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# Wharton - ugly stats for 2007 internships

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Senior Manager
Joined: 30 Jul 2007
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Re: Wharton - ugly stats for 2007 internships [#permalink]

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27 Aug 2008, 08:32
gixxer1000 wrote:
jb32 wrote:
Thus the rich will keep getting richer and the middle class will stay relatively consatant until a generation has passed. Blue collar workers will eventually shift to become the lower class as a new generation of mid-level grey and white collar workers takes their place and forms the new middle class.

I have to disagree with this point. The problem is that as we move from an industrial/manufacturing economy to service based economy we are constantly finding ways to create exponential amounts of wealth with smaller amounts of people. And as these people continue to take power they find new ways to structure our laws and tax codes to support them, often at the expense of less wealth people. In the days of old you if you created a company that created massive amounts of wealth then you probably had an army of middle class workers that you were paying. But now you can create an internet company that generates the same amount of wealth with just a few employees.

As we continue to increase the percentage of people we educate this will only increase the barrier of entry to entry level jobs. I believe about 25% of the population obtains at least a bachelors degree. If we increase that percentage to 50% then the average income will not increase. It will just mean that there will be more people with bachelors degrees working as the shift supervisor at McDonalds.

At some point we have to realize that corporations have a social and economic responsibility to the country. Sure you can buyout a company, layoff thousands of workers a few people can get rich off of RJ Nabisco. But that is largely due to the creation of one of the strongest middle classes ever. Once that middle class erodes then it all falls apart. For example, due to the strength of a large middle class a musician, athlete, movie star can make millions of dollars because there is huge amount of people that can dispose a decent amount of income on entertainment. But as the disposable income of the middle and lower class decreases they won't be able to spend money on entertainment and then creation of wealth through entertainment evaporates.

If the spending power of the middle and lower class continues to decrease, soon we will not have anyone to sell the services to. If you look through out history in the years leading up to the great depression the highest tax bracket decreased from up in the 70% range down to 24%. Then after the depression the rates increased up to 91%. During which time we created the strongest middle class. Now were back down to 35%. A small group of wealth people are making the huge amounts of money with less people and doing nothing to distribute the benefits of that wealth to anyone else. Workers moving from factory workers to fast food shift supervisors with college degrees is not going to change this.

Impressive! Well thought-out rebuttal.

What happened to the kudos feature on these forums?!
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Re: Wharton - ugly stats for 2007 internships [#permalink]

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27 Aug 2008, 08:41
I apologize in advance for my comments in red. They may be insensitive and sarcastic, but it really bothers me when people going to business school think corporations and the rich owe them something. It would be wise to learn now, that they don't.

gixxer1000 wrote:
I have to disagree with this point. The problem is that as we move from an industrial/manufacturing economy to service based economy we are constantly finding ways to create exponential amounts of wealth with smaller amounts of people. Why is it a problem to create greater amounts of wealth with fewer people? And as these people continue to take power they find new ways to structure our laws and tax codes to support them, often at the expense of less wealth people. So it's a conspiracy? Who are these people that get up everyday with the intention of screwing the middle class? In the days of old you if you created a company that created massive amounts of wealth then you probably had an army of middle class workers that you were paying. But now you can create an internet company that generates the same amount of wealth with just a few employees. And this is a bad thing? Actually its a great thing, it lowers the cost of goods and services for the benefit of everyone. Why do you think it only costs \$8 to trade a stock these days when it cost over \$100 just 20 years ago? How many people do you know that have cell phones? How many had them 15 years ago? Only the rich, right? It lowers costs and is a result of increased efficiency. Why do you think just about everyone in this country has a car when only the rich had them in the 20s, 30s, 40s, and 50s?

As we continue to increase the percentage of people we educate this will only increase the barrier of entry to entry level jobs. I believe about 25% of the population obtains at least a bachelors degree. If we increase that percentage to 50% then the average income will not increase. It will just mean that there will be more people with bachelors degrees working as the shift supervisor at McDonalds. This is completely wrong. You do realize there is a talent shortage in this country right now, right? Actually as the baby boomer generation retires there will be an even greater demand for people with bachelor degrees. In fact, the demand is so great right now that there is a shortage of qualified people for jobs in this country. Go ask any tech company in Silicon Valley if they can find the people they need to grow there business. Ask MSFT why they want to triple the amount of H1-B visas they can offer prospective employees

At some point we have to realize that corporations have a social and economic responsibility to the country. No they don't. They have a responsibility to their shareholders. They have no responsibility to determine what you deem as socially or economically responsible.Sure you can buyout a company, layoff thousands of workers a few people can get rich off of RJ Nabisco. Actually no one got rich off RJR Nabisco. KKR paid way too much for the business and barely turned a profit. Although it can be argued the publicity from the deal was well worth the price they paid for the company But that is largely due to the creation of one of the strongest middle classes ever. Once that middle class erodes then it all falls apart. For example, due to the strength of a large middle class a musician, athlete, movie star can make millions of dollars because there is huge amount of people that can dispose a decent amount of income on entertainment. But as the disposable income of the middle and lower class decreases they won't be able to spend money on entertainment and then creation of wealth through entertainment evaporates. I can't even follow what you are saying because this makes no sense. So some people got rich off of RJR Nabisco and that led to the creation of one of the strongest middle classes ever? And then if the middle class erodes we won't have a huge amount of people spending money on entertainment? So entertainment will vanish if the middle class erodes further?

If the spending power of the middle and lower class continues to decrease, Actually it has gone up since 2000, check out the Census figures that came out yesterday. Also, you do realize the middle class is not static in this country. People move in and out of the middle class all of the time. When people retire, get promoted, get fired, etc. A person's status in the middle class is determined by how much money a person reported on their income taxes last year. People retire, go back to school, stop working, etc and they may be considered in the middle class and only claimed \$40,000 in taxable income last year, but they may have asstes worth \$10 million It only depends on how much they earned last year. Truthfully, it's really an arcane way to measure. soon we will not have anyone to sell the services to. If you look through out history in the years leading up to the great depression the highest tax bracket decreased from up in the 70% range down to 24%. It decreased in 1922 to 58% for people earning over \$1,000,000 a year (Equivalent to \$10,000,000 a year in today's dollars), It was lowered to 25% in 1925. Then after the depression the rates increased up to 91%. If you ask any economist, raising taxes and the protectionest Smoot-Hawley tariff Act were the prime reasons the stock market crash actually became the Great Depression. The economy didn't really turn until 1931, when the unemployment rate increased to 25% During which time we created the strongest middle class. Now we're back down to 35%. A small group of wealth people There are currently 9.3 million Millionaire families in this country, not a small number are making the huge amounts of money with less people and doing nothing to distribute the benefits of that wealth to anyone else. Why do rich people owe you something for doing nothing? What do they have to share the fruits of their hard work? Why don't you not complain about what other people are doing and do something to make yourself rich? Getting an MBA is a pretty good start Workers moving from factory workers to fast food shift supervisors with college degrees is not going to change this. I hope you are exaggerating here, but for what its worth the GMs of McDonalds make over \$100K a year. So maybe you shouldn't be dissing fast food employees
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Re: Wharton - ugly stats for 2007 internships [#permalink]

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27 Aug 2008, 10:14
It's hard to gauge tone on a forum, but it sounds like you need to relax. 1st of all where did I say a corporation owes ME anything. And why does my opinion bother you so much. And why does it matter that I have this opinion entering business school. I'm glad that you have the opinion you do and look forward to meeting you in business schools. Maybe your world view will allow me to realize things that I overlooked and vice versa. Isn't that one of the biggest purposes of business schools, to learn from other students. It doesn't really work that well if everyone already has a pompous attitude and thinks everyone who doesn't think like them would be "wise to learn now" that you are 100% correct.

No one is talking about any conspiracy. If I was making huge amounts of money and had the ability in to influence legislation so that I could keep more of that money then I probably would. But America gave me the opportunity to make that money. Our infrastructure help to make that money. I'm sure I used our roads to make that money. I'm sure I have a few publicly educated workers who helped me make that money and I'm sure I used middle class income to make that money. Try selling these service to countries where the people cant afford them. The middle class wouldn't be buying cell phones and cars if they didn't have the money to do so. So yes I think it is in the best interest of everyone to contribute to the middle class.

"Actually it has gone up since 2000, check out the Census figures that came out yesterday."

Just because income has gone up doesn't mean purchasing power has. The average purchasing power of families has decreased \$1000 over the past 8 years.

"People move in and out of the middle class all of the time. When people retire, get promoted, get fired, etc. A person's status in the middle class is determined by how much money a person reported on their income taxes last year. People retire, go back to school, stop working, etc and they may be considered in the middle class and only claimed \$40,000 in taxable income last year, but they may have asstes worth \$10 million It only depends on how much they earned last year. Truthfully, it's really an arcane way to measure."

Now your arguing semantics. While I agree that it is hard to define the middle class I think we can all agree that someone with an income of \$40k and assets of \$10 million is not in the middle class.

"It decreased in 1922 to 58% for people earning over \$1,000,000 a year (Equivalent to \$10,000,000 a year in today's dollars), It was lowered to 25% in 1925."

In 1918 it was 73% and in 1925 is was 25%. Then after the depression it increased to 63% then climbed to 92% in 1953. It then hovered around 70% until 1981.

"Why do rich people owe you something for doing nothing? What do they have to share the fruits of their hard work? Why don't you not complain about what other people are doing and do something to make yourself rich? Getting an MBA is a pretty good start"

The funny thing is that in your essays you'll probably write about how you volunteer to help end poverty. But here is the truth that you really don't care about them. Do you really think that C-level employees actually work that much hard and create that much more wealth than the line workers? Does Brittney Spears really work that much harder than a veterinarian or a construction worker?

"I hope you are exaggerating here, but for what its worth the GMs of McDonalds make over \$100K a year. So maybe you shouldn't be dissing fast food employees"

There is actually a lot of people making a lot of good money at McDonals. But I clearly was referring to entry level position which followed my previous point that increase in the percentage of educated people will lead to increased barriers of entry of to lower level jobs and not an increase in the income of the middle class.

"There are currently 9.3 million Millionaire families in this country, not a small number."

Wow, so thats about 8% of us households. And of those there are probably plenty that while consider millionaires still live above their means and probably won't transfer that wealth to their children, meaning that even a smaller percentage of the population are actually millionaires.

You have a more conservative view and I have a more progressive. I respect your opinion and would not proceed to tell you what you need to learn prior to entering bschool.

And one last thing, don't apologize in advance for your comments. If you have to apologize before you even say them then you probably don't need to say them at all.
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Re: Wharton - ugly stats for 2007 internships [#permalink]

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27 Aug 2008, 10:48
jb32 & gixxer - great discussion. I agree with jb32. gixxer, it does appear in your posts that you think corporations and the rich owe you something. If you disagree, why in the world did you throw out one of the most cliche liberal phrases "redistribution of wealth". God, it sends chills up my spine to even type the words.

gixxer, it also appears that you're approaching economic analysis as a zero sum formula, like when one person moves out of the middle class, another moves in, or if 10,000 more people earn a bachelor's degree this year than last year, then there won't be enough jobs for those 10,000 people and they'll be stuck in an entry level job. Education creates wealth because education leads to creativity, problem solving and innovation. These educated people go out and create their own wealth. if this were not the case, no country's GNP would ever increase beyond inflation.

You have some interesting views gixxer - keep sharing them, I enjoy reading, but I disagree with your analysis.
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Re: Wharton - ugly stats for 2007 internships [#permalink]

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27 Aug 2008, 11:07
I apologize, after rereading my comments they are attacking and maybe a bit unfair.

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Re: Wharton - ugly stats for 2007 internships [#permalink]

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27 Aug 2008, 11:11
KUDOS! (When we get the ability to give them again)
jb32 wrote:
I apologize, after rereading my comments they are attacking and maybe a bit unfair.

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Re: Wharton - ugly stats for 2007 internships [#permalink]

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27 Aug 2008, 12:52
Well thank you for keeping the discussion cordial. I see the point that you both are making but I just see it differently.

Well jallenmorris it's probably because I am a liberal or progressive liberal to be more precise. But I guess it all depends on your viewpoint. I come from a lower middle class family (single mother who makes \$20/hr). So while I currently make more than 150% of what she does at 50% of her age I still relate more to her lifestyle than my coworkers who grew up in a household that makes considerable more than what we do know. I'm happy that America has given me this opportunity to do more than my mother, but I also know that I received a lot of help from the government to get here. I was taught at public schools and drove on public roads and yes even benefited from welfare programs after leaving the military. Which is why I don't mind giving a increasingly more amount of the wealth I have achieved back to others who need it as I have. If I one day become a millionaire I know that it wouldn't have been possible without the government programs that are funded through taxation. Which results in me now having disposable income to buy cell phones, cars, and flat screen tvs. So without this taxation these hardworking corporations would not have me as a customer.

"gixxer, it also appears that you're approaching economic analysis as a zero sum formula, like when one person moves out of the middle class, another moves in"

I would actually argue that for every one person who becomes rich, there are hundreds of people who move from middle to lower class.

"if 10,000 more people earn a bachelor's degree this year than last year, then there won't be enough jobs for those 10,000 people and they'll be stuck in an entry level job. Education creates wealth because education leads to creativity, problem solving and innovation. These educated people go out and create their own wealth. if this were not the case, no country's GNP would ever increase beyond inflation."

I agree with most of this but I feel that while even thought the GNP increases overall, it doesn't increase proportionately. I have no problem if the rich get richer and the middle and poor stay the same. But that doesn't seem to be the case. The rich get richer and poor and middle get poorer. What happens when all the middle and poor are tapped out. Now who buys the cell phones, cars and flat screen tvs.

"I know personally that I want to be rich one day, so why would I want a 70% or even 50% tax rate? If I graduate B-school and plan to be a MC or IB, why do I want to pay a 50% tax rate on \$120,000 salary?"

Me too, which is why I don't think that \$120k should fall in the 50% tax bracket. I personally feel that \$250k is a reasonable salary especially in certain cities. But what if you bring in \$43 million in one year. At some point it becomes excessive. Especially considering the only reason your able to charge the prices you do is because America has such a large middle class. I argue that if corporations keep taking excessive profits at some point the markets will correct themselves. So once the price of entertainment, transportation, healthcare, utilities, food, housing, etc. have all increased to the point where the majority of Americans cant afford them there will be a huge correction and you will no longer be able to charge \$15 for a CD or \$100 for tickets to see a college football game. But why wreck the middle class to figure that out.

You can suck all the money I have now until I'm completely broke and can never buy anything from you again or you can use some of you profits to make sure I'm sustainable and can continue to buy from you for the rest of my life.
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Re: Wharton - ugly stats for 2007 internships [#permalink]

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27 Aug 2008, 13:19
Wow, gixxer...I just don't know where you are coming up with support for some of your asssertions. Point to any study that shows that the middle and poor classes are getting poorer.

Corporations take excessive profits? I understand the theory behind what you're saying. Like "Bill Gates has so much money he couldn't spend it in one lifetime." Well, he actually does, it's call the Bill & Melinda Gates foundation. Also the foundation that Warren Buffett recently gave tens of billions of \$\$ to. Are you ignoring the charitable things that corporations do?

You seem to be making a case that capitalism is going to self-destruct. That the middle class and poor, upon whose backs the evil corporations make their excessive profits, are going to someday literally cease to exist. Then they won't be able to buy MP3 downloads and concert tickets. I just don't even know which argument to use to debate you, there just seems to be so many. The middle class has steadily increased in size and economic power for decades. What about now is causing this historic shift in economic trends?

I would be interested to hear more about your background. I think people that use the tools the government provides for assistance and then is successful and contributes back is great. That's the point of those tools. The problem I have is the way some of the programs are structured so that the programs get used in ways that aren't intended and aren't beneficial to the recipient. If everyone that benefited from a government program had the attitude you do (even the liberal attitude) that you're going to use the assistance and benefit yourself, welfare would be awesome. The problem is actually human nature. Some people aren't interested in bettering themselves to go on to b-school or any of these things you're capable of doing and have set out to do. We speak of giving peopel opportunities to help themselves, but then don't provide any (or very little) accountability for those that do not choose to take the opportunity for what it is and succeed.

One final thought back on corporate greed and excessive profits (and a little about the middle class too). Corporations make the money they do because they can. It's capitalism at it's finest and worst at the same time. There are great things about capitalism, and there are bad things as well. I challenge you to find anything with only upside. What I believe is so amazing about capitalism and America is the American Dream. People believe that if they work hard, be smart, don't get into trouble, and have a bit of luck, that they too can become rich, or at least provide a better life for their children than they had. If we kill the dream that is the ability to make oneself rich, or at least prosperous, we kill what is America and the consequences if that happens will be severe.

One final, final thought . You mentioned something in a prior post about passing wealth onto one's children. I've read an article somewhere, and I'll try to find it, that in America over the last few centuries, the wealth created by people that have been self-made and started companies and become very rich does not last for more than 2 generations. This could partly that the companies are organized and sold into shares, thereby creating a finite amount of wealth rather than continuously owning a business that is constantly making money, or the fact that some people would rather just live their life and be a teacher. I really will try to find that article.

Wow, most of this was random. Sorry.
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Re: Wharton - ugly stats for 2007 internships [#permalink]

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27 Aug 2008, 13:23
jallenmorris wrote:
One final thought back on corporate greed and excessive profits (and a little about the middle class too). Corporations make the money they do because they can. It's capitalism at it's finest and worst at the same time. There are great things about capitalism, and there are bad things as well. I challenge you to find anything with only upside.

Very well put. Kudos.
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Re: Wharton - ugly stats for 2007 internships [#permalink]

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27 Aug 2008, 14:03
"Wow, gixxer...I just don't know where you are coming up with support for some of your asssertions. Point to any study that shows that the middle and poor classes are getting poorer."

I don't really feel like cutting and pasting information from a million sources but here is an article that roughly explains my position.

http://www.msnbc.msn.com/id/21309318/

If you don't feel like reading it I'll paraphrase a little. Overall if you look at the census bureau you'll see that the average family income has risen modestly over the past few decades. But in that same time frame we have gone from one income to two. So we actually should have seen the income at least double. But because education, health care, housing, utiltity costs etc. have increase so much we've only seen modest gains. So if all those cost continue at the same pace at some point we'll be screwed. Unless you want to get two wives (or husbands) so you can have a 3 person family income to keep compensating like we've been doing.

Most people today have about the same with two incomes as they did years ago with one income.

"Bankruptcy law expert and Harvard University Professor Elizabeth Warren spent a lot of time crunching consumer spending numbers for her popular books, "The Fragile Middle Class” and “The Two-Income Trap.” In both, she makes this point: Despite all those \$200 sneakers you hear about and the long lines at Starbucks, consumers are actually spending less of their income — much less — on discretionary items like clothing, entertainment and food than their parents did. In fact, after taking care of essentials like housing and health care, today’s middle class has about half as much spending money as their parents did in the early 1970s, Warren says."

Now they are rebuttals to this viewpoint in the article and everyone is entitled to their own opinion. But there are definitely many experts that feel the middle class is suffering. I can't 100% prove that I'm right and neither can you. But I'm not just making random stuff up. There are a lot of people in the middle class whose positions are getting worse and not better with time.
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Re: Wharton - ugly stats for 2007 internships [#permalink]

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27 Aug 2008, 14:25
gixxer1000 wrote:
Well thank you for keeping the discussion cordial. I see the point that you both are making but I just see it differently.

Well jallenmorris it's probably because I am a liberal or progressive liberal to be more precise. But I guess it all depends on your viewpoint. I come from a lower middle class family (single mother who makes \$20/hr). So while I currently make more than 150% of what she does at 50% of her age I still relate more to her lifestyle than my coworkers who grew up in a household that makes considerable more than what we do know. I'm happy that America has given me this opportunity to do more than my mother, Here's where we are most different. I believe you weren't 'given' anything. America never 'gave' you anything. It provided you an opportunity and 'YOU' took advantage of it. but I also know that I received a lot of help from the government to get here. I was taught at public schools and drove on public roads and yes even benefited from welfare programs after leaving the military. Which is why I don't mind giving a increasingly more amount of the wealth I have achieved back to others who need it as I have. Which is fine, you are free to give as much back as you want, but why force others to do the same? Also, the efficiency of private charities vs. government welfare is generally 75% vs. 35%. Meaning that for every \$1 given to a charity 25% is allocated to administrative costs and 75% to help people. Governments generally spend 65-70% on administrative and beauracracy costs. I personally would rather voluntarily give my money to a charity then have the government take it from me. If I one day become a millionaire I know that it wouldn't have been possible without the government programs that are funded through taxation. It would have been possible, just harder Which results in me now having disposable income to buy cell phones, cars, and flat screen tvs. So without this taxation Taxation did not give you these things, your hard work allowed you to purchase them these hardworking corporations would not have me as a customer.

"gixxer, it also appears that you're approaching economic analysis as a zero sum formula, like when one person moves out of the middle class, another moves in"

I would actually argue that for every one person who becomes rich, there are hundreds of people who move from middle to lower class. While that may be the case, they are mutually exclusive events. One person does not get rich at the expense of another except through crime. If I rob you, then yes I get rich at your expense, but in normal situations this is not accurate. Actually, the only entity that gets rich at the expense of others is government because they can take by force.

I have an example that takes from one of my previous posts about the middle class, see below:

"if 10,000 more people earn a bachelor's degree this year than last year, then there won't be enough jobs for those 10,000 people and they'll be stuck in an entry level job. Education creates wealth because education leads to creativity, problem solving and innovation. These educated people go out and create their own wealth. if this were not the case, no country's GNP would ever increase beyond inflation."

I agree with most of this but I feel that while even thought the GNP increases overall, it doesn't increase proportionately. I have no problem if the rich get richer and the middle and poor stay the same. But that doesn't seem to be the case. The rich get richer and poor and middle get poorer. What happens when all the middle and poor are tapped out. Now who buys the cell phones, cars and flat screen tvs. Actually trade benefits these people even more than it does the rich. Thier dollar goes so much further today than it ever did before. Think about all of the things that the middle class and even poor have today that they didn't have 50 years ago. How many middle class families own their own home? Nearly 80% today, closer to 55% in 1950. The average size of a home has doubled in the last 50 years. Up until the 1980s people didn't have AC. How many own two cars? How many can send their kids to college? Go on vacations every summer? Own cell phones, big screen tvs, cable televisions, fancy clothes? These were things that only the rich could afford 25 years ago.

"I know personally that I want to be rich one day, so why would I want a 70% or even 50% tax rate? If I graduate B-school and plan to be a MC or IB, why do I want to pay a 50% tax rate on \$120,000 salary?"

Me too, which is why I don't think that \$120k should fall in the 50% tax bracket. I personally feel that \$250k is a reasonable salary especially in certain cities. But what if you bring in \$43 million in one year. Good for you, congratulations it's yours to keep. Donate it to Make-A-Wish, build a swimming pool and fill it with \$1 bills and swim in it. Who cares, that's your money and you should keep it At some point it becomes excessive. If you think it's excessive then give it all away. Just don't use the police power of government to take my money away. Especially considering the only reason your able to charge the prices you do is because America has such a large middle class. I argue that if corporations keep taking excessive profits Excessive profit: definition - some arbitrary number that a liberal deems as too much and therefore feels an obligation to take by force and redistribute because they know better how to spend it than the CEO and managers of the company. How much is too much? Who decides when is too much? at some point the markets will correct themselves. So once the price of entertainment, transportation, healthcare, utilities, food, housing, etc. have all increased to the point where the majority of Americans cant afford them there will be a huge correction and you will no longer be able to charge \$15 for a CD or \$100 for tickets to see a college football game. It will never happen because there are always substitutes. If CDs cost too much, I'll download the songs on my IPOD. College Football Tickets cost too much, then I'll stay home and watch it on tv. Housing costs too much then I'll rent. There will not be a huge correction. At some price point people will choose other options, demand will slow and the price will return to what the market demands. It's the law of supply and demand. The middle class will not be wrecked. But why wreck the middle class to figure that out.

You can suck all the money I have now until I'm completely broke and can never buy anything from you again or you can use some of you profits to make sure I'm sustainable and can continue to buy from you for the rest of my life. I have no idea what your point is here

So we know it is a fact that economics is not a zero-sum game, and that trade brings benefits to both parties. So why is it that there are so many bitter people in Ohio and Pennsylvania?

The answer is that while economics is not a zero-sum game, and trade always benefits the participants, change can still produce winners and losers.

Let’s take a look at the plight of the Detroit auto worker. In the old days, Mr. UAW managed to make a good living on the assembly line even without the benefit of a college degree or unusual technical skills. Then along came Toyota, Honda, and Nissan, and pretty soon Michael Moore was running around Flint, Michigan railing against the evils of capitalism.

Someone won (Japanese auto makers), and someone lost (Detroit auto workers). So is that an example of a zero-sum game?

Not really. What’s missing is a full accounting of winners and losers. Most importantly, American motorists were big winners. The Japanese auto makers produced cheaper, safer, more reliable cars. Car buyers ended up saving money AND getting a better product (which probably even saved a large number of people from dying in accidents).

Not only did the benefits accruing to the Japanese auto makers and American motorists outweigh the losses suffered by Detroit auto workers, the net benefit to Americans was almost certainly positive.

The reason we think of the rise of the Japanese auto industry as being bad for America is because the winners are largely invisible (and unaware) and the losers are highly visible (and loud).

In 2005, the Big 3 US auto makers employed 250,000 workers, who were paid an average of \$50/hour, or \$100,000 per year (this compensation figure includes benefits). The total value these workers received was \$25 billion. Americans buy about \$600 billion of cars per year (17 million vehicles per year). Do you think that American consumers have benefited at least 4.2% on the cost of new cars because of Japanese competition? If anything, the equation seems like it is wildly on the favorable side, especially when you consider that those 250,000 workers could, presumably, get other jobs.

The problem is that the 17 million car buyers each year don’t think of themselves as a special interest group and don’t have their own political action committee to bribe–er, support–members of Congress.

However, even if America as a whole benefits from Japanese competition, our friend Mr. UAW does lose out. There aren’t that many \$100K jobs available for people without college degrees or specialized technical skills. Most of the autoworkers who lost their jobs probably didn’t have the skills to make as much money in other fields.

So you see, it's not that economics is a zero-sum game where some people have to lose for other people to win. Detroit suffered because the Japanese could do things better and cheaper.
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Re: Wharton - ugly stats for 2007 internships [#permalink]

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27 Aug 2008, 14:54
That article was written in October 2007 and contains a few nuggets:

"In the end, the portion of an average family’s budget spent on fixed costs like housing has risen much faster than wages and inflation, while spending on discretionary items has declined. That means mortgages, more than lattes, are the source of middle-class anxiety, says economist Jared Bernstein of the Economic Policy Institute, a generally liberal think tank that focuses on the interests of low- and middle-income Americans."

Well we've seen the bubble burst, markets are in the process of correcting themselves. Prices are falling because the market determined that indeed they had grown too fast. So there's your explanation for housing costs increasing as a % of the middle class budget. Next!

"The cost of education has similarly spiked...On the other end, college costs have easily outpaced the cost of inflation. For example, the average bill for attending a four-year public college rose 52 percent from 2001 to 2007."

More people are going to college - good thing. Set supply of colleges and universities in the short run, also state governments are cutting back on funds that would allow colleges and universities to grow, many internationals want to come to the US for school - causes prices to go up faster than historically. Accelerating demand = higher prices. Market reacts by creating online universities and technical colleges are in high demand, i.e. University of Phoenix, DeVry. Costs will slowdown when there are enough seats in colleges to balance the demand.
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27 Aug 2008, 15:06
Who benefits from the housing crash that we've experienced? Housing is down 15% between April 2008 and June 2008 last I saw. A poor person that manages their finances well (you don't have to have a ton of money to manage finances) will now be able to get a house for cheaper.

I really don't understand why people think the Democrat party is the party of the "people" because the Democrat party preaches that the government gave them this and the government gave them that. You're just passifying people into thinking they can't do anything for themselves. If you show someone how their hard work and their choice to take government assistance and make the most of it is THEIR decision and the government didn't force the assistance upon themm, then it empowers that person to do their own thing and not rely upon the government, but be self-sufficient. If Obama were preaching that CHANGE, I'd buy.
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27 Aug 2008, 15:35
Am I the only one who thinks that the notion of "the rich get richer, while the poor get poorer" is kind of ridiculous? The definition of "poor" or "middle-class" is completely arbitrary and is made even more useless when comparing different times in history. Why? Because a "middle-class" family in 1950 had like 1 car, a small house and 1 color TV. Now a middle-class family tries to have at least 2 cars, a McMansion and several flat-screens. How do you control for the gains in consumer standard of living? For instance, the fact that TVs keep getting bigger and more expensive doesn't necessarily mean that the "middle-class" labeled family should be able to spend the same proportionate income on such an item precisely because they are not anywhere close to the same item. They have now increased the standard of living. So, exactly how is it that the poor are getting poorer?
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27 Aug 2008, 15:54
Additionally, my wife and I live nicely on 1 income. It was mainly so she could be at home with the kids, but since the kids were born she has started a business and is trying to get it going. We hear talk of the two income family and it's impossible to live on just one income. That's a lie. What is impossible is for people to make the choices that are necessary in order to live on one income.
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Re: Wharton - ugly stats for 2007 internships [#permalink]

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27 Aug 2008, 16:57
cougarblue wrote:
Am I the only one who thinks that the notion of "the rich get richer, while the poor get poorer" is kind of ridiculous? The definition of "poor" or "middle-class" is completely arbitrary and is made even more useless when comparing different times in history. Why? Because a "middle-class" family in 1950 had like 1 car, a small house and 1 color TV. Now a middle-class family tries to have at least 2 cars, a McMansion and several flat-screens. How do you control for the gains in consumer standard of living? For instance, the fact that TVs keep getting bigger and more expensive doesn't necessarily mean that the "middle-class" labeled family should be able to spend the same proportionate income on such an item precisely because they are not anywhere close to the same item. They have now increased the standard of living. So, exactly how is it that the poor are getting poorer?

Cougar that issue was addressed in the article. Warner basically looked at frivolous spending and noted that there is pretty much the same amount spent its just allocated to different things. For example we spend less on tobacco and more on consumer electronics.

As far as the 2 cars issue your not really gaining anything. So in 1950 you had 1 car so dad can go to work while mom stayed at home. Now you NEED 2 cars because mom has to work as well. We've also undergone enormous urban sprawl were we now have huge amounts of people who live in the suburbs and commute to work, play, etc. Which also increases energy cost.
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27 Aug 2008, 17:21
gixxer1000 wrote:
cougarblue wrote:
Am I the only one who thinks that the notion of "the rich get richer, while the poor get poorer" is kind of ridiculous? The definition of "poor" or "middle-class" is completely arbitrary and is made even more useless when comparing different times in history. Why? Because a "middle-class" family in 1950 had like 1 car, a small house and 1 color TV. Now a middle-class family tries to have at least 2 cars, a McMansion and several flat-screens. How do you control for the gains in consumer standard of living? For instance, the fact that TVs keep getting bigger and more expensive doesn't necessarily mean that the "middle-class" labeled family should be able to spend the same proportionate income on such an item precisely because they are not anywhere close to the same item. They have now increased the standard of living. So, exactly how is it that the poor are getting poorer?

Cougar that issue was addressed in the article. Warner basically looked at frivolous spending and noted that there is pretty much the same amount spent its just allocated to different things. For example we spend less on tobacco and more on consumer electronics.

As far as the 2 cars issue your not really gaining anything. So in 1950 you had 1 car so dad can go to work while mom stayed at home. Now you NEED 2 cars because mom has to work as well. We've also undergone enormous urban sprawl were we now have huge amounts of people who live in the suburbs and commute to work, play, etc. Which also increases energy cost.

Sorry, I didn't read the article nor was I referring to it specifically. But I think you're still missing my point, i.e., what was "frivolous" back then has now become a "necessity". (I'm not talking about how much % amount of income is spent per household on some arbitrary "frivolous" category.) Where do you draw the line? Are unlimited smart-phone plans for all the kids the same as having one telephone in the house back then? Of course not. But your point of view seems to advocate the position that now "middle-class" families NEED to spend more % amount on telecommunications simply because they make those choices. I think it is precisely the change in middle-class consumer preferences, or choices, that makes middle-class families feel like they're getting poorer not that they really are. And why isn't it the case that mom CHOOSES to work to be able to afford 2 cars (and other extra WANTS) not because she NEEDS to? I'm pretty sure jallenmorris gets what I'm trying to say here.

Anyway, I do agree that the rich are getting richer, but the poor and middle class are also getting richer albeit at a slower rate.
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27 Aug 2008, 17:31
[quote="cougarblue]Anyway, I do agree that the rich are getting richer, but the poor and middle class are also getting richer albeit at a slower rate.[/quote]

This can be explained very simply. The 'rich' make decisions that make them richer. The 'poor' make decisions that make them poorer. Having a fourth kid while on welfare will certainly not make you rich. Dropping out of the 8th grade will not make you rich. Going to get your MBA and opening a HF, possibly. Working 90 hours a week, possibly.
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27 Aug 2008, 17:33
jallenmorris wrote:
Additionally, my wife and I live nicely on 1 income. It was mainly so she could be at home with the kids, but since the kids were born she has started a business and is trying to get it going. We hear talk of the two income family and it's impossible to live on just one income. That's a lie. What is impossible is for people to make the choices that are necessary in order to live on one income.

As far as the whole political debate I'll pass on that because they are pretty much like religions and were not going to change anyones mind on a forum.

But as far as you surviving on 1 income I think that's great. But be careful before you pass judgment on others. Of course some people can live off on income. Do you think Melinda Gates has to work? Obviously not. But there are many people who can't. So it's not a lie. My mother was 1 of 12 children and the only one to go to college. She's an accountant and works for the state and currently makes \$20/hr. I can tell you 8 years ago she made even less. I was off in the military and she struggled to raise my two sisters. Did she make it, yes. But it was tough. But she went through a period without health care and other necessities. One severe accident or illness and we can no longer to afford to pay for rent or food. During the same time I was in military making \$998 a month.

I graduated with people who chose different professions and they currently make as low as \$32,000, while I make more than double that. I don't want to cry a river for them but how the hell are they supposed to raise a family off of that. And they are college educated. How far do you really think that University of Phoenix degree is going to take people?

Looking at the census figures 95% of the population makes less than \$160k. Heck most of the people looking to go to bschool expect to make that a year or two after graduation. You have a blessed life. Be thankful, but don't assume that because you have a good life that most other people do to. Its easy to have that position when you parents were successful and then you become successful as well. It seem simple and straight forward. But to a lot of people its not straight forward. They working two jobs to pay the bills and want to go to school but can't find the time. Then they find someone they love and have kids which makes it worse. So now they're struggling to take care of their family when they really don't even know how to take care of themselves.

The average household income in 2006 is \$48201. Think about that for a minute especially considering most households now have two incomes. After taxes you're looking at taking home \$3000 a month. Now subtract housing, utilities cost, gas (let's assume they drive a paid off car), car insurance, food, etc. If this household has even one kid they're screwed. They're probably working part-time (hence the low salary) and therefore have no health care. And don't get me started on child care. I know people who don't work because their entire salary wouldn't cover child care for the month. Why work for \$10/hr when child care is \$1500 a month. Even if you worked 50 hrs a week by the time you take out taxes you'll just break even.

I'm blessed to be in the position I'm in and my family is extremely proud and I do what I can to help. Heck I even have a flat screen tv. But for every one of me I've got 20 cousins back home struggling (trust me, they're always calling me). So while the American dream is still alive, it ain't all roses for most people.
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27 Aug 2008, 17:50
I don't want to spend much time on this, because I don't think there's much middle ground.

But I think your viewpoint on the middle class is ignorant and I think a lot of us that were raised in different backgrounds see things differently.

I grew up in a blue collar family and my mother didn't work to afford an extra car, she certainly didn't work to support my cell phone bill (I didn't have one) and she definitely didn't work to buy our big screen TVs (we had one TV that was about 20 years old). Could my parents have chosen to raise us in a lesser community so we could be a one income family? Could my parents have biked 20 miles to work so that they didn't need a car? Sure, these are all CHOICES, but at some point the line between a choice and a definite hardship becomes real blurry. I think your assessment is unfair and for a lot of people choices don't include a choice between which \$1/2 million house they'll buy.

Finally, a corporation may not owe us anything, but there are some disgusting corporate habits. Is it really right that common workers get quarter center raises while we guarantee compensation for CEOs that don't back up their performance? And certainly each one of us owes something to the society we live in, the greed in this country is horrendous. I for one don't plan to change my thinking because I have a less popular opinion in B-school. Some of us are not in it to get rich quick.

Okay, rant over.
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