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I have my own theory about the increasing revenue gap, the top 1% becoming wealthier and the bottom 50% stagnating at best. I call it "the race to the bottom", but I'd like to check if my assumption is true, and gather some data to prove or disprove my theory. Where could I get the data?

The new cleaning lady (cats love these robots)

In short, my theory is that the average Joe is looking to buy the cheapest possible product, no matter how bad the quality, with a few exceptions such as IT gadgets and computers. It works as follows:

  1. Businesses cut the cost of production to the bone.
  2. Products are so bad that the wealthiest 1% - the big buyers who pay for quality - don't want them anymore
  3. It creates a diminished demand, some products or services are no longer available, resulting in layoffs impacting the average Joe
  4. Meanwhile the wealthiest 1% can't find ways to spend his money; his money keeps piling up

I don't think creating a new currency, or cutting CEO salaries, or taxing the top 1% even more will help, because it's a structural problem - people with the mentality of purchasing the cheapest possible stuff no matter what. And the top 1% have ways to avoid new taxes anyway.

Let me illustrates with three examples:

  • Food: Many new restaurants are now just stores selling sandwiches. I used to spend big money in restaurants, not anymore. I would not even go in one of these sandwhich houses even if I was paid to eat. Likewise, high quality food in grocery stores has been replaced by the cheapest products. So now we buy food on the internet, and hope that one day, we can buy a robot chef who will cook for us (IoT for cooking, to replace restaurant outings). And we also grow some vegetables in our garden. In the process, tons of jobs are eliminated.
  • Cleaning services: I work from home, so I see the cleaning ladies (or guys) when they arrive. Recently, half of them look like ex drug-addicts, some stink smoke real hard. I guess the agency hiring them gets tax benefits for hiring ex-convicts. The last straw was when they stole our kid's savings and credit card numbers. We canceled the service. Other agencies did not look better, as they are in the same "race to the bottom". Cleaning ladies have been replaced by a vacuum cleaner robot in our house (see picture). Their jobs killed by IoT and the greed of their agencies.
  • Education: Outdated curricula, more expensive than ever, with fewer good job prospects. And that's stuff that you can learn online in 6 months for a fraction of the cost. Are we going to send our kids to college? Maybe not, maybe they can work as intern for a friend's company, right after high school, and become employee.

I could add healthcare in my list, but you get the picture.

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Replies to This Discussion

I think point 4 is wrong. The wealthiest can always find ways to spend money. 

I think what has happened is a prisoner's dilemma.  

If an employer can cut wages  or lay off staff they make more money. 

Either way their  possibly former employees have less to spend.

If ALL employers do this  A is busily laying off B's customers while B is laying off A's customers. 

So they have to find cheaper goods and services.  

And A and B have to cut prices and are back to square one. 

As for your food examples, Restaurants that do good food at a fair price do well. Some people will apways pay a bit extra for quality

The cleaning service:  Only use reuptable agencies and make it clear that if anyone they send steals money  you will make it a police matter. And that you expect certain standards in the people they send. 

Education: Yes much is outdated and much is pointless. The "classics" like Sciences and Arts do not date, though  there is little demand for reading Latin poets in the original, even the obscene bits where the precise act refered to cannot be identified today.  Education is not about transmitting knowledge, more about transmitting a mindset. Yes, it is less valuable in getting a good job nowadays, but is far from worthless and not just in financial terms.

I disagree, too, about point #4. Here in Spain we've seen a boom in tourism pouring from Russia obviously produced by higher incomes in that country -in a small part of the population, for sure- and the pouring is in slow recession due to well known problems there. Same thing about chinese citizens, tourist or entrepreneurs. Many bussines -bars, restaurants and the like- are returning to spaniard's hands after some years of chinese management. And their so so cheap stores are closing or being sold.

For the rest, I agree completely. Same things happening here.



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