Spreading the wealth

[adamdavid80]

I'd buy the Baltimore & Ohio Railroad.

Damn!  I just landed there!  Here's your $25, sir...   

[Keemun]

Your reading comprehension is the problem.  It was proposed that income be limited to 40k and that the excess be redistributed.  The total income is conserved, but there is a transfer of income from wealthy to poor, result in a net gain for poor, and an offsetting net loss for wealthy.

It all depends on what exactly Florestan means by "supplemental gain".  If we interpret his question, as you do, to be independent of the preceding sentence discussing the average income, then your analysis is correct.  However, if "supplemental gain" is meant to be relative to the average income figure, then my analysis is correct. 

[Florestan]

Keemun, I might have formulated it ambiguously but somehow Scarpia got it right. The problem was, if income is limited at more or less the average salary and the excess is distributed equally among all, what would be the supplementary gain? Would it really make an essential difference?

I know, it's a rather silly question. No sane person would ever try to propose, much less implement, such an idiocy.

[Keemun]

Keemun, I might have formulated it ambiguously but somehow Scarpia got it right. The problem was, if income is limited at more or less the average salary and the excess is distributed equally among all, what would be the supplementary gain? Would it really make an essential difference?

I know, it's a rather silly question. No sane person would ever try to propose, much less implement, such an idiocy.

Thanks for explaining. 

[bwv 1080]

Here is a theoretical, but nevertheless very interesting, question, IMHO.

According to the Bureau of Labor Statistics, the average annual wages in the U.S. were $36,764 for 2002.

Now, if all incomes in the US would be limited at $40.000 / year and the exceeding amount would be equally divided among all US citizens, how much would be the supplementary gain?

The earnings prospects for graduates of music schools would be greatly improved

[Catison]

The earnings prospects for graduates of music schools would be greatly improved

But then what happens?

[bwv 1080]

Here is a theoretical, but nevertheless very interesting, question, IMHO.

According to the Bureau of Labor Statistics, the average annual wages in the U.S. were $36,764 for 2002.

Now, if all incomes in the US would be limited at $40.000 / year and the exceeding amount would be equally divided among all US citizens, how much would be the supplementary gain?

So say this happens.

Take someone who is a brilliant heart surgeon whose after-tax income is currently $300/yr after tax.  She has $100k in student loans, a $400k mortage and a $40 car note.  After this redistribution plan passes she is bankrupt - her car is repo'd, her home foreclosed and she defaults on her student loans.  Is this fair?   No, so the government decides that heart surgery is a valuable skill and should deserve a higher income than say, sitting home in your underwear collecting $40k a year posting on Internet discussion boards.  It becomes difficult for the government to decide how much a heart surgeon should earn relative to everyone else so the bureaucrats in charge have a brilliant idea, let the employers of heart surgeons bid for how much they will pay.  They reason that the hospitals are in a much better position to judge the value of a good surgeon and how much it costs to support them.  Further they figure out that if there is a shortage of heart surgeons, the salaries will be bid up, attracting more talent to study medicine and become heart surgeons.  Alternatively, if there are too many heart surgeons the price will fall and fewer will enter the profession.  This works so well that they decide to employ the same process for nurses, janitors, hospital adminstrators etc.

[Catison]

So say this happens.

So why don't we just jump right to the whole labor-as-a-market idea already?

[Florestan]

So why don't we just jump right to the whole labor-as-a-market idea already?

But labor-as-a-market is already there, isn't it? Who set the wages if not the market? A heart surgeon working in a state-of-the-art, metropolitan area private hospital wil earn more than a heart surgeon working in a small community hospital in a rural area. Even the wages of those who work in the public, state-funded sector, are not --- or is it rather should not be? --- arbitrarily set, but according to the financial strength of the state, which in turn is dependent on the market.

[Catison]

But labor-as-a-market is already there, isn't it? Who set the wages if not the market?

Yes, that was the joke.

[ezodisy]

According to the Bureau of Labor Statistics, the average annual wages in the U.S. were $36,764 for 2002.

I'd just like to know how that average is made up -- I imagine something like 90% on 29k, 9% on 55k and 1% on 10m (no I didn't do the math).

[bwv 1080]

I'd just like to know how that average is made up -- I imagine something like 90% on 29k, 9% on 55k and 1% on 10m (no I didn't do the math).

Income follows a power law distribtution, not a normal one so there is a skew, however the median household income for the US in 2007 was $51k

the data is here
http://en.wikipedia.org/wiki/Household_income_in_the_United_States