Why the wealth gap widens

My theory. The world is getting smaller physically and electronically. Shipping from one country to another is less expensive and the world is connected by technologies better than before. The rich benefit from it and the jobs of the poor folks are being replaced from low-wage countries.

To illustrate, most long-time stock holders of Apple have their wealth increased. Steve Jobs had the vision of great products and how to produce them cheaply by outsourcing overseas with the technical help (40,000 technicians and engineers in China). There are many educated and hard-working programmers/engineers from India and China and also their grown-up children working in Apple here and similar high tech companies.

No longer the dropouts from high schools can sweep the floor of a GM plant and live a middle class life style. Our generous welfare system encourages its citizens to be lazy. If it means you lose your free health care when you work, you do not work. It is the viscous cycle for the next generation.

Preferential treatment on taxing the rich is debatable. Capital gain tax (sometimes already taxed on corporate income) is usually lower than wage tax. The 'gain' sometimes is a loss if you include inflation. However, the rich pay far more percentage-wise and 40% with low/no income do not pay much income tax. The rich pay sales tax more as they consume more. Estate taxes most likely only affect the rich.

Another secondary reason of the gap is inheritance though I do not know many personally. In addition, children from the rich usually have better education and connection. The living proofs are so many children of actors, fund managers, and government officials getting jobs via connections. Check the publicized jobs of the children of Bush, Clinton,... They could be the returns of favors to their parents.

-----

(c) TonyP4 2012. Written in 2/19/12. Last updated in 2/19/12.

Disclaimer:

Do not gamble your money you cannot afford to lose. Past performance is a guideline and does not guarantee future performance.

All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.