, just that the emergent property of the system is tilted toward capital and away from labor. this is the version of capitalism as we have it now.
you've implicitly accepted that game when you took a salary and an equity stake. capital holders are exceedingly motivated and practiced at squeezing value out of a transaction--that is why they got into the game in the first place. within this game, you'll need to either find leverage points (like a unique skill or asset) to get what you think you deserve, accept what you've got and appreciate your relative comfort, or find another opportunity (which is a potential leverage point in itself).
(part of) the medium-term solution is to bend the regulatory environment toward fairness. things like making the capital gains tax rate the same as ordinary income, and holding corporations and executives responsible for their actions, just like regular persons.
in the long-term, is there another system of figuring out who deerves what and how much? how do we allocate resources fairly so that no one feels shafted? it's the ultimate (dynamic systems) optimization problem. capitalism is attractive because it's decentralized, but is there a system better at solving this optimization problem without losing this attractive property?
To me it is pretty ridiculous how much labor is taxed, and how little capital is taxed. Especially if we are worried about automation and lack of productivity growth, it seems so counter-intuitive that we are completely stuck to a tax system that devalues workers.
The reason is simple: labor has less options. Capital can mostly go where it pleases - if it is taxed too much it might flee the country. But your 160 million workers aren't going to uproot themselves and move to another country because they're too heavily taxed.
Honestly, where would it go? The US Treasury sets the bond price and no one is turning it down even with completely shitty returns (like 1-2%!). If capital flees they can go to an even higher tax country in the EU. They can go to a negative return country like Switzerland. They could go to China, but guess what, it's a one way trip!
I bet if lawmakers said capital gains tax is bumped to 20% everyone of them would bitch and moan for 30 minutes, and then pay the damn tax.
That's the problem, they wouldn't just moan for 30 minutes. They would spend money to have the tax reduced which I'm assuming is the only reason the tax isn't at 0% because it's not worth it for them to push it below 15%.
Are you thinking of any specific one out of the "so many" examples, or are you assuming? Because for Senators, it's illegal to sit on a corporate board, and for Members of Congress, it's only legal if the position is unpaid: https://politics.stackexchange.com/questions/10976/legislati....
However their relatives can sit on boards, so a senator's spouse would be fair game. And they can use the paid board gig to make money between terms.
Susan Bayh, ex senator and governor from and Indiana married to another senator, sat on multiple boards between her own political terms and while her husband was in office (also while she was governor). She's been on at least 14 boards in total: https://en.wikipedia.org/wiki/Susan_Bayh
Are you suggesting that spouses of Congressmen shouldn't be permitted to sit on corporate boards? (And presumably, should be excluded from any of a range of careers in the private sector.)
No, I'm just claiming policy makers can be influenced by corporate boardrooms. I don't really have a solution for it, and I can't really say that I know whether or not this is a big problem that needs solving, but is there legal ways for companies to use board positions to affect policy makers? Yes.
Personally, I don't think it's the worst. I would rather they had to do this than get huge retirement packages as they do in my country after their service. Also, if their spouses can make a living being involved in business so politicians can't use sympathy for their poor family as leverage to get higher compensation that would be good too. But we can't handwave the issue of corporate influence over politicians however we choose to deal with this.
They can get around that through the "revolving door" between legislators and lobbying groups: opensecrets.org/revolving/
The old "you pass legislation that we want, and we'll have a seat waiting for you on the board after your term is over, with a nice paycheck attached".
If it were me, I would consider moving my money to Latin America. Not Mexico of course, due to the recent election, but definitely would research the regions and political climates of our southern neighbors.
I work every single day to try to build a world where we get socialism voluntarily. I’m an author and I write about how we can build a world where helping people is so easy we choose to support it without government intervention. I’m a libertarian socialist, which is a term I encourage you to look up. My specific angle is robotics, and I not only work a full time day job making robots in Silicon Valley, but I also bust my ass at home to make better open source robotics platforms to enable this world I claim we can create.
Are you so sure I won’t pay or work to create the world I advocate for?
Though I agree with you to a point, I'm careful not to take this first pass understanding too far. A socially cohesive society with well funded infrastructure, reliable courts, low inflation, stable interest rates, and an educated populace makes for a very attractive investment area.
Sweden has a capital gains tax of 30%, two to three times that of America and they have a similar GDP per capita, depending on the year.
> The reason is simple: labor has less options. Capital can mostly go where it pleases - if it is taxed too much it might flee the country.
That's not a law of nature, just an artifact of the current legal regime. It would definitely be a challenge to update the law to make it harder for capital to hop between jurisdictions to avoid tax, but it's also a challenge to collect individual income tax, so I think it'd be doable if the political will was there.
>> it seems so counter-intuitive that we are completely stuck to a tax system that devalues workers.
Old people. Retired people live on money gathered from ownership of things. Since old people have the most political power it should be no surprise that the tax code favors their capital gains over working wage earners. In the days when the boomers were young and in work (50s 60s) the tax code was very different.
We defined work and productivity as the end in it self but it's not.
We regard automation as the main cause of unemployment but what was the automation that produced the unemployment and underemployment that we are seeing right now?
The main cause of unemployment is that we built the infrastructure that we need and now we only need to maintain it, and that requires much less work.
The problem is that we depend on employment to redistribute wealth we are destroying the planet doing stuff that we don't need.
People who would rather not change the balance of power between labor and capital worry about lack of productivity growth, because up until recently productivity growth was the bandaid hiding the underlying problems with inequality. As productivity growth stops, we have to address the actual problems, and certain people would rather not.
It's not counter-intuitive if you look at who makes the laws.
The system is one where back-scratching, ass-covering, and kickback-giving is the norm. It's surprising there's any tax on capital at all. A few more rounds of conservatives in power might take care of that.
Conservative anti-tax crusader Grover Norquist once said, "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub."
These are the kinds of people who are running the show these days.
> Grover Glenn Norquist (born October 19, 1956) is an American political advocate who is founder and president of Americans for Tax Reform, an organization that opposes all tax increases. A Republican,[4] he is the primary promoter of the "Taxpayer Protection Pledge", a pledge signed by lawmakers who agree to oppose increases in marginal income tax rates for individuals and businesses, as well as net reductions or eliminations of deductions and credits without a matching reduced tax rate.
Sounds like he wants to lower individual's income taxes. Letting people keep the money they earn hardly seems anti-labor.
This is correct but it's also rewording the parent comment. There is reason to be legitimately concerned that things might be on fire in a year or two, it would be very good for the US government to take actions to prevent that for the benefit of the people who are being ground down and, for bonus points, it would be in the best interest of the people grinding others down!
Also, the general sentiment is "Well, I'll/someone will worry about that later, today, I need to get mine (money&power)." See: decisions for short term stock price growth vs decisions for actual company improvement over long term.
Absolutely nobody pays the actual statutory corporate tax rate, the average tax rate paid by US business after applying loopholes and so on is 22-24%: [1], and about a fifth of profitable companies pay no tax at all: [2]. This is so well-known and obvious that even mentioning the 35% rate at all is evidence of bad-faith arguing.
It's not even a relevant comparison. "Corporations" don't spend profits on luxuries for themselves. Their human owners do. Owners pay capital gains tax (which you can argue is too high or low or too easily avoided.)
You are making my point for me. Corporate profits are double-taxed. In 2017 the corporate profits would be taxed at 35% before distribution, and then once again at 20% after distribution (to the shareholders), for a cumulative tax rate from the profit made by a business to the money in the investor's pocket of 48%.
The recent tax cuts were touted to generate big raises for American workers. A few companies made some news with one-time payouts, but then the rest of that is just being funneled to shareholders.
If a government creates laws that incent shareholder givebacks, you wonder why workers' share of profits aren't increasing?
The recent tax cuts will take a few years to filter though the economy to workers - at best. Thus it is incorrect use results to judge any policy until many years have passed. This is the nature of most things that the government does, and why it is really hard to figure out what is best.
There are ways to make judgement that are not based on results, but they always subject to their own biases.
Yes, but nobody really believes in trickle down economics. The entire name of "trickle down economics" came from people who were against supply-side economics and named it based on their (mis)understanding of the theory. Around half of economists today seem to be on the supply-side side (notably, the Chicago School and the less mainstream Austrian School).
You have considerable influence over both your income and your expenses. Update your resume. Ask for references and referrals. Apply for different jobs. Make a budget and stick to it. Pay yourself first. Be patient and give it time.
I think one of the biggest issues in Corporate America is that the pay of upper management is totally divorced from the pay of the common worker. Furthermore, upper manager is often incentivized to fuck over workers because of their preferred stock options.
I am sure it has always been this way but I don't know if it has always been this unbalanced.
To be fair, the Federal Reserve is not responsible for labor law and the like. They are clearly very late in their response, but it's notable that a non-political organization felt the need to comment.
I don't think that the person you're replying to is implying its the Fed's fault as an organization. It is the function of people in power (both politically and in the economy) since the 80s having eroded worker's abilities to push back, so it's more an indictment of the system, not individuals strictly.
The comment was massively down voted when I saw it, so I have to assume the reason was because people interpreted the comment as I laid it out. Though now it is out of the light grey
The Fed is responsible for the savings rate of the average American, which is to say, it's absolutely worthless to stick your money in the bank and watch it grow, which would help starve off what they're talking about here.
The average American has no particular reason to stick with a "savings account". They could buy equities and ETFs that are as simple as savings accounts.
The Fed is responsible for QE, including about two Trillion in purchases of Mortgage-Backed Securities [0], which has the effect of making housing more expensive than it would otherwise be. If you're a home owner or debt owner, that's good for you. If you pay rent or a mortage, that's wage suppression.
Why doesn't the stock market act as a balancing system to low wages? Lowering wages implies higher efficiency thus resulting in higher profits which ultimately end up in "investors" pockets. Why are these "investors" not the common American "worker" whose wages are low? Why has the market not created such an instrument to supplement the "worker" who has low wages but could ultimately profit from the ever-increasingly efficient economy?
This is an honest question whose answer I ponder. Why doesn't the stock market act as a great redistributor of capitalistic wealth?
There's a barrier to entry and a requirement in regards to education that are intrinsic in the stock market. You also need liquid cash you're willing to part with, and in large enough amounts to matter. And in between the stock market and the worker are a ton of predatory "advisers" who would rather suck someone dry with fees than ever see the worker profit.
I'm finally at a point where I have enough liquid cash to finally start investing, and I'm finding the whole process very daunting. Trying to get enough information to make the "right" decision has filled me with analysis paralysis.
> There's a barrier to entry and a requirement in regards to education that are intrinsic in the stock market.
This right here. While the audience here should be able to invest, based on income and education levels, the sad fact is that a vast majority of people have never been taught to save or even budget. I am very much in favor of self-reliance, but when you have an entire generation raised by a generation that doesn't save, what do you think is going to happen? Add on to this ever increasing prices in rent and basic necessities (food, utilities), and it's not a surprise when the vast majority of people don't own stock, even in an index fund. Shit, pensions were created over half a century ago because our grandparents couldn't be trusted to save for retirement!
I will say this: scrape together $1k USD, open an account at Vanguard and put it in a total stock market index fund. Keep putting money into it, as much as you can afford. There are other better websites out there that go into more detail, but that's the gist of it.
I feel like unions really missed the boat on this one. Maybe I don't know union history well enough, but it seems like the UAW should have made large equity stakes in Ford, GM and Chrysler (or the equivalent historical companies) important priorities in their heyday.
They are. Well most likely. It is hard to track down the real numbers, but somewhere around 60% of all stocks are owned by mutual funds, and the primary investors in those funds are retirement accounts.
However you do need to have a retirement account to share in this, the lower your wage the less likely you are to have such an account.
Because you need lots of captial in order to buy enough stock to make a substantial life improving financial gain. The short term gains, fluctuations, etc. can easily wipe out the capital gains that one is able to make on a worker's take home pay.
It does. Around half of all financial asset wealth is ordinary people’s retirement savings. And that’s nothing compared to the wealth the American middle class holds in home equity.
High-flying Wall Street types are ultimately dealing with regular people’s money (often through indirections like pension funds).
> Why are these "investors" not the common American "worker" whose wages are low?
Because workers don't have money to buy stock, so they don't get the gains from stock appreciation. And because workers are taxed vastly more heavily than investors at the same income level, people who don't stay out living off investments rather than wage labor are, even if m with the same pre-tax income, greatly disadvantaged at accumulating the resources to become others of capital sufficient for their own support (the lucky worker manages to accumulate enough for a modest but decent retirement by the time they are incapable of further wage labor, but many do not.)
It's a lot easier for a modestly wealthy capitalist to become a very wealthy capitalist than for a worker to become even a self-sufficient capitalist.
> Why has the market not created such an instrument to supplement the "worker" who has low wages but could ultimately profit from the ever-increasingly efficient economy?
Because that would involve the people who have disproportionate political and economic power handing over the tools of accumulation of that power to the people they spent considerable effort denying it to in order to accumulate it themselves.
> Why doesn't the stock market act as a great redistributor of capitalistic wealth?
Because that (at least, in the direction of redistribution you propose) is literally the exact opposite of its purpose.
Yes, why hasn't this arisen naturally? Are the potential profits too low to collect the meager income of many low-wage Americans and then redistribute the gains over time?
If you don't have high wages, you can't invest enough to expect more than a very modest retirement. You can buy some stock, and lots of people do—America has a fairly large number of people who own some stock, just very few who have accumulated enough to live off their investments while still growing them.
"Why are these "investors" not the common American "worker" whose wages are low?"
Where the hell are they going to get the money to become investors in the first place?
"Why has the market not created such an instrument to supplement the "worker" who has low wages but could ultimately profit from the ever-increasingly efficient economy?"
What employer, and it's the employers that are the ones this would have to be directed toward, has been asking for this?
How can this be fixed? If businesses increase salaries they will likely not meet their quarterly which means investors will punish them. Too many quarters like this and the C-Team gets replaced. This is a sad, pathetic treadmill we are on. I strongly feel we need to go back to annual reporting.
Powell also spoke to this in a recent interview with Marketplace[0]
>Ryssdal: I want to get to the regulatory part of your job, which you address right there in a second, but I want to first talk about some of the things that came out of the financial crisis that we're still dealing with. And maybe the most relevant for consumers in this economy is the idea that wages now for a decade or more really have been stuck. And the question is: As you consider your dual mandates of price stability and maximum employment, where are wages on your list of things to worry about? And what really power do you have?
>Powell: So wages were low, and that was understandable after the financial crisis because unemployment was extremely high. Unemployment was 10 percent in 2009. As unemployment has declined — now all the way down to 4 percent, the lowest it's been in 20 years — we would have expected wages to move up fairly significantly. We now just in the last year or so, we have seen wages move up.
>Ryssdal: A hair, right?
>Powell: We look at a range of — there's no one wage indicator. We tend to look at sort of the four big ones in particular. And if you look back to five years ago, they were all in the low twos — this is annual rate of increase — and now they're all close to three. So there's been this very gradual move up. I think, you know, part of that is that wages should reflect inflation plus productivity. So if you're delivering more output per hour, it should be reflected. Productivity has been very low. But there is still a bit of a puzzle in that we're hearing about labor shortages now all over the country in many, many different occupations in different geographies. And one would have expected, I would have expected, that wages would move up a little bit more. So I think we don't directly look so much at wages as we do price inflation, but I think we're looking very carefully at maximum employment, and that is one of the things that pushes up wages and price inflation.
>Ryssdal: Right. But why are they stuck? Is it just that we're not producing enough widgets per hour? Is it robots? I mean, what is going on? Because that's the thing that people want to know about.
>Powell: So, one big part of the explanation is certainly that inflation has been low and productivity has been low. So productivity just means how much your output per hour increases. And that's what you should expect as a worker to get paid for, is enough to cover inflation plus how much did your output go. So if you take that at the aggregate national level, if you add those two up, that's actually pretty consistent with what's been happening with wages. So again, there's no — I wouldn't call it a mystery, but I would say that it's a bit of a puzzle given how tight labor markets appear to be. And what we're hearing from employers really is that they can't find workers, and you're wondering, well, why aren’t wages going up faster?
>Ryssdal: Why aren’t they paying them, right?
>Powell: It’s a good question. It’s a good question. We don't really have the answer to that question.
>Ryssdal: Which is a little troubling, if you're the guy running the economy.
>Powell: I don't think of myself as the guy running the economy. You know the economy is a $20 trillion economy.
To be charitable, the Fed runs the money supply, but they don't control who gets the money. It's the job of Congress to regulate corporations and unions and minimum-wage and all that jazz.
When the Fed bailed out the banks with QE1,2,3 they chose a program they allocated money to the banks which let them out of their losses while individual borrowers bore the brunt of the recession.
Unfortunately the laws and regulations in place facilitating this trend are put in place, for the most part, by elected representatives. For one thing, we need to change “first past the post” election results to decrease the polarizing results that have been shaping our politics as of late. I’m just saying, this isn’t a conspiracy by one party or group. To an extent, it’s the country we voted for.
I don't know a better one but I'm sad to see the organization doesn't support leveling seats for volume positions (i.e. house members & senators) there are some complex voting systems that appear to be theoretically more representative than IRV but for single position elections (governor, president, DA, etc...) IRV seems like a good balance between complexity and fairness.
Your solution doesn't have much to do with your problem. In general, the Republican party treats lowering taxes on the rich as a major policy goal. On the other hand, the Democratic party doesn't, and politicians and activists on the left side of that party tend to favor increased taxes on the rich.
The problem isn't polarization: the problem is that the wrong pole is getting elected.
This is a strange take when the wealthy actively conspire through bought-and-sold politicians to discredit, undermine, and destroy labor organization, the only thing in history with a proven track record of winning concessions for workers(in aggregate).
Maybe there’s not a “conspiracy,” but there’s certainly a class war.
I agree class issues are at play. But our “class system” is not determined by blood lines. The constituents of a a given class are fluid. Which leads me to believe it is a combination of human nature and relative participation of the various classes. Blaming “the rich” when voting turnout is so low and election participation is low is a non starter for me.
> Blaming “the rich” when voting turnout is so low
Depressing turnout by demoralizing constituencies that lean to the other side and, particularly on one side, outright voter suppression, is something that the rich (both independently and acting through the major parties) fund lavishly, so why wouldn't they get blame when turnout is low?
We've had 5 occasions where the president lost the popular vote but won't the election and 2 of them were in the past 18 years. Do you think most people look at that situation and go "if only I had voted, then things would be different". Between that and a few court rulings that have turned the major elections into an event only the rich and their friends can partake in, I don't see how it's not people bring systematically repressed
That the popular vote isn't who wins is a feature. It helps prevent the tyranny of the majority. Of course if you are in the majority that lost you hate it, while the minority like it.
> That the popular vote isn't who wins is a feature. It helps prevent the tyranny of the majority
No, it doesn't. It lowers the threshold for dictating policy, and biases it to particular interests; that makes tyranny of those interests more likely, including when they command a bare majority (or even large minority) of support.
You don't fight tyranny of the majority by unequal representation; you fight tyranny of the majority with constitutional limits on what government can do at all, or by requirements for supermajorities or (as some state constitutions do) multiple time-separated votes (or both!) for particular kinds of action.
Crafting campaign finance laws in such a way that those with more wealth can disproportionally affect election outcomes is anti-democratic.
Voter suppression/disenfranchisement in the form of impediments to voter registration, voter ID laws, felon disenfranchisement, misinformation about voting process/procedures, closure of DMV offices, etc. are all anti-democratic tactics used by political parties to reduce/refuse voting access by constituents.
If a party can make voting inconvenient/inaccessible to a targeted population they can win electoral outcomes that do not match constituency desires.
Voter suppression is real.
Voter suppression works.
Social mobility exists but is low in the US and has been on the decline. There's no hard and fast rules on class in the US but for all practical purposes most people are going to be the same class as their parents
Or maybe worse, if they are from middle class or lower.
I worked for a couple of NY financial services firms and saw first hand how easy it was to get internships, interviews and jobs for kids with connected parents while the rest of them struggled.
I think the worst result of this is, people might (maybe they already have?) just stop trying. Very few people are gonna put up with years and years of crap just to get ahead a little bit, most people aren't just built that way.
>Blaming “the rich” when voting turnout is so low and election participation is low is a non starter for me.
A big part of the Republican electoral strategy is disenfranchising working-class voters through any number of tactics, especially those subcategories of working-class people who they expect won’t vote for them. And that doesn’t even begin to address the structural and intentional hurdles to working class people’s participation in American democracy, from disenfranchisement via mass incarceration to fear of losing their jobs if they leave to vote.
Labor disputes are handled through state and federal labor relations boards. You file a complaint, an investigation is started, and eventually a ruling is made. Lawyers are not a requirement but the employer will probably send one anyway.
Voting is also only the last step in a representative democracy, and is the only free one. They don't have the time or money to fund the preceeding steps.
Which is necessary to avoid having to vote for one of two shitty options.
It is true that multiple parties (which first past the post prevents) would make forming coalitions around issues like this easier.
Saying "this isn’t a conspiracy by one party or group" is pretty silly though. The economic policies advocated for and enacted by the two parties point in completely opposite directions.
My daughter is going into the Air Force, getting her degree at night for nothing in 2.5 years, going back in as an officer, effectively doubling her income all the while not paying for food, lodging, medical/dental. She plans on doing 20. She'll likely marry an Air Force officer, and two people retiring at 39/40 YO will have a combined retirement of just under 100k (today's money), all the while not wasting precious money on medical/dental. She'll be young enough to have a second career in her chosen field and if the legislators don't screw up SS, she'll have three retirement incomes.
My family has served in every branch except the USCG, and I was NROTC early on. The educational benefits are great, the GI Bill is great, the VA financing you can access is great. None of that requires a 20 year stint.
I knew quite a few officers who planned on doing the 20 year office career and then retirement. None of them made it. I knew plenty of officers who wanted to be stationed in Hawaii. They got a taste and then were redeployed elsewhere. The Air Force you think you know does not exist. They are as cut throat as any corporation. And like a corporation the closer you get to retirement the harder they try and spin you loose.
Your daughter may do all 20 years of service. But do know that one day she will plateau career wise and when she does that is when the sharks circle. [0]
All paid for by those who don't go into the military–industrial complex, but instead pay enormous taxes to fund it. The kid fixing broken windows does well too.
The U.S. accounts for 35% of the world's defence spending, more than twice that of Russia and China together.
You are paying for it by your service, which only 1% of the population serves. I have nothing but respect for the military and those who serve. People need to stand behind the troops or in front of them. People sleep well at night because of the military and their sacrifice.
And logger, or fishermen, or oil rig workers, or drivers, who app work far more dangerous jobs, don't "sacrifice"
I sleep well at night because of a roofer who risked his life to fix a hole, not because the US spend an obscene amount of money on its military.
P.S the military isn't that dangerous. The largest killer is suicide, then transport accidents, then other accidents. Truckers are in a far more risky job, because of the danger of driving, and because of the sedantary lifestyle. Next time you see a trucker at the gas station remember to applaud him and thank him for his service.
don't forget the collateral damage caused by those troops. Americans might get to sleep well and eat well, but those yemeni weddings guests who got droned get neither.
And all those who don't go into the military-industrial complex benefit from a secure America, and a country like America being a global hegemon and not Russia or China.
The kid fixing broken windows does good too, but isn't exactly risking their life and limb in such an explicit manner as the way a member of the armed forces may.
The post was meant to state that there are paths that do not require going into mounting debt. The military is a fine path for those who are wired that way. It teaches discipline, team work, being a part of something bigger than yourself, and in return you basically live for free, largely pocketing the lion's share of your income. A young person can get a degree at night in the military (free) and if they like the military after their 4-year enlistment, can become commissioned in 3 months and effectively double their income, all the while spending nothing. It's a win-win. To the leftists that hate the military, nothing will convince them, but they sleep well at night because there are people willing to do so.
The fact that _anyone_ can go down this path does not mean that _everyone_ can. The military would simply stop recruiting people or offering as nice benefits if everyone did this.
The issue in our country is that we are increasingly making the default way of life for average Americans be one of more anguish and stress when we do not have to. None of the options for success in the US that we currently have are going to handle the mass group of unemployed people that something like automated cars or fast food resturaunts automating will bring, especially when so many are already doing so poorly
There is no single path to prosperity that everyone can follow. That's why I value people that share their story or the path they took, even if it doesn't apply to me.
I'm a veteran that had to enlist so I could get out of poverty. I also lean left. Let me say this out of a little spite since you decided to get political:
If you and your daughter's mother made the "right" decisions, your daughter wouldn't have to enlist in the military to have a chance at a good life.
Fair enough, but it's her choice. She is choosing this path largely because she doesn't want to attend college in a traditional setting and deal with the kinds of BS that plague colleges now. My daughter leans hard right, again her choice, and in many ways she is further right than me or her mother. My daughter wants to do things her own way, and the Air Force is the way she wants to do it. Who am I to stop her? She's always been a willful kid and she's always been academically on point. The Air Force way benefits her in numerous ways, not least of which is she keeps her money in her pocket.
Thank you for a civil response. I apologize for my comment. I also want to add that you painted a very rosy picture of the military and while under ideal conditions everything you said can occur, the reality could be much different.
Also, what triggered me was your “leftist” comment. The military is essentially a social welfare system funded by tax payers. I’ve never met a person who joined because they wanted to be a hero or because of some sort of prestige. Almost everyone joins because of the benefits or travel or because their families forced the issue, among other reasons. It would be great if our government offered similar incentives using tax money for other career paths. As I understand it, it’s a “leftist” ideal that is constantly being shot down by the “right”. Maybe I’m wrong about that.
Anyway, you seem like a decent man and your daughter sounds like she was raised well. I’m sure she will make a fine officer someday.
How ironic she's relying on the taxpayer for her financial future. Good job the rest of us actually generate economic activity so we can pay taxes to pay for her.
This is true for poor people, but I know kids who have gone into the military form backgrounds where they could have gone other routes. They have the background to get a student loan to pay for everything.
Depends on the situation. I enlisted in 11th grade. I got a scholarship awarded as a senior and my recruiter told me it was too late to change my mind. A lot of kids are not aware of their options and neither are their parents. Also, the kids that enlist for the excitement of being a soldier base their decisions on the glorified version of events presented in movies and the media. Real war is an awful thing to witness. No sane person would ever enlist to take part in it.
A lot of what you say is true, while also casually ignoring the many downsides to being in the military (such as being in situations where you are forced to kill or be killed).
I have a lot of respect for the military, and part of that comes from the incredibly high cost most military members face. Not only the potential to lose their life, but to come back carrying a strong mental weight, and to typically have to fight tooth and nail to get the benefits they were promised for signing up for in the first place.
To say your posts in this thread are disingenuous would be putting it lightly.
The statements "There exist valid and rewarding career paths for those who are willing and able" and "There exists a troubling economic trend between the relationship of capital vs labor that should be addressed" are not contradictory statements - both can be true.
People should have a sense of personal responsibility, certainly. People should also be financially educated and make good career decisions. We should also look to our political and financial organizations to find problems in the large and do what we can to fix them. And since we live in such a diverse society with drastically different values (the very values your daughter and her colleagues nobly fight to protect), the answer is not "everyone else should adopt my way of thinking". Even if you're "right", that is simply not a realistic path for policy makers, who need to deal with problems in the large.
Maybe this will highlight my thinking - I'm an engineer who went to engineering school and chose a rational career path with high expected gains. I have friends who majored in art at a very expensive school and will likely never be able to pay off their debts. I would say they did not manage their career well and perhaps should have made a different decision. However I would not want to live in a world where we did not have artists. Art education of some type is necessary for us to maintain our culture, so if everybody did the personally "rational" thing where would we be as a society?
People need to be taught about investing and the time value of money from an early age. If you invest in some low-cost index funds, you share in the profits. And if you start early, it doesn't have to be a big sacrifice.
Many people barely have enough to live on, let alone invest. If wages were higher in real terms, they're lives would be better. Plus, investing is risky. Not everyone has the ability to weather business downturns without tapping into savings.
BTW, this isn't a moral argument (at least it need not be), practically people cannot invest in anything and yield an actually substantial return. Almost half(E) people in the US cannot weather a $400 emergency without going into debt, how could they possibly have enough money to invest for either themselves or their children?
This arguably would be only valuable for people in the middle class to upper middle class.
EDIT: the statistic is 46%[0]. Okay, it's not "most" people but it's a good fraction. I wouldn't be surprised that >50% can't weather a $1000 emergency.
I don't disagree with you, but the obvious counter is that you are mixing causation and correlation. You would have to show that people are not investing because they have no extra money and not that they are choosing to use their money now instead of investing. Realistically it is likely a combination of those two and therefore the comment that started this thread has a point that teaching people about investing can help motivate a shift in priorities which is better than nothing.
>You would have to show that people are not investing because they have no extra money and not that they are choosing to use their money now instead of investing.
We know they don't have enough money to invest. Average income + average cost of living < amount needed to safely invest.
We've quite literally known about if for years on a national scale. He doesn't have to show anything.
I am not victim blaming, I am pointing out a way that the "broken system" has failed to educate people about the problem. You also can't just cite the average cost of living as if that it is a standard that has no waste in it. We need to do a better job of framing things like "if you switch to a worse phone plan and save $10 per month to invest, you will probably have something around $30,000 in 30 years while only investing $3,600.".
I edited my comment to remove the statement "Stop blaming people for a system they didn't choose." I'm sorry you read it. It was unnecessary and you're right, you're not really victim blaming.
I got frustrated at face value because increasing wages would do more to alleviate a lot of American's financial woe's -- now and later -- than (rightfully) helping to educate Americans about investing money. You're right, even small bouts of investment can net large gains in the future. I jumped the gun and took it as "if you just stopped being dumb with money everything would be better!"
Wage increases are not only largely (historically) objectively justifiable, but wage increases would be more consistent and easier to "implement" than educating an entire populace in a better manner. There would also be the enormous task of changing purchasing habits. We know that even when people understand "doing X is bad for future results", that doesn't mean they'll make the more rational choice.
Neither perspective is exclusive. We can increase wages and we should also invest in educating Americans about sound financial practices. But wage increases can happen now, would be immediately beneficial to everyone, while also making it easier to invest and take on the risks associated with investing.
I sincerely appreciate this reply. Not enough people are willing to do to what you just did.
I agree with everything else you said here. More money is always going to be the quickest and simplest fix for this. I was simply pointing out that financial education should also be part of an ideal solution and that education alone is "better than nothing."
I appreciate the spirit of this comment too. I do think though that where many well-intentioned people go wrong is that they think wages are just like a dial that "we" (or gov or whomever) can easily turn. I think this essay gets at a lot of these ideas very well:
"We need to do a better job of framing things like "if you switch to a worse phone plan and save $10 per month to invest, you will probably have something around $30,000 in 30 years while only investing $3,600."."
Prove that is possible. Find an investment that will do that.
Those were back of the napkin numbers. The S&P 500 has an average annual return around 10%. With a monthly investment of $10, it would take just over 32 years to get to $30,000. So I might have been a little too generous but the numbers are still realistic and the specific numbers were not really the point of the comment anyway.
The numbers were very much a part of the comment, and thus it is quite valid to guarantee you're still operating in reality when you make claims like that. Your 32 years to get $30,000 makes a lot of assumptions. One, that in 32 years $30k is going to be a significant amount of money, still. Second, that the person investing does not have an event in their life that would drain away any investments that they have, like an illness.
Has there ever been a real precedent for a society where a majority of them provide for themselves by investing in the stock market over living off of a wage?
And I bet it is a combination of the two. Just I think it is probably 0.1% of because people don't do something they've generally never done and 99.9% that real wages haven't kept up with inflation.
No one was suggesting that a majority of society lives purely off investment income, just that investing can provide benefits for working class people too.
To be fair, the reason so many people can't afford a $400 emergency is because most people don't save anything in the bank. And this is not exclusive to working class folks. A lot of people do a terrible job budgeting/saving/investing because they weren't taught to do so. $20 in the bank every month would do plenty to give you a little bit of financial leeway.
If one has internet, one can invest in oneself through education in very tangible lucrative ways. Never before has access to so much knowledge been available from MIT courses to marketing books, much of which is free.
Never before has access to so much knowledge been available from MIT courses to marketing books
Sure, but do these mooc/online courseware platforms teach one how to apply these new tangential skills and translate them into CV language and personal development actions that will get them hired? Especially if one is not already mentally inclined to join a 21st century workforce?
I'm asking this coming from the perspective of someone born in rural South Carolina (in a portion of the United States known as 'The Bible Belt') who is an entirely self-taught programmer, versed in a couple of languages-and realized I had to go to an entirely different part of the world to even make use of what I had learned. So my mind is going out to those people who don't live in dense urban areas and are maybe looking for a relatively 'future-proof' job that may as well be asking the to learn an alien language.
It was only by circumstance alone that I got exposed to the kind of entrepreneurial thinking needed for me to realize early on: I'm not gonna do jack shit with these computer skills, there's no market here, I live in a town that used to be a booming textile center and is now an economically depressed shithole (I say that lovingly, it's my economically depressed shithole), and has been for the last 30 years-forcing me to pack up and leave.
Do you think a substantial number of people who have internet have the same circumstances I did to know "I have this skill now, thanks to an online course, and now I need to follow up on it by making this sacrifice to put myself in a position where these new skills will get me hired. I need to be having these discussions with recruiters and hiring mangers, and doing these things to stand out"? Or even have the resources to pack up and plant their butt in a different part of the country?
Personally, I don't know if all of these code camps and online training programs do more than say "Here's a wrench, here's how to use it, good luck with your future as a wrench turner".
Can anyone speak to career development as an extension of this wealth of online knowledge? I just have hesitations of what utility these programs offer beyond here's how to do x with n.
People working two or three jobs don't usually have the time to educate themselves. Moreover, the job market is generally against people without a degree.
Understand, there are people in this country who have been working since 16 to provide for themselves, they work for less than 9 dollars an hour, and still pay rent, utilities, medical bills, car payments and more. They didn't have hours during summer to sit around and play video games that they could have spent watching MIT courses instead. They today, still don't have the time to game the system and get ahead that others have.
The ability to get ahead by shear will is far beyond the will and patience most people who write medium posts about coder burnout have to contend with, the difference is instead of possibly not becoming a more well off person with higher net worth, the possibility is dying or incurring more debt.
Regardless, even if single individuals can get ahead, that's fine and commendable in some sense, but there will be many more who won't, the shear majority won't because the system itself produces these circumstances, and in fact, profits off it. What we see is the function of the way we set up companies and society in general.
Even if people don't have money to invest, they can still go into debt. And the time value of money applies to both investments and debt. People need to know how to shop around for debt and to understand the implications of different loan terms. They need to understand the impact that bad credit can have on their future.
I'm totally with you that we need to teach people financial literacy in like high school. But there's only so much financial literacy can do for the populace if the labor share of productivity gains are low, if precarity is on the rise, if student loans are so high, if k12 education quality depends on your zipcode/parent's income, if one medical or legal mishap might mean bankruptcy or a lack of access to the job market, if assortative mating means marriage is yet another driver of the great divergence between the upper and lower quintiles of income in this country.
With what money? Between student debt, stagnant wages, the 'gig' economy, and limited mobility - how is anyone supposed to save a reasonable sum to invest in even when taking into account the joys of compound interest?
If you took all the money a person on a limited income spends on Netflix, restaurants and games they could scrounge up enough money to buy a trailer home in the middle of Nebraska just before they die of old age.
The reason people don't save every penny is because pennies don't matter any more. The price of housing, medical care, and education is becoming so overwhelming that everything else pales in comparison.
This isn't like the 1960s where you could get by on a part-time minimum wage job, pay your way through college, and buy a nice house in a good part of town that you could easily own outright in twenty years.
Those days are over.
Now the best you can hope for is to pay rent, to squeak by from one week to the next, and to take the edge off the bitter, brutal reality of things you buy yourself a game or pay for Netflix.
It's a relative thing. Students back then didn't have to pay three hundred bucks for a textbook and they didn't have to go so deeply into debt they could've bought a Ferrari.
Netflix is $10 per month. I am sympathetic to the view that people are squandering money they could invest, but in many cases it's just not a meaningful amount of money. Buying a video game every couple months is what, $50 or $100? Sorry, but this just isn't meaningful compared to things like rent and transportation. If someone is paying $1000 per month in rent, a single month of rent is an entire year of saving on little things, and that's a level of rent that's relatively low even far away from the Bay Area.
Really disagree with these comments (not as much this one as the other one in this thread) being flagged and removed. IIRC the line was basically, "many people have much more to invest then they claim, but they spend it on netflix, brunch, concerts etc instead"
Sure, obv won't apply to everyone and not everyone will agree, but seems like a reasonable sentiment that should at least be allowed to exist on the thread. Deleting it makes it seem like you're going for thought monoculture here.
I strongly disagree, mainly because that line of thought has no basis in reality, and allowing it to persist like this encourages the dehumanization of the lower classes. It's not a reasonable sentiment in the least.
No one said anything about dehumanization. It's your prerogative to disagree to what extent that line of thinking is based in reality. It shouldn't be your prerogative to see comments like that deleted because you disagree with them.
This article is talking about the labor-shareholder profit split. It's absolutely relevant to point out the opportunities normal people have for becoming shareholders. stockpile.com let's you buy fractional shares (no longer need 2k to buy a share of amazon) for a 99 cent commission. You can get commission free ETF's from Schwab with a couple hundred $ account minimum.
Arguing that most workers are so strapped for cash that they literally cannot set aside a few bucks to invest -- and not only that -- that arguments even hinting at such a thing should not even be said out loud, is mind boggling.
"It shouldn't be your prerogative to see comments like that deleted because you disagree with them."
It absolutely should be everyone's prerogative here to see comments that disagree with reality deleted.
"It's absolutely relevant to point out the opportunities normal people have for becoming shareholders."
It is. The comment you're talking about did no such thing, and proceeded to blame poor people for not doing so based on a viewpoint that is completely divorced from reality.
"Arguing that most workers are so strapped for cash that they literally cannot set aside a few bucks to invest -- and not only that -- that arguments even hinting at such a thing should not even be said out loud, is mind boggling."
Arguments that have no basis in reality are not being done in good faith. Arguments like the one you're currently trying to defend exist solely to blame the poor for being poor, and to make the person feel smugly superior that they're not poor, even though the difference between them and the people they're complaining about is usually just dumb luck.
Investing is very close to being a legal ponzi scheme.
If everyone invested as much as they could, people wouldn't buy enough to drive company profits like you see today, or to be the last people holding the bags when a recession occurs.
Also stock markets don't go up forever, Japan's Nikkei topped in 1989, and as of now, has barely recovered half the value. Do you really think even index funds are risk free when you can have a 50% loss for 30 years?
Lack of surplus income to invest, and/or mid-career wipe-outs of any accumulated funds (divorce, illness, disability, natural disaster, lawsuit, legal defence, market crash) and that plan utterly fails.
Retirement isn't something to leave to chance. Social insurance applies the law of large numbers to eliminating much of that.
The US pensions crisis is going to be devastating beyond all belief.
other people have addressed the problems with your position so i would just like to add that you’re wildly insensitive if you really think that this is due to the irresponsible habits of the poor.
low-cost index funds are a parasitic investment strategy that's leading to a huge overvaluation of tech stocks.
What could go wrong with millions of people believing in a simplistic investment strategy that always works. Kinda like buy a house real estate prices always go up. Well, for all the private equity funds that picked up real estate and banks at pennies on the dollar.
What Americans need is more emphasis on creating and sticking to budgets, recognizing true needs versus wants, and how to save. Investing can come later after the budget which includes some attempt at savings.
Many people who enter a program to learn how to budget quickly learn how all the monthly bills in their life add up quickly to consume their income. Examples are spending too much on cell and internet service plans, too many subscriber entertainment services, gym memberships, eating out wastefully, and more. Even the knowledge the buying a car with a term over 42 months is too much car is important to know.
Yes there are some in society who truly are at limits but we have to follow a different means to get them back to functional levels. It still benefits them immensely to learn strict budgeting that they can take forward when their income stabilizes.
Okay, this is a post about how wages haven't gone up, not about how bad americans are at budgeting. American's haven't suddenly gotten bad at budgeting, real wages have been stagnant as the cost of many things, like college for their kids, new homes, etc, have gone up significantly.
Where is your post about how million dollar CEOs need to cut their executive pay budgets, stop paying for new yachts, and pay their workers a higher share of profits instead of taking higher pay, in order to encourage the economy?
Why is it the people who have the least who have to tighten their belts?
If you think that the source of the problem is people wasting money on other things, then you don't have a sufficient grasp on the problem to be able to issue that kind of advice.
Who could've seen it coming except all social sciences and literally mathematics...
What I'm saying is, how are they just now "troubled"? This is all but inevitable barring drastic measures to enforce the opposite trend, at which point it's no longer any recognizable sort of capitalism. Honestly it just seems like a bunch of people receiving numbers they expected and pretending to be surprised.
40-50 years ago, a young person fresh out of high school could get a job that allowed them to live the middle class life -- own a house and support a family with only one spouse needing to work.
Nowadays even college graduates struggle to achieve "liftoff."
Globalization has led to a race-to-the-bottom situation where jobs flow across borders, to the places where desperate poverty allows wages to be as low as possible, and the greatest degree of worker exploitation is allowed.
Which is great for those people being lifted out of poverty. And it's great for companies who can more freely exploit workers, and maximize their profits. And it's great for consumers, who get lots of cheap new stuff.
But it totally wrecked our economy's ability to provide a good standard of living for the ordinary person.
Those chickens finally came home to roost in the last US presidential election. There's a lot I don't like about Trump, but I think his tariffs really will make America great again (if they aren't just repealed by the next administration). Because we're finally doing something about this situation.
But he is going about it completely wrong.
Imposing tarriffs on things we need to produce when we cannot meet our own demand, and won't ever again only lets other countries impose tarriffs on things we NEED to sell.
In 2017 the US needed 100M metric tons of steel as raw material. We only produced 23M tons. Where is that difference coming from? Purchasing it from other countries. We just don't have the production to make what we need, so why on earth would anyone force the price of that upwards?
So now the cost of everything goes UP 25% or more due to tarriffs, and we no longer can sell our exports of soybeans or whatever because they're now 25% more expensive overseas.
Because the seller still needs to sell it. And their reduced cost of goods sold compared to USA is low enough to sustain a decrease in margin. How much, I don't know.
Devil's advocate: who else will actually buy that steel?
It is the long game. The US is paying more, but we are also looking elsewhere for steel. Thus it hurts China as well. This puts pressure on China to change. It is a long game played by those willing to take short term hurt for a long term wins.
I don't agree with this strategy, but it does have some sense in its own way.
> to the places where desperate poverty allows wages to be as low as possible, and the greatest degree of worker exploitation is allowed.
Not that it helps people today, but eventually this trend leads to reductions in poverty and their children demand more. Look at China's middle class. I don't doubt that in 50 yrs they'll be equally as entitled as American and European labor.
So I agree this is a hard time, but I think it's the result of non-smooth changes in protectionism and the ability to globalize the workforce.
> There's a lot I don't like about Trump, but I think his tariffs really will make America great again (if they aren't just repealed by the next administration). Because we're finally doing something about this situation.
The tariffs are at best misguided and most likely highly counterproductive. In the steel sector, the main problem boils down to China massively overbuilding steel production in the past decade and dumping (subsidized) steel on the world market. Building a coalition of nations to confront China on this matter wouldn't be very difficult... but Trump manages to make it about attacking Europe, Canada, and Mexico instead. And the fact of the matter is that there are far more jobs in manufacturing sectors that are at risk because of sudden increases in raw materials brought about by tariffs than there are job prospects to be brought back. On top of that, the resulting trade war is going to cause more pain in the labor market in unrelated segments.
> There's a lot I don't like about Trump, but I think his tariffs really will make America great again
Tariffs won't do that.
Trade negotiation aimed at trade deals with strong common (not necessarily identical but converting over time) labor and environmental protections—where the partners with weaker protection in reach sub-area catch up over time to those starting out with stronger protection—so that competition is on a progrrssively leveling field, rather than a race to the bottom, would help.
Tariffs might have utility as leverage in such negotiations, but while this administration may make noises a better trade deals, they haven't shown interest in labor or environmental protections domestically or internationally, so they don't seem likely to use tariffs in the only way in which they might contribute to solving the problem rather than making it worse.
Trump has been talking about intellectual property issues and using the tariffs as leverage in those discussion. That is, exactly what your third paragraph was saying, except that he isn't talking about labor or environmental protections - which you seem to be implying are the only two places where they can work.
I don't agree with Trumps' strategy, but I can see what he is trying. We will see if they work long term.
> Trump has been talking about intellectual property issues
IP is a capital issue; tightening IP protections reinforces the relative power of capital on all sides of a trade regime.
> That is, exactly what your third paragraph was saying, except that he isn't talking about labor or environmental protection
Yes, it's exactly what I'm talking about except for being completely different and benefitting a narrow interest rather than a broad one.
> which you seem to be implying are the only two places where they can work.
No, they can work as leverage on any issue; labor and environmental issues are just the critical ones where they would have broad benefits to the Sheridan public because they would address the problem of the choice between making local conditions worse and losing jobs.
We're doing something, but is it a competent response? Done the wrong way, tariffs just cause everyone to lose. Trump is a symptom of the problem and that's a big part of the reason he happened, but he's not particularly a good solution to it.
I agree. I remember those days. At 50, I've been in IT now for 3 decades. The pay in IT has decreased as well. My dad pulled a family of four along on his salary and we were comfortable, but not rich. I lacked nothing. However... when I turned 10, I came home one day from school and there was a brand new mower sitting in the driveway with a gas can and a rope. My dad said, "Son, canvas the neighborhood and charge $5-10 (size) a lawn. That money is yours. Save a dollar for every 10 for gasoline." I was making about $250 a month.
This taught me to get off my own butt and make it on my own, which I have. I paid my own way through college (impossible now), bought my own car, married a woman who did the same. We are largely debt free (mortgage), but will be free soon. Except for property tax, we owe no man anything, and this is the way it should be. Pull yourself up by your own bootstraps. Big daddy government is not the answer and technically owes you nothing. As Gerald Ford once said, "A government big enough to give you everything is big enough to take it all away."
Sadly, this young generation has embraced the notion of entitlement. No one is owed anything except human dignity. Americans have lost the sense of doing it on their own. Te military is a great choice for kids who cannot afford college. I'm not babying my kids. They will need to make it on their own. My dad did it, I did it, my wife did. None of us were rich, and by today's standards, we would have been considered poor.
Entitlement is receiving a brand new mower + fuel, in an area in need of its services and with residents having funds available to pay for its services, and thinking that your "hard work" is the only thing required to have realized its profits.
I'm fairly certain that young persons don't feel that anyone "owes them anything" - they only want the same opportunities that those before us had. The facts that those easy gains aren't possible anymore isn't a fault of those with the misfortune of being born 30 years later. Even in your own post, you admit that your platform of success isn't possible for current youth (can't afford college, can't afford a new vehicle, can't afford housing, etc), but yet, you still find a way to blame it on their "entitlement".
How's a kid supposed to make money mowing lawns if their parents cannot afford a mower? How are they supposed to do that if they live in the inner city & there are no lawns? What if their neighbors can't afford the service?
I'm not really sure what you are trying to say here. A safety net is entitlement? How so? What's the correct cutoff here, should we end social security and medicare as they exist today? Are you prepared to retire without either right now (kudos if you are)?
Should the US summarily shrug at people with disabilities that can't reasonably work? What will become of them? Homeless? Death? Should their families take care of them? What if they can't afford to? What should people do if they can't join the military?
You correctly point out that expenses are _much_ higher now. Is my generation entitled because we generally want a fair wage to pay for those expenses? Are we entitled for desiring the return of unions -- unions that did much to create those high wages out of the exploitation of the 1800's & early 1900's. Have you really thought any of this through?
Look, I'm part of this generation you're disparaging. I could wax poetic about how I "pulled myself up by my bootstraps" because I'm doing quite well. But I know it is bullshit, because I've also been fortunate enough to choose the right career, at the right time, and had remarkably few setbacks in life. Also I'm a white male in the US. I'm playing life on easy mode and to say otherwise is a lie.
That isn't true for everyone, and standing on your soapbox calling on everyone to "pull themselves up by their bootstraps" is both ignorant and dishonest. You've done well in life, but it appears to have bred a stunning lack of empathy.
The median student loan debt is inching towards the median starting income for college graduates, something that massively sets people back in their ability to move forward in their life and do things such as purchase a home. Add on to the fact that job growth has concentrated into a few cities that are rapidly becoming more expensive and you have what we have today.
If wage growth matched productivity gains, a lot of these problems would be non issues. Nothing in here has anything to do with entitlement.
You acknowledge this indirectly, but the cost of education is not insignificant for young people today. Like you, both of my parents were able to graduate college without debt. Both had part time jobs, but my mom went to school on the GI Bill and my father received a state funded “hardship grant” because he was a talented/impoverished kid. In short, our society gave my parents boots so they could have the opportunity to build solid careers and raise their children in better circumstances than they received. Yes, the military is a fine option for some - but for most young people they have to take on ~30k in debt just for the opportunity to apply for a proper job. That's a very real anchor on success, and it's not the only one.
I was the #2 engineer hire when I was hired five years ago. Since then, we haven't become super successful -- yet -- but we're at least at breakeven. We have three engineers and we're working on a huge new project that hopefully will really grow the company.
I have 1.8% equity.
Sometimes when I'm working late or working on the weekend, which is often, I wonder: Is this really worth it?
I'm totally fine with taking a pay cut to build something new, in order to have the chance at making life changing money. But at the equity I have, we'd need to be quite successful in order to get that.
The VCs who funded our seed and series A (the only funds we've raised) will see the lion's share of the profits. Emotionally, that feels odd. We've thrown a significant percentage of our lives, and they've only thrown in money -- and a pretty small amount of it, really. I know it's supposed to make sense from a financial perspective or whatever, but emotionally it doesn't feel fair.
But hey I guess it worked, I have what feels like a small percentage and yet I'm throwing everything I have at this company. I'm likely an outlier, though. I suspect that if VCs and founders gave employees a bigger piece of the pie, they'd have a much more motivated workforce.