Why Would OXFAM Twist The Income Inequality And Wealth Inequality Numbers? I Know Why…

oxfamThe world seems top be abuzz because of today’s Pre-Davos OXFAM report stating how 1% of the world population will shortly own 50% of the world’s wealth. On the surface those numbers could be pretty scary. Bringing to mind scenarios where the wealthy 1% become the evil taskmasters to rule over us all.

The thought that 1% of the worlds population would hold 50% of the wealth should certainly strike fear in us all…

That is unless you have the real numbers and even a passing grade in primary school math. I’m not talking calculus or anything here. The terror of this 1% holding 50% of the worlds wealth can quickly be dispelled with the use of a simple four function calculator.

First some facts…

1) According to the U.S. Census Bureau’s U.S. and World Populations Clock the current world population is around 7,218,930,000. This number is constantly increasing sicne there is a birth every 8 seconds and a death every 12 seconds. To make my point I will use the number above. That’s around 7.2 Billion people living on earth right now.

PopCLock2) According to a handy Wikipedia page using some seemingly reliable sources the 2014 sum total of the worlds wealth is around $263,242,000,000. Sorry for all the zeros but that is just over $263 trillion.  This is also the number shown in the OXFAM Worksheet that went along with their report.

Now the simple math part…

No need to get out your calculator since I will do all the calculations for you. But by all means please do check my math. I know you will want to once you see the number I come up with and how you probably neatly fit into the category of the the richest 1% in the world.

Here we go…

1) Since the World population is 7,218,930,000 then 1% of that world population is (7,218,930,000 x 1% (or 0.01)) equal to  72,189,300 people. Those are the evil 1% hording the planets wealth.

BillGates2) Since the World’s sum total wealth is $263,242,000,000 then the 50% of that wealth that the evil 1% holds is (263,242,000,000 x 50% (or 0.50)) equal to $131,621,000,000,000. Looks like lots of cash, right?

3) Now since the evil 1% or 72,189,300 people in the world hold 50% or $131,621,000,000,000 of the World’s hard-earned wealth that means that on average each of those potential evil doer one-percenters has (131,621,000,000,000 ÷ 72,189,300) exactly $1,823,275.75 dollars in their passbook savings account down at the corner bank.

That’s sounds like a lot of money to hoard. Or is it?

Stop and think about what you are worth for a minute… I’m not talking about how much cash is in your wallet or gold hidden in your wine cellar. I’m talking about how much money do you generate?

That $1,823,275.75 probably looks like a lot of money to you but lets look at it this way…BUFFETT CREDIT

If OXFAM or your favorite uncle or Warren Buffet sent you a check today for $1,823,275.75 (forget about the tax ramifications for now) instead of going out and spending a penny of it, what if you put it all in a supper safe 30 year U.S. Government bond paying 2.5%?

At 2.5% a year interest rate you would receive a nice pretax check from the U.S. Treasury for (1,823,275.75 x 0.025 (or 2.5%)) $45,581.89.  How close is that to your current pretax take home pay plus any returns from your current investment portfolio?

Wait a minute!

That’s right if your gross income on your 1040 this year will shown a number over $45,581.89 and you don’t think it will fall much below that for the forseeable future then technically, I got some bad news for you,  you (your blood, bone, and never-say-quit spirit) are an asset that is worth at least $1,823,275.75. I’m sorry to say you are technically in this exclusive 1% club. No secret handshake required.

88587_wealthiestpeopleThis concept that the present value of your future earnings should be considered at all may seem a little out on a limb but it is not really. Most of the wealth held by all the richest people in the world (people like Bill Gates, Warren Buffet, and Mexico’s Carlos Slim) is in stock certificates and the value of their stock is nothing more than the present value of the expected future cash flows of the those companies. Don’t believe me? Then check here.  Basically what all the words on that page are saying that all a stock is worth is the present value of the expected future cash flows.

So if you are not making at least $45,581.89 a year you can stock reading right now. But if you are making that much or more go look in the mirror. You are the evil 1% the people at OXFAM have in their gun-sights. Be careful because if word gets out your life may be inconvenienced by a crowd of protesters outside your home, office, car, or favorite coffee shop.

How can this possibly be true? How could you actually be part of the evil 1%?

Any time you see supposedly smart people like those at OXFAM start to throw around these type of percent numbers your B.S. meter should start to click like a Geiger Counter within a few miles of Chernobyl Hot Dog, Beer and Perogi stand.

Member: The Evil 1%

Member: The Evil 1%

If you run the real numbers. taking into account the real wealth of people all around the globe, you might find that we are all a part of some kind of 1%. And we are all not that evil. Some one may want to convince you that you are the 99%. Maybe you are. But, run your numbers and you may find that you are solidly in the 1%. Enjoy it. embrace it. Yes, you are special.

The bottom line is that there are a lot of people in the world and there is a lot of wealth. A lot more that the fine people at OXFAM could even imagine. Most of it like the value of a Papua New Guinea Farmers Sweet Potato farm can’t even be accurately measured.

Unless…  You are OXFAM looking for a Monday morning slow news day headline… Then those scary big percentage numbers are just fine.

Can Aetna’s CEO Teach Obama The Realities of Minimum Wage and Income Inequality Economics?

aetna2Today Mark T. Bertolini, Aetna’s Chief Executive Officer, announced that the health insurance company would boost the incomes of its lowest-paid workers by as much as a third. The move by the big health insurer affects around 12% of Aetna’s domestic work force who will see a raise to a floor of $16 an hour. These are primarily employees in customer service and billing-related jobs.

The CEO stated that the reason the company is raising wages is not because they want to be good guys. They are raising wages because it is becoming increasingly difficult to fill open job positions and retain employees. That is what could be called natural economic forces.  Better know as competion!

With the entire health insurance industry growing because of of the government’s healthcare law insurers are having a harder time finding people to do important jobs like customer-service, billing, claims-processing and similar tasks.

Aetna1Aetna is only the first to move on this increased wage front. Within months don’t be surprised when most of the other insurers are forced to do the same to get all their essential tasks done. Empty desks and unfilled job requisitions will push employers to raise wages. Then,  as wages increase, more potential workers may be enticed into the workforce to fill these open jobs.

Maybe even workers from other industries with similar skill sets will make there way to higher wages offered in the insurance sector. People will certainly consider the move if it is for a nice high pay raise. Some may even go back to school to pick up a few extra classes so they can qualify for these new higher wage jobs. Pishing up the entire wage scale.

This is how the natural forces of economics works.

And what about the lower wage jobs newly vacated?

As long as the government does not interfere and force wages up the new vacated job will still be there and waiting for someone who wants to jump on the first rung of the career ladder. You always have to start somewhere.  At the lowest wage levels employers are willing to take risk and spend more on training. But at some of the government imposed minimum wage rates for entry level positions employers may just get by with fewer workers. Not a good thing for anyone. This how you break an economy.

callcentreNext… All these Aetna employees will just need to worry about the number crunchers in the back room who will be looking for a way to bring labor costs down. At these higher levels it may start to make more financial sense to move these tasks offshore at a fraction of the costs.

If you think it won’t happen think again…

Can these service jobs be more complicated than technical support for computer gizmos, booking a flight, reading an x-ray. or preparing income tax forms?  All these used to be done by U.S. based employees. Pay levels went up, desks were empty, employers and customers suffered… Then the jobs were sent to India and the Philippines.