2 Questions About Income Inequality

[anglolawyer]

Hmm, all very interesting. Thanks. Can't help thinking something fishy has been going on in the realm of financial services too. The banks and other financial institutions seem to have decided at some point to turn their reputations for probity into cash, a sort of one-time hit that can only be tried again once we have forgotten the last time.

Globalisation holding down wages at the lower end might have played a big (or a much bigger) part too. Good point lupus

 

[TellyKNeasuss]

Here's the Wikipedia article on Post-1980 increases in income inequality. As with any Wiki article, it's only as good/accurate as the contributors make it.

http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States#Post-1980_rise_in_inequality

In summary the rise is apparently due to a combination of factors including

• An economy which is more skills and technology driven. The comparatively small number of people who can acquire those skills are very well rewarded but the average working person is no longer as much in demand so pay has dropped

• 
  
  What skills are these? I don't think that there are many computer programmers or electrical engineers in the top 1 percent. The top 1 percent is predominantly composed of corporate executives, financial professionals, doctors, and lawyers. And computer programming is not a difficult skill that only a few people can learn. How much did the engineers who originally developed the Internet make?

 

[Belz...]

[DEVILSADVOCATE]Perhaps this is because people from rich families are brought up to work hard while people from poor families are brought up to be lazy.[/DEVILSADVOCATE]

[playingalong] Doubtful. Being already rich would only make me lazier [/playingalong]

 

[The Don]

What skills are these? I don't think that there are many computer programmers or electrical engineers in the top 1 percent. The top 1 percent is predominantly composed of corporate executives, financial professionals, doctors, and lawyers.

It isn't just the 1% who are responsible for the income inequality. When I started off in industry back in the 1980s, as a junior engineer I was earning less than the shop floor workers. These days those shop floor workers (many of whom were unskilled or semi-skilled) have been automated out of jobs and/or seen their pay rates driven down.

As a junior engineer I'd now likely be making far more than my shop floor brethren and there are far more of them then there were of the likes of me, hence the increasing wage inequality.

And computer programming is not a difficult skill that only a few people can learn.

IMO that's absolute rubbish, or more specifically very few people in my experience have the skills and training to become effective programmers. Even if someone has learned the syntax of the programming language it doesn't mean that they are able to translate the business requirement in to workable code and there are even fewer people who are able to build robust applications with few bugs.

I've done a fair amount of recruiting over the years and am very particular about the people I'll even bring in for interview. Despite this, I'll make an offer to 5-10% of those candidates who are well qualified for the role and even then, it'll only work out for about 50% of the people I recruit.

Good programmers are few and far between which is why I've been happy to pay up to £2,000 a day for a really, really good one.

How much did the engineers who originally developed the Internet make?

Who are these engineers and what model could they have to make money from "the internet" ? Do you mean the telecommunications engineers who implemented the underlying communications infrastructure or the software engineers who developed the software to enable us to communicate over it ?

The original basis for the internet was ARPAnet which was built to connect centres of academia so I presume that the developers were comfortably off but not lavishly rewarded.


edited to add...

A few computer programmers and engineers who have done quite nicely

- Bill Gates
- Paul Allen
- Larry Ellison
- Steve Wozniak
- Steve Jobs
- Larry Page
- Sergey Brin
- Jeff Bezos
- Mark Zuckerberg
- Me (I'm not in the 1% but in the UK I'm probably in low single digits)


edited again to add.....

Looking at the 6 people in our band, five have done very well financially and the 6th is reasonably comfortable but not wealthy. Five of the band have a computing and/or engineering background and work in computing and/or engineering, the 6th has worked in financial services for the last 35 years. I know we're atypical but it indicates that given the right circumstances you can do pretty well financially.

 

[Gawdzilla Sama]

[DEVILSADVOCATE]Perhaps this is because people from rich families are brought up to work hard while people from poor families are brought up to be lazy.[/DEVILSADVOCATE]

Yeah, rich guys work really hard.

 

[anglolawyer]

Well, it tends to be true that successful people work very hard. There used to be a Sunday Times Magazine thing called 'a life in the day' (maybe there still is) and it would feature the typical day of a different famous person each week and just about always the featured person would mention getting up at some ungodly hour of the morning to get started and would describe a pretty tough, committed regime.

I don't suppose any of us have a problem with hard work and talent being duly rewarded. Well, I certainly do not and I speak as a pretty lazy (and untalented) fellow who does not like getting up early and probably would not get up at all unless he had to. So I am reconciled to the consequences.

But the inequality we are talking about goes way beyond the few millions that a hard worker can acquire in a diligent life of toil. Once you get up into the hundreds of millions and billions it's a different ball game. As Conrad Black discovered when he sought that lifestyle without the means to pay for it (allegedly).

There is a graphic going around showing that the top 1% of Americans own a staggering share of the wealth of the nation. I don't believe they did that by getting up early or inventing really useful things (I could be wrong). How did they do it and whence the change that brought this disparity into being?

 

[TellyKNeasuss]

IMO that's absolute rubbish, or more specifically very few people in my experience have the skills and training to become effective programmers. Even if someone has learned the syntax of the programming language it doesn't mean that they are able to translate the business requirement in to workable code and there are even fewer people who are able to build robust applications with few bugs.

I've done a fair amount of recruiting over the years and am very particular about the people I'll even bring in for interview. Despite this, I'll make an offer to 5-10% of those candidates who are well qualified for the role and even then, it'll only work out for about 50% of the people I recruit.

Good programmers are few and far between which is why I've been happy to pay up to £2,000 a day for a really, really good one.

I've worked as a computer programmer for a lot of years. It is not difficult, though many people make it more difficult than it needs to be. I've encountered many people who have good, high-paying IT jobs and are considered to be valuable employees but aren't highly intelligent. Computer science is the only subject that I've taken more than 3 classes in that I have a 4.00 GPA in (I've taken about 80 hours of CS classes, of which 33 were Master's level classes). The classes just were not difficult (though very time-consuming).

Who are these engineers and what model could they have to make money from "the internet" ? Do you mean the telecommunications engineers who implemented the underlying communications infrastructure or the software engineers who developed the software to enable us to communicate over it ?

Any or all of the above.

The original basis for the internet was ARPAnet which was built to connect centres of academia so I presume that the developers were comfortably off but not lavishly rewarded.

Lavishly rewarded enough to have an effect on income inequality?

A few computer programmers and engineers who have done quite nicely

- Bill Gates
- Paul Allen
- Larry Ellison
- Steve Wozniak
- Steve Jobs
- Larry Page
- Sergey Brin
- Jeff Bezos
- Mark Zuckerberg
- Me (I'm not in the 1% but in the UK I'm probably in low single digits)

There are around 2.5 million computer programmers and engineers currently employed in the USA. Your list comprises what percent of 2.5 million? (And, to be picky, Steve Jobs was not a programmer.)

 

[The Don]

I've worked as a computer programmer for a lot of years. It is not difficult, though many people make it more difficult than it needs to be. I've encountered many people who have good, high-paying IT jobs and are considered to be valuable employees but aren't highly intelligent. Computer science is the only subject that I've taken more than 3 classes in that I have a 4.00 GPA in (I've taken about 80 hours of CS classes, of which 33 were Master's level classes). The classes just were not difficult (though very time-consuming).

That may be your opinion and you're welcome to it.

As I've said above, my experience is that a tiny fraction of those people who are employed as programmers are any good at it. The vast majority are frankly incompetent. Whether the problem is with their underlying intelligence, their approach or their attitude or some combination of the three varies from individual to individual.

Any or all of the above.

Lavishly rewarded enough to have an effect on income inequality?

If they're in the top 10-20% of earners then they're likely to have had an impact on income inequality. A household income of $100k a year will put you in the top 20% of households, $145k will put you in the top 10%.

Its almost certain that they would have been in the top 20% (my parents-in-law are retired school teachers and they're well above that) and It's very likely that they would be in the top 10%

There are around 2.5 million computer programmers and engineers currently employed in the USA. Your list comprises what percent of 2.5 million? (And, to be picky, Steve Jobs was not a programmer.)

You were asking about the top 1%, by necessity this will be a rarefied group of which not all programmers and engineers can be members.

The average software developer in the U.S. earns $90k, this puts them well above the mean so developers (like all other well paid groups) are part of the income disparity problem.


You still haven't espoused your own theories behind income disparity.

 

[Belz...]

I've worked as a computer programmer for a lot of years. It is not difficult, though many people make it more difficult than it needs to be.

Depends what you're programming. I like to think I'm a pretty good programmer, and I've done some fairly abstract andmind-breaking stuff, but I've never worked on the really really hard things.

 

[TellyKNeasuss]

That may be your opinion and you're welcome to it.

As I've said above, my experience is that a tiny fraction of those people who are employed as programmers are any good at it. The vast majority are frankly incompetent. Whether the problem is with their underlying intelligence, their approach or their attitude or some combination of the three varies from individual to individual.

Most hiring managers are of the opinion that virtually all programmers are better at it then I am

I think that the main problem is attitude. Many programmers seem to have the view that all the formal stuff that they make you do in school, like draw class diagrams or write pseudo-code/pseudo-English is just an academic exercise that isn't necessary in the real world.

You still haven't espoused your own theories behind income disparity.

I haven't seen a theory that IMHO completely explains what's going on in the USA. That was part of the motivation for creating this thread.

 

[Professor Yaffle]

A summary of potential drivers of inequality:

http://www.equalitytrust.org.uk/about-inequality/causesdrivers

 

[Modified]

As I've said above, my experience is that a tiny fraction of those people who are employed as programmers are any good at it. The vast majority are frankly incompetent. Whether the problem is with their underlying intelligence, their approach or their attitude or some combination of the three varies from individual to individual.

That is certainly my experience. In a group of five, there is often one who is as productive as the other four combined, and who is being paid slightly more to 50% more than the rest. Sometimes the ratio is higher. This is a failure of management, perhaps rooted in human psychology. They would rather hire 20 people at average salaries than pay what it takes to get 10 good ones, even though the 10 good ones would be far more productive. Part of the problem is that with most company structures, to get the good programmers you have to pay them more than their managers.

 

[Xulld]

That is certainly my experience. In a group of five, there is often one who is as productive as the other four combined, and who is being paid slightly more to 50% more than the rest. Sometimes the ratio is higher. This is a failure of management, perhaps rooted in human psychology. They would rather hire 20 people at average salaries than pay what it takes to get 10 good ones, even though the 10 good ones would be far more productive. Part of the problem is that with most company structures, to get the good programmers you have to pay them more than their managers.

Well I am sure management academics everywhere would be happy to here the method for determining which one is the most productive without having to employ them, train them to the environment, and then meter them to know which is which.

 

[TellyKNeasuss]

They would rather hire 20 people at average salaries than pay what it takes to get 10 good ones, even though the 10 good ones would be far more productive. Part of the problem is that with most company structures, to get the good programmers you have to pay them more than their managers.

IMHO, the real reason is that few companies know how to determine who are the good programmers and who are the average programmers. My experience is that companies in general just hire the person whose resume says that they have the most years of experience using X, Y, and Z. In my last job-seeking episode, exactly one employer asked me for a sample of my work.

 

[NWO Sentryman]

A lot of the Inequalityforall is situated on the premise that the USA can return to a "New Deal" economy. Well, it isn't 1945 anymore. Eurasia has surpassed its pre-ww2 economies, China/India is the world's manufacturer, The working class is being annihilated by automation and black people can vote without anywhere near as much hassle. The Nuclear family is disintegrating, and jobs aren't for life.

 

[Modified]

Well I am sure management academics everywhere would be happy to here the method for determining which one is the most productive without having to employ them, train them to the environment, and then meter them to know which is which.

There are plenty of good candidates with existing solo work. Of course, if companies were willing to pay what those people were worth, that would not be the case for long. Also it's well worth it to hire quite a few on a trial basis and lose them on your way to finding good ones.

Low-level managers generally know who is productive and who isn't.

I have seen companies capitalize on this though. I know of one company that fired 8 of 9 software engineers and became more productive with just the one. And I mean more productive in total, not relative to salaries. Those 9 working "together" actually accomplished less than the one working alone.

 

[Modified]

IMHO, the real reason is that few companies know how to determine who are the good programmers and who are the average programmers. My experience is that companies in general just hire the person whose resume says that they have the most years of experience using X, Y, and Z. In my last job-seeking episode, exactly one employer asked me for a sample of my work.

I think they don't invest enough effort in learning how to determine that. Interviews without testing or evaluation of previous work may be worse than useless. Many of the worst programmers can talk a good game and many of the best don't come across well.

 

[TellyKNeasuss]

Many of the worst programmers can talk a good game and many of the best don't come across well.

You mean like the woman that I worked for at the National Snow and Ice Data Center who sounded so impressive that she was first promoted to Lead Programmer and then put in a position where she had complete control over hirings and firings but did things as ludicrous as putting 89 'if' statements in a single function?

 

[wrs]

Since income inequality in the USA has been in the news lately, I have a couple of questions about it:

1) Since it is generally accepted that intelligence is normally distributed and presumably ability is also normally distributed, if income inequality were primarily the result of differences in intelligence and ability should it be expected that income should also approximate a normal distribution?

Intelligence and ability are two different things. The first doesn't lead to or imply the second. I went to school with smart people who made good grades but couldn't solve problems in the real world because they really couldn't think that way. They were good with facts and algorithms but when it came to actually dealing with a real problem, they didn't do as well.

Ability leads to self-confidence which is what it takes to demand more money than the next guy for apparently doing the same thing (from the point of view of the person paying for said service). Ability also leads to actually delivering results instead of decoration and thus justifying the higher price tag. I hired smart people and helped them do better than they were doing because I had the ability to go out and sell our capability as a firm to customers for more money than other people. The guys that worked for me weren't able to do that, they were smart and some were smarter than me but they couldn't get more money for themselves than I could get for them, so they worked for me and they didn't mind that.

2) If income inequality is primarily a result of the higher income earners working harder than the lower income earners, should income inequality remain stable, or only have a slight trend, over the long term? This question is based on the reasoning that an increase in income inequality implies that the financial reward for working harder is increasing, which would be expected to motivate more people to work harder with the result that there would be more people sharing the increased reward for working harder which in turn should cause the income inequality to decrease. This is analogous to what happens when demand pushes up the price of a product and leads to more producers producing the product, which in turn puts downward pressure on the price of that product.

One important factor in determining income is directly related to how close you are to the money stream. That is my experience. The closer you get to the money, the higher your income in almost all cases. There are exceptions such as for cashier and people who facilitate money transfer but otherwise the relation holds in my experience. This is very much the case in big companies and it's true in smaller ones as well. Now it's not absolutely the only way to get a high income but it's probably the most certain route in a corporate environment. This would mean sales and marketing as well as finance are going to pay the best and guess what, they generally do. So given that, it's not so much how hard you work as how well you maneuver.

 

[TellyKNeasuss]

Intelligence and ability are two different things. The first doesn't lead to or imply the second. I went to school with smart people who made good grades but couldn't solve problems in the real world because they really couldn't think that way. They were good with facts and algorithms but when it came to actually dealing with a real problem, they didn't do as well.

Even if ability and intelligence are not highly correlated, is assuming that ability is normally distributed a reasonable assumption? If so, my question is still a sensible one.

Ability leads to self-confidence

Completely WRONG! There have been multiple studies, including the famous one by Dunning and Kruger, that have found that people with little ability are often highly self-confident. Dunning and Kruger found that people with below-average ability tend to over-estimate their ability and people with above-average ability tend to under-estimate their ability. Another well-known study, by Downing, found that the tendency of people to believe that they are exceptionally intelligent is inversely correlated with their IQ.