Wealth vs. work

The tech sector has created great wealth — and worse inequality. Is that San Francisco's future?

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El Roto's 'Untitled (30 Cartoons)' is among the works on display at YBCA's 'Without Reality There Is No Utopia" exhibit
PHOTO BY JOHN MAVROUDIS

steve@sfbg.com

May Day, also known as International Workers Day, began in the United States, but it's been all-but ignored by most Americans for decades. And on this May Day, 2013, in the city of San Francisco, it's a good time to note that the growing wealth and income gaps between the rich and the rest of us are reaching historic highs — a dangerous situation, many economists warn — and hardly anyone at City Hall is talking about it.

The job boom in San Francisco, much touted and promoted by Mayor Ed Lee, has been largely in the tech sector, which has created great wealth. But some economists are starting to argue that the Internet, rather than creating economic and political democracy, has done just the opposite.

We're talking about more than just high rents and gentrification — the industrial sector that San Francisco is pinning its future on, critics say, is one of the most brutally monopolistic and exploitive in modern history. It should come as no surprise that the Bay Area has among the highest income and wealth inequality in the nation.

There's no shortage of data pointing to growing inequality and the danger that it poses, but the bottom line is that hoarding of wealth by the rich is causing the middle class to shrink and to make it harder for those on the bottom to just get by.

"About 6 in 10 of us believe that the tax system is unfair — and they're right," Nobel-laureate economist Joseph Stiglitz noted in a recent New York Times column. "Put simply, the very rich don't pay their fair share,".

But Americans generally don't understand how bad things really are. Polling done by Harvard and Duke University researchers in 2010 found most Americans vastly underestimate this country's wealth gap (most thought the top 20 percent controlled 59 percent of the country's wealth, rather than the true figure of 84 percent), and overwhelmingly preferred far more economic equity (most respondents thought it would be fair for the top fifth to control 32 percent of the wealth, which is the case in Sweden).

Part of the misunderstanding comes because "the economy" of the wealthy is doing great, even if that doesn't help most Americans. "The stock market is basically back to where it was in 2000, while corporate earnings have doubled since then. Yet the real median wage is now 8 percent below what it was in 2000, and unemployment remains high," UC Berkeley Professor Robert Reich, another leading voice on the issue, wrote on his blog last month.

"Most of the Western world has experienced an increase in inequality in recent decades, though not as much as the United States has," Stiglitz wrote. "But among most economists there is a general understanding that a country with excessive inequality can't function well."

 

 

GEN Y, X, HIT HARDEST

The wealth divide is not only growing, but it is impacting young people and minority groups particularly hard, and with that concentration comes the potential for social instability and unrest.

The growing divide between the rich and the rest of us is being felt most acutely by Hispanics and African Americans, according to a new report by the Urban Institute, "Less Than Equal: Racial Disparities in Wealth Generation."

Comments

What matters is where the poverty line is, and not so much how many people are above it, or by how far. Consider these two cases:

A) Nobody makes under 20K a year. Income maxxed out at 100K

B) Nobody makes under 30K a year. Income maxxed out at a billion.

Clearly there is more inequality with (B), but there is also less poverty. So B is better but you wouldn't know it looking just at "inequality:

Leftists love to look at inequality and whine about "fairness" but there is no evidence that inequality leads to poverty and, indeed, for many it is the path out of poverty.

History tells us that you cannot eradicate poverty by legally mugging the rich. Punitive types of redistribution simply deter or relocate the rich elsewhere.

And, as the old saying goes, no poor person ever gave me a job. Like it or not, if you want to help poor people, you need the rich people to create prosperity and employ people. Robbing them won't get you far and could set you back.

Be grateful that SF has a booming economy, because that benefits everyone, enabling for instance a very high minimum wage and lots of jobs for those who want to work.

If you want the opposite, why aren't you living in Detroit?

Posted by Anon on Apr. 30, 2013 @ 10:20 pm

"A) Nobody makes under 20K a year. Income maxxed out at 100K

B) Nobody makes under 30K a year. Income maxxed out at a billion."

In situation A, nobody can be outbid on their neccessities by more than a five-to-one ratio on average.

In situation B, the ratio is 333,333:1

Yes, when the rich get richer the poor *do* get poorer.

Posted by lillipublicans on May. 01, 2013 @ 8:09 am

things that are in plentiful supply. So a dozen or so billionaires in SF do not make you any poorer.

200,000 people making 150K a year might, but then they are not rich anyway.

Posted by anon on May. 01, 2013 @ 8:23 am

In situation b prices go up for all the things that people need at the bottom. Also, the people at the top end up hoarding political power so they start slamming shut the doors of opportunity below them, and hoarding their wealth. So yes, inequality matters.

Posted by Guest on May. 01, 2013 @ 10:24 am

And to be clear, the bottom is sliding down in real terms. So the actual situation is BOTH greater inequality AND lower real wages and wealth at the bottom.

Posted by Guest on May. 01, 2013 @ 10:37 am

Fuckface: inequality ... the path out of poverty.

Posted by marcos on May. 01, 2013 @ 10:42 am

10.55 an hour is starvation.

Posted by pete moss on May. 01, 2013 @ 11:14 am

Half the country is starving and obese?

Posted by Guest on May. 01, 2013 @ 11:49 am

Q: "...the average wealth of white families is $632,000." Does that include Bill Gates and the mega rich? That number sounds massively skewed.

Posted by Guest guest on Apr. 30, 2013 @ 10:49 pm

Is it mean or median. Big difference. People like Buffett and gates will skew the mean, but not the median.

But bear in mind also that "wealth" here includes non-liquid assets like home equity and retirement plans.

And with an average annual income of about 75K, it's not beyond belief that the average family can accumulate 632K or assets over a lifetime.

Whether it is enough to retire on is another matter.

Posted by Guest on Apr. 30, 2013 @ 10:57 pm

mean and median, but here attempts a counterpunch of stupidity by pretending that "average" encompasses one or both of those terms.

What a pathetic sot.

I'm going to remind the SFBG administrators of my idea that this site be improved. I propose that in order to post here, it be required for some simple rebus puzzle to be solved. That would eliminate such absolute stupidity.

http://www.fun-with-words.com/rebus_puzzles.html

Posted by lillipublicans on May. 01, 2013 @ 8:16 am
Posted by anon on May. 01, 2013 @ 8:25 am
Posted by lillipublicans on May. 01, 2013 @ 8:37 am

Oh, the humiliation. No wonder SFGate banned you. It was to save you from yourself.

Posted by anon on May. 01, 2013 @ 8:44 am

wealthy" when anyone with an Estate of less than 10 million doesn't pay any Estate Tax at all?

In fact, it's the exact opposite - ONLY the wealthy get hit by inheritance taxes. The poor, middle class, and even moderately wealthy, pay NOTHING.

It's a tax on being wealthy.

Posted by Guest on Apr. 30, 2013 @ 10:59 pm

I wrote that inheritances contribute to the consolidation of wealth, which is an obvious point that I needn't defend. Inheritances also feed the growing wealth gaps between white families and minorities (tax policies consolidate wealth with rich white people who pass it down to their kids).
But it is also true that the estate tax has become far less progressive since 2001, with the exclusion amount climbing from $675,000 to $5.2 million and the tax rate falling from 55 percent to 40 percent (that last figure was increased by Obama from 35 percent).
BTW, your "it's a tax on being wealthy" comment is just stupid. Wealth is what has traditionally been taxed throughout the world, it's only a recent American phenomenon that has somehow found fault with taxing wealth, thus creating a greater tax burden on the average struggling worker. Why should people who made their wealth exploiting people and natural resources and creating a warmer, less stable planet for future generations feel so entitled to keep every dollar they "earned," let alone pass those ill-gotten gains to their spoiled children?

Posted by steven on May. 01, 2013 @ 11:28 am

Here is the rub. 47% of Americans pay ZERO income tax. Many of these get income tax refunds anyway, by qualifying for Earned Income Tax Credits. Yes, Mitt Romney paid less than 1/2 the % of his total income in income tax than I did, and that is unfair in my opinion, but not as unfair as the fact that 47% pay NOTHING.

Add to that the massive fraud being perpetuated by people who underreport income or don't file at all. They illegally receive government benefits in addition to not paying income tax.

Yes - we have a revenue problem. Not enough people pay income tax. Everyone who earns should pay. Everyone should pay the same %, and pay on all sources of income - Capital Gains, Dividends, too.

If everyone had skin in the game, we would all be better off.

Posted by Richmondman on May. 02, 2013 @ 3:59 pm

Everyone does have skin in the game, and the income tax is only one of many taxes that Americans pay, a burden that actually falls heavier on the poor than the rich in terms of a percentage of their disposal income. Check out this piece on the issue by the country's top tax writer: http://www.sfbg.com/2011/04/12/failed-experiment

Posted by steven on May. 10, 2013 @ 9:45 am

Wait, that doesn't sound like a great example you're making.

Given a random distribution of incomes under your two scenarios, the expected average income of people under B would indeed be much greater than A, but being that the quantity of a scarce and limited resource (like housing, for instance) is presumably equal under both scenarios, the expected price of that resource would also be greater under B.

Assuming both distributions are negatively exponential, the percentage of people being unable to afford something could very well be greater under B. Anyway, I think the real point that "leftists" are making would be more along the lines of

A) minimum 20K, maximum 1 billion
B) minimum 30K, maximum 1 billion (or 900 million, perhaps)

under which the latter scenario would be unequivocally preferable, for most people, anyway.

Posted by Guest on Apr. 30, 2013 @ 11:32 pm

oops reply fail

Posted by Guest on Apr. 30, 2013 @ 11:43 pm

It tends to correlate to education, effort, willingness to take risks and inter-personal skills. It's not clear what else should correlate to income than collective perceived valuation.

But the real point here is that a more equal society could mean that the poor are poorer, since the assumption that the pizza is a fixed size is highly flawed.

But I suspect many leftists would want more equality anyway, because their real agenda is hatred of the wealthy, and not helping the poor.

Posted by Guest on May. 01, 2013 @ 12:43 am

In the past week I've had two textbots (people absolutely addicted to texting) run right into me on the sidewalk. They were both busy texting some crucial message to someone, probably something such as "c u @ the bar @ 6" or something.

One of those textbots has yet to see me. She never took her eyes off that screen even when she ran right into me. She said nothing ("excuse me" is not in her vocabulary) and she continued texting as if she were completely oblivious to me and her surroundings. My partner had a texbot run into him yesterday in a similar situation.

I suspect that all the wealthy tech people on those two-story tech shuttles (there are more of them than Muni buses) look out of their windows when they arrive back in the City and smile to themselves thinking, "look at all of these sheeple on the sidewalk and crossing the streets just staring at their gadget screens and texting. Their gadget is to them what a rattler is to a baby. And no one is talking with anyone. We in the tech industry have got them hooked. They're absolutely addicted to my industry and because of that I'll have a job for a long time."

Thank you for staying on top of this topic and thank you for the article.

Posted by Guest on May. 01, 2013 @ 4:31 am

do not attack those who work for the companies that provide them.

Well, maybe we don't much like people who push heroin onto kids, but there are many businesses built around addictions like drinking, smoking, gambling and those are all legal and mainstream.

So insofar as toys and devices are addictive, I'm not sure you can blame the average mid-level employees at Google or Apple for that. After all, you can only work for the businesses that are offering jobs, and addiction pays because it is an inelastic demand.

Besides, addictive people will always find something to obsess about. You cannot save them from themselves.

Posted by Guest on May. 01, 2013 @ 5:06 am

Oh I do so agree. I think it's wonderful that people are addicted to these gadgets. I also think it's wonderful that more and more people are literally running into each other on the sidewalk because of this addiction. It makes for a much more exciting sidewalk, don't you think? I also think it's very positive that people no longer have manners (they can't say "excuse me" when they're addicted to texting and run into someone). Not having manners is good. I think it's a very positive thing that fewer and fewer people are talking any more making for a more silent society. That's good, it's good. One benefit of this addiction is that it's generating more income for medical doctors because of some people seeking help because of very painful repetitive motion syndrome from texting (all that fast thumb work is not natural movement). That office visit generates $$ to a doctor and we know that doctors need more money. Some people addicted to texting are seeking the help of therapists because of a lack of communication skills. All they know how to do is text; they don't know how to actually talk to someone so that therapy work helps generate $$ for therapists. Anything that generates money is good in my mind because it's all about money and the ends justify the means, don't you think? I know you'll agree with me as a good right-wing conservative.

Posted by Guest on May. 01, 2013 @ 3:32 pm

Also, I forgot to add that I think it is extremely positive that school children don't know how to spell correctly. I'm sure you would agree. Because of their texting addiction they think the word "what," for example, is spelled like this:

wut.

They also think that "see you" is written like this:

c u

I read that school teachers are "pulling their hair out" dealing with idiotic spelling problems directly related to students' texting addiction. Either students never learned how to spelled words correctly or they've forgotten the correct spellings due to not using the correct spellings since they became texting addicts. But the positive of this is that not knowing the correct spelling of all kinds of words is good because it will create jobs and generate money for linguists, learning specialists, psychologists, other specialists, money for teacher overtime (if they get paid for overtime) and many other people. It's good, it's good. The end$ justify the mean$. So stupidity resulting from the texting addiction is good because it creates jobs and helps other people become wealthy. I'm sure you would agree.

Posted by Guest on May. 01, 2013 @ 5:56 pm

Another thing that those awful tech people provide is a way to maintain and support a web site. I'm not sure about the technology that SFBG uses to maintain this site but I can see that they attempt to monetize it via Google. Certainly people seeking information about the Bay Area are directed here via Google, Facebook and others.

So, in other words, those parasitic people in the two story tech shuttles, which outnumber Muni buses, create a product that allows you to post here.

Posted by Troll on May. 01, 2013 @ 8:47 am

Maybe Google could donate one of their 2 story busses tothat ladywho's talking about converting old Muni busses into mobile washing facilities for homeless peeps

Posted by pete moss on May. 01, 2013 @ 11:21 am

"The awful people on those buses make this forum possible"

They have nothing to do with this forum. This forum has been around for years...longer than those tech people have been on those buses. The server for this site is in Hawaii to my knowledge and they use Drupal.

Posted by Guest on May. 01, 2013 @ 7:04 pm

And the ads that attempt to pay the bills for this site? Any idea where they come from?

And the search engines that provide new eyeballs?

What are the little "T" and "F" sharing buttons. Aren't they Twitter and Facebook?

Posted by Troll on May. 01, 2013 @ 7:24 pm

Troll, you make the classic mistake of taking criticism of an entity and turning it into a desire for its destruction. Despite your regular criticism of government, you probably don't actually believe that all government should cease to exist, right? It's the same thing with the tech monopolies. I like Google and Facebook and I use them and appreciate them, but that doesn't mean I want to give them carte blanche to control my life and manipulate the markets for both labor and entrepreneurs. You act as if the only reason we're able to search this government-created thing called the Internet is because of Google's foresight and benevolence. Please! There are plenty of search engines out there that work just fine, and if they all went away tomorrow, a whole new crop of them would spring up to replace them. Google is just another corporation, and corporations need regulation if they are going to act in the public interest rather than the short-term interests of their investors and top executives. Same thing with Facebook, Twitter, Apple, and Airbnb.

Posted by steven on May. 10, 2013 @ 9:56 am

"We're talking about more than just high rents and gentrification — the industrial sector that San Francisco is pinning its future on, critics say, is one of the most brutally monopolistic and exploitive in modern history."

What?

Posted by Guest on May. 01, 2013 @ 7:52 am

Economics is not Steven's strong suit...

Posted by Demented, Yet Terribly, Terribly, Persistent on May. 01, 2013 @ 8:05 am

Well, to be fair, Steven isn't saying that. Critics are.

Posted by Troll on May. 01, 2013 @ 8:06 am

Not to mention the voices in my head...

Twitter is brutally monopolistic and exploitative! Evil, Evil, Evil!

Posted by Demented, Yet Terribly, Terribly Persistent on May. 01, 2013 @ 8:35 am

I supported that point in my article, and McChesney's entire book supports that point, as does simply perusing a list of the largest US corporations or reviewing the Justice Department's anti-trust work of recent years (from Microsoft to Google). Honestly, if you want to learn about the tech industry, don't read boosterish bullshit like TechCrunch or listen to the self-serving statements of Ron Conway and other tech titans, read the good investigations that Harpers, Mother Jones, and other real journalism outlets have done. You just might learn something. Start here: http://harpers.org/blog/2012/01/an-excerpt-from-killing-the-competition-...

Posted by steven on May. 01, 2013 @ 11:43 am

Steven, gotta separate the tech part from the business part. The MBA fratboys are winning over the geeks, trying to wrap the culture that led to innovation into a synthetic corporate veneer that is slowly strangling the kind of innovation that led to the development of this enabling technology.

The best software remains free software.

Posted by marcos on May. 01, 2013 @ 11:56 am

That's a good point, Marcos, and it's true that I'm using "technology" and "tech sector" as a stand-in for large technology corporations. The technology itself can be really cool, stuff that I use myself and that can be beneficial to society. Hopefully tech workers will rise up at some point and realize that they're getting played just like the rest of us, and to that end, I share your desire for a revitalized progressive movement in this country.

Posted by steven on May. 01, 2013 @ 1:19 pm

Rise up and do what exactly?

Posted by Guest on May. 01, 2013 @ 1:57 pm

There has been a cultural shift in what it means to be a tech worker in the Bay Area, both as you relate to your environment and as relates to the nature of the workplace. Most of us who worked on the enabling technologies decades ago did not grow up in virtual worlds. Many of us took detours from tech educations to dabble in the liberal arts, some of us dabbled in the tech departments.

Kids today have had this technology their entire lives and for many it has colonized what I see as too much of their lives. Their educations are directed exclusively to pay off those gargantuan student debts.

It is kind of like the extinguishing of the liberal arts, philosophy, politics, literature, etc., from academia because it is not cost effective, this extinguishing of realia in favor of entering and operating almost exclusively in the matrix of the virtual. In both cases, liberal arts and realia were the bridges over which we all crossed to get here as societies and individuals.

I can understand the fixation with creative destruction in the tech world to achieve efficiencies and how that might play into minimizing the real world's window on your desktop. But when there is perfectly good code that gets the job done, you don't just replace it because you want to, you do that when you have to.

Eliminating stimuli, such as contact with the real world, with which we evolved to handle and upon which we might depend similar to the starvation of the liberal arts as relates to intellectual development that led to people like Johann von Neumann is always a tricky business.

Posted by marcos on May. 01, 2013 @ 2:18 pm

Are large tech companies monopolistic? They try to be with varying success.

Is the tech industry "one of the most brutally monopolistic and exploitive in modern history?" Give me a frickin break, Steve.

Posted by Guest on May. 01, 2013 @ 12:14 pm

What are two things that almost every financially successful tech company has in common? They are funded by very rich people who expect healthy returns on that investment (euphemistically called venture capitalism, which is a big factor in the consolidation of wealth), and they have a corporate culture of workers toiling far more than 40 hours per week (a hard-won federal labor standard that the tech sector wantonly ignores). In other words, it's the 1 percent getting richer by exploiting workers, plain and simple. And it's made even more obscene by venture capitalists like Ron Conway that invest in a whole cross-section of tech companies (apparently hedging his bets) and then sponsor the political ambitions of Mayor Ed Lee and other neoliberal corporate shills, who then subsidize his investments with our tax dollars.
As far as monopolistic behavior, do I really need to justify that? It is the stock in trade of big tech companies like Oracle, Google, Apple, Facebook, and the other big tech companies. Start-ups these days aren't even looking to succeed in their own right, they're mostly just hoping to make themselves attractive enough or enough of a threat to get bought by their sector's reigning monopoly. We haven't seen this much monopolistic behavior in this country since the last Gilded Era, when Rockefeller and the other robber-barons were finally countered (to some degree) by Teddy Roosevelt and the Progressive Era.

Posted by steven on May. 01, 2013 @ 1:15 pm

I phone screened for a job last month where they told me that their work week was 50 hr/wk. They were not offering a 25% premium in compensation, so I told them that I was not interested.

Posted by marcos on May. 01, 2013 @ 1:45 pm

"it's the 1 percent getting richer by exploiting workers, plain and simple"

Mostly simple

Posted by Guest on May. 01, 2013 @ 2:00 pm

"the one percent" without having any concept about the wealthy at all, because they have been failures all their lives.

Posted by Guest on May. 01, 2013 @ 2:29 pm

Actually, if you read the article you're commenting on, you'd see that I clearly defined how the richest 1 percent is consolidating their wealth and depriving other groups of economic opportunities and stability, and how that has evolved over time. That concept, spelled out clearly in statistics and elaborated on by Nobel laureates in economics, is what this article is about, you idiot. Do you actually read the things you write before sending them?

Posted by steven on May. 10, 2013 @ 10:02 am

I expect that of the kneejerk commentators here, but not of a so-called professional.

Steven, I very much doubt that you even know anyone who is the richest one percent.

Even so, why would it matter? If the one percent all moved to switzerland tomorrow, do you seriously think we'd all be living in the land of milk and honey?

Posted by Guest on May. 10, 2013 @ 11:38 am

>"a corporate culture of workers toiling far more than 40 hours per week (a hard-won federal labor standard that the tech sector wantonly ignores). In other words, it's the 1 percent getting richer by exploiting workers, plain and simple."

Wait...so now the people in the white buses who are skyrocketing SF's cost of living with the exorbitant salaries are exploited workers?

When did this change? Didn't I just read here yesterday that they were overpaid elite snobs who were the only ones who could afford to live here anymore?

>"Start-ups these days aren't even looking to succeed in their own right, they're mostly just hoping to make themselves attractive enough or enough of a threat to get bought by their sector's reigning monopoly. "

OMG is Steven clueless. Yes, most of them want to get bought up. They want to prove their concept and then cash in big time. They do this by choice, and I certainly can't fault their strategy. The part about "their sector's reigning monopoly" is downright goofy. Yes, there are some startups that could only be bought by a Twitter or Google. But most of them can shop their business to about a half dozen or so possible suitors.

Instagram would not have gotten a billion dollars from Facebook if the things that Steven is saying made any sense whatsoever. Yammer got $1.2 billion from Microsoft. Skype $8.5 billion. Very generous reigning monopolies.

Posted by Troll on May. 01, 2013 @ 2:37 pm

Folks being real here, was born in the bay area which means of have seen changes and some of them not so great. I was raised in a blue collar family, I grew up in the center of the Tech World. Not everyone made loads of money, not everyone become CEO's of large companies or rode on the capital cash cow.

You had dreams, people who wanted to change the world, but not everyone owned, purchased or wanted to own a device.

Today it seems Twitter and Google appear everywhere, start a company, get a app going and watch it grow. How many of you type on a computer, watch cable, own a cell phone, access Facebook?

Heck how many of you watch porn on a computer?

Next year will be half century old, seen the tech world go from small to huge.

Posted by Garrett on May. 01, 2013 @ 2:11 pm

Great article Steve.
Couldn't have said it better myself.
I predict the end of the tech (including biotech),
and real estate bubbles by the end of this year.....

Posted by TrollKiller on May. 02, 2013 @ 4:32 pm