There seems to be a majority on the left that believe there should not be billionaires in the world. These same people believe the economy that America has built does not work for many Americans. I see Facebook and Twitter posts all the time in relation to these subjects. There are three major themes I see within these posts: billionaires hording wealth and the income inequality that it leads to, billionaires sitting in their offices while their employees fail to make living wages, and the economy that the United States has built does not benefit the middle class. These seem to be very valid reasons as to why we should not have billionaires and that the economy is not working, that is, until you peel back the curtain. I want to spend time explaining how billionaires help the economy instead of hindering it and that the economy that we have built is working, and that will include pushing back against the arguments listed. At the end of this post, I hope to have provided significant evidence as to why billionaires should exist and how the economy that we have built is strong.
There are those that believe a billionaire being worth $1 billion means that there is $1 billion other individuals cannot have. In reality, that is wealth in the economy that was created by the idea that a certain company came up with. It is not about getting a bigger piece of the pie but expanding that pie. This happens by gross domestic product (GDP) growth. GDP is the total worth of an economy. I want to start from 1940 and look at the United States GDP every 20 years. In 1940, the United States’ GDP was $.1 trillion or what would be valued at $1.33 trillion today. In 1960, the United States’ GDP was $.54 trillion or what would be valued at $3.26 trillion today. In 1980, the United States’ GDP was $2.86 trillion or what would be valued at $6.76 trillion today. In 2000, the United States’ GDP was $10.25 trillion or what would be valued today at $13.13 trillion (Andjelic, 2019). Finally, in 2020, the United States GDP is valued at $21.44 trillion (Silver, 2020). This bigger pie can be attributed to the billion-dollar ideas that have popped up in the past 30 years. In 1990, there were 99 billionaires in the United States (Statista, 2012). In 2020, the number of billionaires in the United States has increased to 614 (Coudriet, 2020). These are individuals that have grown the pie in the United States to what it is today. These are not people that are hording wealth, they are creating it.
What about the expanding inequality that having all these billionaires creates? There are two types of monetary inequality: income inequality and wealth inequality. Starting with income, since 1980, the bottom 50% of America’s share of income has dropped from 20% to around 13% (Goldstein, 2017). This must mean the richer are getting richer and the poorer are getting poorer. Well, in 1980 the bottom 50% had a 20% share of $2.86 trillion which equates to $.57 billion or what would be valued at $1.35 trillion today. Today, the bottom 50% have a 13% share of $21.44 trillion which equates to $2.79 trillion. In real dollars that is a 500% increase or even adjusted that is still a 150% increase in the share of income for the bottom 50% of Americans.
When we get to wealth inequality, there is a stronger argument. The bottom 50% of Americans have negative wealth (Warren, 2019). Having negative wealth is not a bad thing. If I take out a loan to buy a $200,000 house and take out a $15,000 loan for a car, I will have negative wealth because of the debt I have accumulated. That does not mean I cannot afford all these payments and live my ideal life. There is a huge percent of those in the bottom 50% of Americans that would fit into this group of individuals. That accounts for much of the debt the bottom 50% on Americans have. The other huge factor when it comes to debt for the bottom 50% of Americans is college debt. This is where statistics surrounding wealth inequality get sketchy. Most, if not all, college students and recent graduates fit within this bottom 50% of Americans. They have not had the opportunity to make the salaries that those individuals 40 years ago could only dream of.
This takes me into the next points that I will make. There are business owners and executives that can make millions and even billions, while their employees get paid much less. Walmart and Amazon are two prime examples that are used to push this point. I will get to those two businesses, but I want to start with Microsoft and Facebook. College students that are racking up debt will have jobs waiting for them when they get out. I will use employees of Microsoft and Facebook to show this, while at the same time showing how valuable the idea the founder of each company had was worth. Facebook employed around 45,000 individuals in 2019 and they grew their workforce by about 30% a year in the past 5 years (Macrotrends, 2020). Those 45,000 individuals made a median income of $240,000 a year (Romburgh, 2019). If Facebook continues to grow their workforce at a rate of 30% a year that is 13,500 individuals that will be hired next year. Not all of those will be recent graduates of course, but for arguments sake let us say half are recent graduates, which come out to 6,750 individuals. Those are 6,750 individuals that had debt and were probably in the bottom 50% of Americans. They are now vaulted into the top half of Americans in terms of income and will be able to quickly pay off college debt. Microsoft employed around 144,000 individuals in 2019 and grew their workforce between 5-10% in the past 5 years (Macrotrends, 2020). Those 144,000 individuals made a median income of around $170,000 a year (Lerman, 2018). Like with Facebook, let us say Microsoft grows it workforce by 10% next year, which would be 14,000 employees. If half of those are recent graduates, that is 7,000 individuals who were most likely in the bottom 50% of Americans and most likely had college debt. Those individuals will now be in the top 50% of income earners and be able to pay off their accumulated debt. These are jobs that just were not there 30-40 years ago. Therefore, the value of a college education has risen in recent years. I am not arguing that the price of college is not too high, but the value of a college education has outpaced inflation. This is also a nice snapshot to see just how valuable the ideas that Mark Zuckerberg and Bill Gates had when they started Facebook and Microsoft. They built giant corporations that employ hundreds of thousands directly and employ millions indirectly. These were just two of the many examples. I could have listed other tech giants such as Apple, Netflix, Hulu, Verizon. Then you have all the law firms and pharmaceutical companies where starting wages have continued to rise.
I do want to touch on the cost of college in all of this (There will be a full blog post pertaining to the cost of college in the future). The cost of college has risen drastically in recent years. I spent a lot of money and took out loans to attend college. I believe the money was well spent and I see it as an investment. There are other options besides a 4-year university. I think our culture needs to stop pushing a four-year college on every high school student. High schools need to have comprehensive counseling that provides options for students. This will make students realize they have options other than a local retail store or college. There are community colleges where you can get associates or bachelor’s degrees for a reasonable amount of money. These are investments that are worth their weight in gold. You can reap the benefit of a degree without spending an exuberant amount of money. There are also trade schools which are great investments for many Americans. This is deviating from the main post, but I felt obligated to address the issue.
Now, let us examine two places where you do not need any post-secondary education to work at, Walmart and Amazon. Unlike Facebook and Microsoft, where you need a college degree no matter if you are an entry employee or an executive, at Walmart and Amazon most workers have a maximum of a high school diploma. Walmart employs around 1.5 million individuals in America (Bose, 2018). The average full-time (34 hours a week) hourly employee at Walmart, which accounts for most jobs at Walmart and does not require a college degree, makes $25,000 a year (Youn, 2019). Those numbers do not include distribution centers which would increase that number. Amazon employs around 750,000 individuals (Zetlin, 2019). The median pay at Amazon is around $35,000, but this includes part-time and seasonal workers (Romano, 2019). I could walk into Walmart or Amazon now and get a job and make enough in my hometown to afford what I need. I can work hard and eventually I will make more than that $25,000 and at that time I will be able to buy a car. I can work even harder and become a supervisor or manager and be able to afford a mortgage. I can build a good life for myself without going into college debt. The job may not be great, but you can make the most of it. The employers may also offer programs that will help pay for schooling if that is something the employees are interested in. These are low-skilled jobs that can lead to other great opportunities within the company. There will also be individuals who are content with the $25,000 they will make a year. The Walton’s and Jeff Bezos built companies that relied on low-skill workers. These companies make the lives of every American easier. The billions that they are worth are well earned. I would argue the service that they provide to America and the world are worth more than their current net worth. Both companies have been working to raise the wages of their employees in recent years without government forcing them to. Walmart and Amazon are good for America. They provide jobs that are needed for Americans that are not suited for college or a trade. I can also use other examples like Target or Lowes. That does not include other retail/clothing stores, car manufactures, and factories. These jobs help provide livelihood for many of those in the bottom 50%. These jobs work for certain people and as we grow and create other sectors people can begin to move out of these jobs and into better paying and higher skilled labor. I would like to add that there are many jobs within these sectors that do not require a college education and will still allow you to work your way into the upper class.
There are many people that think the economy that we have built does not benefit the middle class. The top 1% or 10% keep gaining wealth while the middle class suffers. While it is true that real median household income has not risen since 2000, it should be noted that the 15 years prior we saw unprecedented growth. From 1985-2000, America saw real median household income increase from $51,000 to $61,000 ($23,000 to $41,000 not adjusted) (Fred, 2019). As of 2018 that number has only risen to $63,000. Between those 18 years, the world saw the biggest economic downturn since the Great Depression. The economy is finally stable and looks as if when Covid-19 passes the economy can be taken to new heights. Why though does the middle class keep shrinking? Well, that is because more people are graduating out of the middle class and into the upper class. The number of households making less than $50,000 has been shrinking and it is at an all-time low, whereas the number of households making more than $100,000 is at an all-time high. You do have a trade-off, but so many more people are moving from the middle class to the upper class than those moving from the lower class to the middle class that the middle class is still shrinking.
The evidence that I have laid out provides us with a few conclusions. First, billionaires help grow the economy and do not hinder it. Second, business owners deserve the fruits of their labors as what they created provides more benefits than we can comprehend. Third, the economy that we have built is working for the American middle class. No matter what those on the left try to post on social media to attack the right on the basis of the economy, facts will always win the day.
Sources
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