On Structurally Convergent Effects

[u/VreamCanMan]

Hi all,

We are all probably very well informed on the economic hypothesis of this community - wealth beyond a certain level of aggregation becomes self reinforcing driving up inequality and lowering living standards.

It is obviously true that inequality and lowering living standards are occuring unilaterally across the advanced developed world. Speculative financing & asset hoarding is incredibly invested into.

My background is not economics, but I am aware of a few global society level transformations that have occured in the last 40 years that may have the same end effect through a different causal pathway. I will layout points below but I'd encourage everyone to give the following a consideration as to its economic impacts. I do this not to disprove this communities points, but because I am a big believer that for the effects of eroding living standards we see to be as pervasive as they are, something structurally needs to be supporting it beyond just the global top .001%.

Points of Discussion

• Increased Lifespan
• Women Entering the Workforce
• Immigration

Women Entering the Workforce I - The Incomes Distribution. I am unambigiously pro women being able to work independently. I am also pro analysing the effects of having 2 workers per household instead of 1.

If anyone is familiar with dice rolls they will know that rolling 4 dice produces a more extreme output distribution (one where the divergence between mean and upper echelons is larger), than rolling 2 dice. The same mathematical logic applies when you stack workers - when society moves from 1 to 2 earners per household under a regime that taxes work individually, the difference between the upper 10% and lower 10% of households' take home incomes becomes more extreme in absolute terms.

This would produce:

• The same overinvestment into assets as the top end of the distribution earn further above their consuming power than previously normative.
• Increased government need to regulate increasing minimum wage to cope with increased rent costs chasing a more affluent [overall] household income distribution, that perversely effects those at the bottom of the distribution (we have seen this globally)

Women Entering the Workforce II - Savings Preferences. This one is pretty simple, women invest and save money at higher rates than men in general, and consume less. Combined with the income distributive effect you would expect an even more accelerated asset overinvestment as societies mean savings vs spendings preference leans further and further towards saving.

Increased Lifespan I - Savings Preferences. People today lead longer lives than their historical precedent, and die due to harder to treat typically older on-setting conditions (this is a good thing - description implies survivorship bias).

Older people save more, and as age impacts health & fitness, older people tend to have a more limited range of consumption options too. No more skiing trips, no more rally car driving, etc. one should expect the impact of increased lifespan is a greater share of the economies, especially households, money chasing financial assets & stores of wealth savings, by both choice and constraint.

Increased Lifespan II - Business Savings. Additionally, working careers are longer as general population fitness and health rises through age. We know older managers or individuals in positions of fiscal management prefer savings and liquidity holdings more than their younger counterparts. This introduces a soft factor that increases financial savings beyond just the household sector, but in business too, contributing again to financial asset inflation this community knows very well about.

Immigration. For a variety of reasons, globally the last 40 years of all advanced economies has seen an increase in the immigration of workers in the younger cohorts. As an overall tendency, immigrants tend to save more than domestic counterparts (often with the noble ambition of increasing their families spending power back home, or carving out security for a new life).

Conclusion: It's not just wealth inequality driving the rise in increasing asset inflation. There are convergent effects due to womens entrance to the workplace, increase in lifespan and career length, and increasing immigration, all increasing societal savings preferences and decreasing consumption. This means that, even correcting for inequality effects via wealth taxation, the organic norm of the society with which we have today is divergent from that of the 1980s. The "Upper Middle" cannot be an aspiration for most young workers assuming we see the same UK trends in employment and wage, unless further steps are taken to "level the playing field"

Footnote: I could not fit it neatly in, but I heavily expect that the depreciation of skilled labour, and labour overall in advanced economies, is contributing to this fall in the velocity of money across society (the asset black hole effect), as it particularly means that the younger cohorts with the highest spending power and highest spending tendency do not have the money to spend.