This interview with a banker's wife in London was getting passed around Steve's office last week. Jeremy S. sent it my way, too.
The woman describes the incredible hours that her husband puts into his job. He's working so hard that she had attend weddings on his side of the family by herself; he was too busy to go. He works on weekends and doesn't get home until 10 in the evening.
(Yes. And when layoffs are on the horizon, everyone works triple hard.)
At the end of the interview, the interviewer brings the conversation back to the Occupy Wall Street movement. The wife says that teachers should be paid more money, but she doesn't have a whole lot of sympathy for the protesters. She and her husband work very hard, made lots of sacrifices, and have been very careful with their money.
"I don't think I should have to justify myself to anyone, but just for the record, I spend one evening a week cooking meals for homeless people. My husband and I donate significant sums to charity, anonymously. I fully expect that your readers will hate me. I guess maybe I shouldn't have done this interview. I suppose I am pretty rightwing, in that I care about people and believe in helping others while also strongly believing that people must take responsibility. This is a capitalist system, right? This is what we have chosen to live under, not communism. There is so much anger towards banks and the finance industry whereas hardly anyone seems to demand any sort of mea culpa from all those who took on financial commitments they should not have – such as those on minimum wage who got several loans and mortgages in order to buy a house they could not afford."I see inappropriate self-righteousness when I pass those 'protesters' in their tents… Meanwhile people like my husband and I speed past them to work on our future, to make a contribution to society… We studied hard, now we work hard and we pay hard. Fifty percent tax and we don't mind. I do wonder how much those people would pay without grumbling if roles were reversed?
How would you respond to her?
Apt. 11d 
The point about the people borrowing more money than they could possibly pay back doesn’t help the bankers. In fact, I think it is one of the main charges against the bankers. Either some of them didn’t really work all that hard or they just aren’t that good at their jobs.
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A sincere question I’d have for this woman, or her husband more specifically, is, working hard to achieve what? What is the end result of these 80-hour work weeks? Buckets of money, I’m sure. Beyond that, it seems that the banking industry with all of their financial innovating ways doesn’t create anything of much value.
It would be my preference for bankers to be more like doctors: able to make a good living but unlikely to become filthy rich. It’s the chance of becoming rich that pushes them to do irresponsible things.
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A relative and her husband (she’s 30ish, he’s 40ish, and they’ve been married about 13 years make a lot more money than my husband and I, and have $500k cash in hand that they plan to buy a foreclosure with. They genuinely work a lot harder than my husband and I do, and they make and save a lot more money. He’s a corporate consultant. She runs several seasonal businesses. In his down time, he’s got a firewood business and does deliveries in the big city that piggy-back on his usual commute. He runs his older Mercedes on reprocessed French fry grease. They have done a lot of non-standard things with their housing to be able to save as much as they have (in Dave Ramseyese, “Live like no one else so that you can live like no one else”). It would be wrong for me to envy them, because I am quite unwilling to adopt the lifestyle that got them where they are today.
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Ditto what both MH and Scantee said: first, who is really culpable for selling folks on all sorts of bad loans in the first place, considering who the people were who benefited from those bum loans being traded hand to hand; and second, exactly what public good has the enormous concentration of wealth in the hands of the finance industry contributed to?
Fifty percent tax and we don’t mind. I do wonder how much those people would pay without grumbling if roles were reversed?
Third, I really suspect there wouldn’t nearly so much grumbling if this claim–“we don’t mind”–wasn’t so obviously untrue about a large percentage of those making lots of money these days.
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Also, each of these articles on rich people is exactly the same.
1. They seem to think that there is a positive, 100% correlation between hours worked and financial remuneration when in reality there are loads of people working the same hours number of hours for a fraction of the pay.
2. There’s always some bragging about how messed up the work culture is as if to justify the high pay. “I also know men in corporate law who were in a conference call when their wives went into labour. And trust me, they did not come out of that call until they had finished. That sort of thing happens in finance too…”
3. Plus the standard shock at finding out how the little people live as if they’ve never thought about it before (in fairness, they probably haven’t). “You want me to estimate a starting teacher’s salary? I don’t know. Let me think, £45,000? Wow, it’s really only £22,000? I had no idea. That really is too low…”
I could go on but why bother. This was my favorite part of the article:
“On weekdays I do not include my husband in any of my after-office plans. He leaves home by 8.30am and is usually home by 10 or 11 in the evening, sometimes later, sometimes a bit earlier. Some days I actually quite like this, to be honest. I know that we get to see each other at least once every day, to touch base.
It strikes me sometimes what a different life other people lead. When I go to gallery openings or expositions, some people are genuinely surprised my husband couldn’t make it at 7pm.”
Yes, the main difference between your life and lives of everyone else is that their spouses can make the 7 pm exposition.
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The British tax system seems a bit more punitive than ours (although who knows how things even out with deductions). Even Adele has been complaining:
“Trains are always late, most state schools are s**t and I’ve gotta give you like four million quid. Are you having a laugh?”
http://www.thefrisky.com/2011-05-29/adele-hates-paying-taxes-as-much-as-normal-folks/
“Third, I really suspect there wouldn’t nearly so much grumbling if this claim–“we don’t mind”–wasn’t so obviously untrue about a large percentage of those making lots of money these days.”
A lot of things that you take for granted (eventual financial aid for college, mortgage interest deductions and tax-free retirement savings) do not apply in the same way to upper-tier earners (the mortgage interest deduction phases out well below $200k income). You’re living in an entirely different tax environment and that is true even if the rates themselves aren’t that dissimilar. A lot of the stuff that you can do with pre-tax income, they have to do with post-tax income.
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If my wife expected me to go see art after work often enough for “when I go to gallery openings and expositions” to be regular class of events in the calendar, I’d find reasons to stay at work longer.
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(the mortgage interest deduction phases out well below $200k income)
What? Unless I missed a recent change in the law, that’s really wrong. The mortgage interest deduction is more valuable for those with relatively higher incomes and it isn’t limited by income.
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What? Unless I missed a recent change in the law, that’s really wrong.
There was some sort of gradual phase out, but it’s not nearly what Amy claims it is. I think that for every $1,000 you made over some limit, you lost $30 of your deduction, so if you were making $300K a year, you could only deduct $98K instead of $100K of your mortgage interest.
It was more a talking point that Republicans could use to fool people with poor math skills than an actual revenue source.
In any event, if I recall correctly, Bush got rid of it because it was more important for rich people to get 100% of their tax deduction instead of only 98%.
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On the substance, MH and scantee hit the nail on the head, thereby killing the substantive conversation by getting the answer right on the first try.
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“A lot of things that you take for granted (eventual financial aid for college, mortgage interest deductions and tax-free retirement savings) do not apply in the same way to upper-tier earners (the mortgage interest deduction phases out well below $200k income).”
Emphatically not true.
The mortgage interest deduction (well, all deductions) do decrease in value as your income increases, but even at 1 M, one still gets most of the advantage of the interest deduction & charitable donations (i.e. making 1M results in something like a 10% decrease in the total value of your deductions). You can’t deduct interest for home loans over 1 million, though.
It’s true that people who make over 200K or so are not eligible for IRAs, but they are eligible for tax deferred investment accounts and companies that pay people at that level make full use of them (they have all kinds of funny names that most people have never heard of). Think of the kind of thing that’s used to defer compensation for college presidents so that they don’t have to pay taxes on them yet.
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Oh and 529 college savings plans (not tax free contributions but tax free earnings) are available regardless of income level.
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Alright. You guys got off too easy. I’m going to play devil’s advocate on this one.
re: It’s Wall Street’s fault that people make bad investments in their houses. What? No it’s not. People thought that the economy was going to keep doing well. They thought the housing market was going to keep going up. Real estate agents and mortgage brokers talked them into deals that they couldn’t afford. But these people were grown ups and no one forced them to do anything. Some Wall Street brokers bought up the bad mortgages and made money off of them, but they did not make people buy houses they couldn’t afford.
re: What does Wall Street do? They make money for you. Where’s all your retirement money? Where is your TIAF-CREF? It’s on Wall Street making you some money. Where’s the pension fund for the New Mexico’s teachers’ union? On Wall Street. It’s creating capital, so your company can expand and create new jobs. Our country needs the stock market and the people who work there, that’s why we propped it up.
We need Wall Street workers, but it’s the type of job that almost nobody would do without a buttload of money. Tough hours, stress like you wouldn’t believe, boring work.
Have fun.
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“We need Wall Street workers, but it’s the type of job that almost nobody would do without a buttload of money. Tough hours, stress like you wouldn’t believe, boring work.”
If both the hours and the compensation were both cut in half, I bet you could fill those positions. And create twice as many jobs!
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Real estate agents and mortgage brokers talked them into deals that they couldn’t afford. But these people were grown ups and no one forced them to do anything.
There is a big difference between
A: “Get the adjustable rate mortgage! It’s 2% for the next three years. At the end, if the payments are too high, you just roll over into another adjustable rate mortgage!”
B: “You can also get the adjustable rate if you want, but it’s going to increase in three years, and we don’t really know what rates will be then. You may be able to re-finance, but you won’t have paid off any of your principal, so if there’s any sort of decline, you could end up losing the house.”
The problem wasn’t, really, that the banks got bailed out, or that one side was “bad” and the other side was “innocent.” It was that one side of the transaction got bailed out, while the other side just lost their houses.
re: What does Wall Street do? They make money for you. Where’s all your retirement money? Where is your TIAF-CREF? It’s on Wall Street making you some money.
Not really. It went through Wall Street to get to Apple and Proctor & Gamble and General Electric. And no one is organizing “Occupy General Electric.” They’re making gobs of money selling us light bulb, but, heck, at least we’re getting a light bulb out of the deal.
Wall Street is great at what it did in 1962 when people made 1/10th as much money. The extra 90% of their salaries are coming from additional non-productive areas.
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I guess if you insist on keeping this going even after we’ve settled it, I’ll take the bait…
“It’s Wall Street’s fault that people make bad investments in their houses. What? No it’s not.”
Until recently, bankers limited who could get a mortgage based on who could reliably be expected to pay it off. Then they realized they could make buckets of money lending money to people where their reliability to pay is questionable. But it’s not as if those lendees all of a sudden became financially smarter. They assumed, wrongly, that they wouldn’t be lent money they couldn’t afford to pay back. Paternalism where one party has specialized knowledge (the bankers) and another does not (the masses) and the knowledgeable party restricts access to a product based on that knowledge can be a good thing.
“What does Wall Street do? They make money for you. Where’s all your retirement money?”
I guess this is where I admit that I think stock-based retirements are a bit of a fool’s game. There’s no there, there. The stock market is just as reliant on the TIAA CREFs of the country as the TIAA CREFS are on them. Moderate, reliable gains are just fine, thanks. I prefer a society where the highs are less high and the lows are less low.
“We need Wall Street workers, but it’s the type of job that almost nobody would do without a buttload of money. Tough hours, stress like you wouldn’t believe, boring work.”
There are thousands of people clamoring for each one of those jobs. The stress was self-invited: they created the cooker environment in their race for ever greater gains.
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Laura,
There a plenty of shitty jobs out there that pay very little. We somehow manage to fill those with people capable of doing the work. Why is banking so special that it is not subject to the laws of supply and demand or the same pressures that every other job in the US is subject to? Considering how terrible the financial crisis was, we might argue that, even with offering all this money, we still managed to get people horribly incompetent people (smart? maybe. competent at their jobs? no).
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Click to access talentgrab.pdf
Malcolm Gladwell explaining why high salary for bankers is just a societal choice, and how in the 1950s the situation was completely different, with no obvious drop in the quality of “high paid” executives.
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There a plenty of shitty jobs out there that pay very little. We somehow manage to fill those with people capable of doing the work.
B.I. must live near a nicer Wendy’s than I do.
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“Considering how terrible the financial crisis was, we might argue that, even with offering all this money, we still managed to get people horribly incompetent people (smart? maybe. competent at their jobs? no).”
LOL. That statement could be twisted to mean that the financial crisis happened because we were paying the bankers too little. If only we had offered the bankers more money, we would have gotten competent people who could have prevented it from happening!
In all seriousness, the prevailing compensation scheme promoted excessive risk-taking–high risk meant high rewards. If banking were more “boring”, the compensation wouldn’t be as high, but we probably would have avoided the crisis.
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Investment banking salaries are subject to supply and demand. There are dozens of investment banks in the US and abroad. They are all competing for a certain type of employee. The kind who works 80+ hour weeks. The kind who pukes in the toilet every morning from the stress. The kind who has no hobbies, no friends, and no relationship with his/her children. Clients shop around for firms that will make them the most money. This is the system that capitalism has produced. It may not be the best, but it is certainly based on supply and demand. The system got bailed out, just as the airline industry and the car industry did, because it is vital to the economy. Unlike the other industries, it paid all the money back with interest. And they did it before gov’t could get off its ass and create some regulations over the industry.
Investment banks are entirely different from banks that give out mortgages. Some brokers bundled up bad mortgage and others just bought government bonds. The whole financial industry isn’t one big monolith.
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The kind who pukes in the toilet every morning from the stress.
Would they settle for pukes in front of the elevator every afternoon from the Yuengling?
Unlike the other industries, it paid all the money back with interest.
Was that just because AIG’s positions got covered by the government?
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Back to supply and demand, Wall Street CEOs often use that as a reason for why they should get paid so much. They say that there is demand for their skills and that CEOs in every profession get paid a lot of money. You know how much a college president gets paid? What is the relationship between their salary and a college adjunct professor? Does that college president work that much harder than the adjunct? No. In fact, I bet the adjunct works harder.
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Pro Publica has a nice summary of bailouts (I haven’t checked if their area graphs are right and use area instead of diameter, but otherwise, it looks good).
http://www.propublica.org/special/government-bailouts
I was wondering when the airline industry was bailed out, and it looks like after 9-11, which does seem kind of special.
And, I do wonder what the “paid back” refers to, since, as MH asks, what about Bear Stearns, AIG, Fannie Mae, in addition to TARP.
It seems to me that the promise of a bailout has to mean significant regulation. If an organization becomes too big to fail, or too critical to the country, and we need to bail the organization out if it makes bad decisions, we have to regulate it.
I don’t blame bankers specifically, though they’re part of the issue. I blame the skewing of wealth itself, which in turn drives and rewards many of the bad behaviors. As a factoid, compare taxes for people earning 1M in 2002 v 2012(say, mostly salary based). They (assuming mostly salaried income, retirement sheltering, MI deduction, some charitable donation, and regular other stuff) pay 25% in 2012 of their comp in taxes, compared to 30% in 2002.
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Laura, you’re not seriously comparing adjuncts and investment bankers up there, are you? I mean, trying to get us to feel sorry for i-bankers is one thing, but that is crossing the line into Ludicrous Speed.
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I was just saying that there are screwed up salary structures in every profession right now.
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add to scantee’s point 1, way further up: twelve hours of sitting in a comfortable chair tinkering with spreadsheets, does not qualify as ‘work’ in the same way as twelve hours of cleaning hotel bedrooms does.
“it’s the type of job that almost nobody would do without a buttload of money. Tough hours, stress like you wouldn’t believe, boring work. ”
Try being a warehouse slave – ten to twelve hour days mandatory, impossible goals with screaming managers, tedious repetitive work, and barely more than minimum wage: no sick days, no chance at promotion, no benefits. Yet people are lining up for this. I hear the ghost of Tom Joad..
“I see inappropriate self-righteousness when I pass those ‘protesters’ in their tents… Meanwhile people like my husband and I speed past them to work on our future, to make a contribution to society”
This is not likely to reduce the rage of the protesters. Exactly where are they supposed to find the jobs that allow them to contribute ? That’s a large part of what the protesting is about.
“What does Wall Street do? They make money for you.”
No, Wall Street makes money for Wall Street. We’re not getting even a trickle-down..
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twelve hours of sitting in a comfortable chair tinkering with spreadsheets
The chairs usually aren’t comfortable unless you are high up the chain or have a doctor’s note about a bad back or something. One of my work sites recently forced everybody to stop sitting on exercise balls, which had become something of a trend.
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add to scantee’s point 1, way further up: twelve hours of sitting in a comfortable chair tinkering with spreadsheets, does not qualify as ‘work’ in the same way as twelve hours of cleaning hotel bedrooms does.
Also: cleaning hotel bedrooms is much harder than teaching two classes a semester, reading a legal brief in a different comfortable chair, arranging books on a library bookshelf, reading blogs, or pretty much any other occupation of a blog reader/writer here. Really. All of us are privileged. I think the hardest job has to be the roofers who spread tar in the summer time. Worse job ever. If we complain about the salaries of brokers, then everybody’s salary has to be lined up on the same ruler. I might not have a problem with that, but I’m saying that some lawyers might not be happy making less than a hotel maid.
OK, here’s how I would respond to the Banker’s Wife. People are upset about a lot of things and this movement is an expression of that general unhappiness. College degrees did not lead to jobs, and instead created debt. People aren’t shirking work. There are no jobs to apply for. Or they’re not qualified for the right kind of jobs. Or their old way of work does not exist any more. Maintaining a middle class way of life has become tougher and tougher. These are real problems that we as a society need to sit down and figure out. The Occupy Wall street people may not have any real solutions, but maybe if we all made an effort to listen to their problems, rather than discounting them as whiners, we could figure something out.
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Late to the comments party, but I have to chime in about the supposed college financial aid benefits for the middle class. A family making $80,000/year is not going to get grant money from colleges, outside a handful of Ivy League schools. The best they can hope for (outside merit aid) is to borrow money at 6% and defer payments (not interest) until graduation.
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If we complain about the salaries of brokers, then everybody’s salary has to be lined up on the same ruler.
Absolutely, which is why I always make clear to the ‘girls that “We are very lucky to have what we do.” And why I always support government attempts to help the less fortunate. Just because my family’s hard work paid off, doesn’t mean the next family’s did.
And as long as there are people who are willing to work hard, but cannot find jobs, I find it criminal that we are not spending more to create jobs because someone is afraid of “inflation” or some other macro-economic whatsit.
If taxes are raised so high that they actually harm the ability to create jobs (as I believe they did in the Carter administration) then I would oppose them and vote to have them cut. But we are NOWHERE near that point now, and it strikes me as insane to oppose higher taxes on those, like bankers or investment bankers, who are both wealthy and not job creators. These are people who would actually not be hurt at all if taxes were increased, because they are just using their taxes to bid up the costs of positional goods.
What the banker’s wife did wrong was get defensive. If she said, “We work hard, and we are also very lucky that our hard work paid off,” I don’t think it would have been seen as newsworthy.
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Tasha,
Good point. UChicago is free for any one whose family makes less than 70K a year. Princeton it’s less than 100K. They can do this because only a small portion of their students come from the bottom 80%. A majority of students here aren’t on any aid at all, not even loans. Our society is getting more and more stratified, and being able to graduate college debt free is now a luxury for only the wealthy or the lucky.
Laura,
Sure, CEOs use that argument, but that doesn’t mean it’s used well or accurately (or that I agree with it.) My point is, “if we don’t pay people this much, they won’t do it” is just wrong in this climate, considering we have people lining up in droves to earn minimum wage, or Ivy League graduates fighting to get paid $30,000 to work 60 hours a week and maybe get shot at as a math teacher in an inner city school, you could easily pay bankers less and still fill the positions, very possibly with the same people. (The same is true with CEOs. I actually used to work for a B-school prof who studied CEO compensation, and there was, if anything, a slight negative correlation between performance and pay.)
But anyways, we probably agree on this issue in general, i.e., that compensation structures are messed up, and that the vacuuming of wealth out of the bottom 99% by the top 1% is not only unethical but also extremely detrimental to our society for all sorts of other reasons. For other people out there, I find it hard to believe that anyone thinks that even if people don’t have the right to a safety net and/or poor people deserve to be poor, that Nigeria is a nicer place to live than Sweden.
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That entire piece read as a fair bit of tone-deaf justification but one part that made my blood boil especially was her complaint about mat leaves.
Apparently no woman working in this industry should have children because that’s too hard on the rest of the team. Men can, of course, because they have wives to pop out the babies and nurture them.
But in her mind, its those evil women in the workplace that make her husband’s life hell. No sense that maybe the workplace culture and management are insane? Nope! That’d be accepting that maybe the system is screwed up and that’s not something she seems willing to do.
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I am in fact annoyed by the people who took out larger loans than they could repay. But they (a) actually suffered consequences for that choice, and (b) were not individually responsible for major economic problems. Folks on Wall Street got away scot-free and caused real harm to a lot of people in addition to those who took out bad loans.
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MH said:
“What? Unless I missed a recent change in the law, that’s really wrong. The mortgage interest deduction is more valuable for those with relatively higher incomes and it isn’t limited by income.”
I should have used the phrasing “begins to phase out.” I’ve seen the number $166,800 as the point where you start not getting the full mortgage interest deduction (not sure if that number is correct). I think it’s really bizarre to have the income level for the full deduction so low while allowing it to apply to million dollar homes. If it were me setting up the system, I wouldn’t let it apply to million dollar homes, but would be laxer about the income level. Honestly, a $200k a year person really should not be buying a million dollar home, unless they have an amazing down payment. I hate the way our tax code is set up to encourage people to do dumb stuff. (How often do you hear people say, “But think of the mortgage interest deduction!” even if somebody in their income bracket doesn’t get a mortgage income deduction. It’s hard to stay away from free cheese, even when it’s bait in a trap.)
In general, I don’t approve of the mortgage interest deduction (since I think it merely inflates home prices), but if we are going to have it, it should be fully available to all income classes.
It’s also true that the Obama administration would like to pare down a lot of existing deductions for high income earners (mortgage, charity and state tax).
http://www.investmentnews.com/article/20110925/REG/309259968
Facebook User:
“I am in fact annoyed by the people who took out larger loans than they could repay. But they (a) actually suffered consequences for that choice”
There are many people today living in houses that they have made no payments on for the last 2-3 years. To my knowledge, the current record holders are some homeowners in Prince George County, MD, who haven’t made a payment on their $1.2 million dollar home for 5 years and in fact have never made a single payment. I’m sure it’s a stressful living situation, but hey, no rent in a million dollar house! It’s hard to see how this couple has been “punished.”
http://consumerist.com/2012/03/couple-spends-five-years-in-12-mansion-without-ever-making-mortgage-payment.html
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It takes an average of 900 days to foreclose on a home in the state of New York.
http://www.housingwire.com/2011/05/16/new-york-foreclosure-backlog-a-totally-different-world
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“I should have used the phrasing “begins to phase out.” I’ve seen the number $166,800 as the point where you start not getting the full mortgage interest deduction (not sure if that number is correct).”
It phases out very slowly — so the percent reduction is low, even as you go up to a million dollars. I think one of the tricks about this is the AMT, and how it ends up applying. AMT kicks in and eliminates your deductions if your deductions are high compared to your income. But, if your income is high, AMT doesn’t kick in. The personal exemptions also phase out at higher income levels. But, all these phase outs still leave substantial deductions at the 1 M dollar level (with income as the main source of family revenue).
The MI deduction is pretty much available to lots of people. I don’t like the MI deduction either, because I agree with you that it just inflates the price of houses. But, on the other hand, I think it’s perfectly reasonable to have deductions phase out as people’s income increases (just as tax rates should increase as people’s income increases).
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It’s kind of opaque though, isn’t it? The AMT is especially weird. It’s weird to have a back-up tax code (the AMT) that kicks in if you are too successful figuring out the primary tax code.
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Kind of on the line that the banker’s wife argued is the next wave of borrowers that is just now starting to default, municipal governments. I’m thinking of this because Harrisburg just announced it will miss its bond payment. The last governor, a Democrat, gave them enough aid to keep them barely solvent until his term was over and nothing more. The current Republican governor forced the local government to cede control to a receiver who is to sell assets and cut services. Though his mandate was to stop the city from declaring bankruptcy (the city council went and tried this without the mayor’s agreement), he is moving them into default before he’s had time to break-in the springs on his chair.
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I think one of the tricks about this is the AMT, and how it ends up applying. AMT kicks in and eliminates your deductions if your deductions are high compared to your income. But, if your income is high, AMT doesn’t kick in.
The IRS’s page on the AMT makes no mention of a deduction/income relationship. The AMT kicks in at a middle-class level:
You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount.
The AMT exemption amounts are set by law for each filing status.
For tax year 2010, Congress raised the AMT exemption amounts to the following levels:
$72,450 for a married couple filing a joint return and qualifying widows and widowers;
$47,450 for singles and heads of household;
$36,225 for a married person filing separately.
http://www.irs.gov/newsroom/article/0,,id=204410,00.html
The Banker’s Wife painted a picture of incessant work. On this side of the ocean, I believe people who work in finance MUST take their vacations. They also MUST be out of touch. That’s to prevent Ponzi schemes, rogue trading and the like; if you’re out of touch for two weeks or so, you can’t keep creating false documents, for example. See: http://www.marketplace.org/topics/business/easy-street/credit-suisse-makes-life-little-harder-aspiring-rogue-traders
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The IRS’s page on the AMT makes no mention of a deduction/income relationship.
Only if your taxable income gets too low relative to your total income (because of deductions) does the AMT matter. Those numbers you have are the amount of income except from the AMT, not the overall income which triggers the AMT. A couple earning $73,000 could have theoretically had to pay AMT rates on $50 if they tried to claim deductions of $72,500. Obviously, that would leave $500 for non-deductible expenses meaning they’d have to be living off nothing or savings.
Realistically, nearly all of what you need to stay alive isn’t deductible. This can’t start to kick in until somebody is earning much more than the exempt amount.
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It is annoying to have two nearly separate tax systems, one of which is deliberately left to be adjusted at the last possible moment every year. But it doesn’t come close to offsetting the advantages that the mortgage interest deduction brings to the higher end of the middle class.
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Why I Am Leaving Goldman Sachs.
(Well, not me personally. Some guy named Greg.)
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“But it doesn’t come close to offsetting the advantages that the mortgage interest deduction brings to the higher end of the middle class.”
Yup. I shouldn’t have brought AMT into it because we were talking about the ordinary phaseout of deductions as income increases. The ordinary phaseout exists, but it isn’t very big — you still get most of the value of your deductions even at 1million.
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To return to earlier parts of the conversation: do adjuncts deserve to be paid more? Yes. That said, adjuncts at my institution teach, period. They do not advise students, they do not serve on committees, they do not direct independent studies, they do not mentor other instructors or TAs, they do not serve as readers of graduate theses or exams, and they are not required to conduct research, present at conferences, or publish in scholarly journals. As a tenure-track professor, I’m doing all of those things this semester, in addition to teaching. Given this reality, it is in no way fair or accurate to say that an adjunct at my uni is doing the same job that I am or works harder than I do. Please note I have stressed that this is reality at MY institution. This may not be how it is elsewhere.
My husband has a BS in Economics. He works, at minimum, 10 hours a day, excepting a few weeks a year when work is light. For four-six months of the year, he works no less than 12 hours a day and averages 16 hours a day. He has worked 20 hour days, and some of his colleagues have worked 26 hours straight (or more). His job is highly repetitive and physically demanding.
He pours concrete for $11/hr.
I have difficulty feeling any sympathy for the banker’s wife. There are plenty of people who work very long, demanding hours; my husband is one of them. My farmer relatives are, too. The idea that those who are compensated for far more must be working much harder or longer is just flat-out wrong.
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In one of my old jobs, I worked with a guy who had in a former life been a missionary priest in Liberia. You did NOT want to be a room with that guy when anyone wearing a suit began to complain about how hard they worked! He would describe people working in extremely unhealthy conditions, working down in mines in the dark, sustaining life threatening injuries, wearing down their bodies until they did not work anymore, small children breaking bricks from sun up until sundown — His point, which I never forgot, is that hard work in the Western world is simply incomparable to hard work in the developing world.
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Somebody should make a viral video about it.
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Adjuncts at the city college system that I used to teach at make roughly $2,500 per class. In order to make enough to barely survive in NYC- $25,000, they had to teach 10 classes per year. With 50 students per class. Tenure Track professors made three times that amount. They taught 2 classes, plus the service and research responsibilities. They also got health insurance and job stability.
Salaries in this country are based on the difficulty of the work, the rareness of the talent to do the job, and investment. Unless there is a monopoly or a union changing the dynamics, that’s how it works. So, Derek Jeter who didn’t get a PhD and doesn’t work that hard, makes millions. Rare talent. PhDs don’t’ make that much, even though the difficulty is high, because there are a ton of people willing to do the job. PhDs aren’t rare enough. Roofers work hard, but there are a lot of people with few skills who are willing to do the job. That’s why they get paid so little.
I think it would be a good idea to reduce for the extreme inequities in every profession.
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Roofers work hard, but there are a lot of people with few skills who are willing to do the job.
That seems unfair to roofers because it does take talent to do it right and relatively uncommon strength. At 18, I could barely walk on a roof with a bundle of shingles. Also, before the housing crash at least, roofers, at least those with legal status, were relatively well paid in most parts of the country.
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Laura, I’d be curious as to how you address these question with your own kids, although I know that they are still quite young. What I mean is that my parents never really talked to me about money when we talked about my future. We talked about what jobs I might be good at and what I might enjoy — but no one ever sat me down and said, “You know, if you become a doctor, you will make at least five times more money than if you become a college professor.” Now my husband and I wonder about what we should say to our own kids. The world’s a lot harder now. How much reality do we share with our kids?
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We’ve had lots of talks about money with Jonah. Some more honest than others. His best friend in the old town was very, very poor, so he knows that we’re comfortable, even though we don’t have fancy cars or anything. He knows that some jobs pay better than others. It’s not fair, but it’s reality. We have actively talked him out of getting a PhD in history. I think that our kids are growing up in a much different environment than we did. Even if we aren’t talking about it specifically at home, they just understand that they need to carefully choose a profession and that they will have to be practical.
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Living in the smallest house in the richest neighborhood in the area, I feel like I’m doing my job right if we get exactly as many “Are we rich” questions as “Are we poor” questions.
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If you get too many “Are we poor?” questions, you should put on an addition.
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“The world’s a lot harder now. How much reality do we share with our kids?”
I tell my kids that I want them to learn to live on little enough that the amount that they earn doesn’t determine what they do with their lives.
I haven’t tried to talk my children out of getting PhDs in history (and, oddly, one of the things my kid might actually be interested in), but I will tell them that choice needs a backup plan and that they need to get the PhD cause they enjoy doing the work to get one. I’ll also tell them not to take out loans without a good idea of how they’ll pay them back (so PhD in history only if someone pays you while you’re getting it).
I did, however, get asked the question about what I would do if my dd decided she wanted to go to art school (because a character in a book was facing it) and whether I would pay for it. I thought about a little bit, and then realized that I wouldn’t really have a choice, because she already has 529 money allocated to her to go to art school, if that’s what she decides. Hadn’t really thought that one through when we started the plan when she was 4. Then we had a conversation about clown school, which she could go to with the bucks, too.
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MH is right. Roofing–which my husband also does, in addition to carpentry–requires more skilled labor than one might think. Many people can’t do it, given its physical demands (including strength and agility). Carpentry is a skilled trade for sure. The problem there is that those without skills put in low bids. To people who don’t know much about construction, cheaper=better. But, you get what you pay for in this case, and before long you’re going to have truly skilled carpenters (like my husband and his brother) to come in and re-do the job. I have lost count of how many times over the years that scenario has played out.
This is also why many suburban developments/subdivions quickly fall apart and lose their value. Many of those developers are throwing up the cheapest housing possible, and they’re pieces of crap that age very quickly.
I get how supply and demand works, btw. My point in the earlier comment was that there are *many* folks who work very difficult jobs for extremely long hours, like the banker husband of the article. To say that he earns more money than most people because he works longer and harder than they do–which is what the wife claimed–is just not true, but that attitude is indicative of a belief that if people only worked harder, they wouldn’t struggle financially. Again, that is just not true. Hard work and long hours do not automatically equal big bucks, and earning less than 30K a year doesn’t mean you’re lazy. That is what the banker’s wife doesn’t understand.
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Weirdly enough, the guy who put on our roof on the old house was a former Wall Street dude. He quit (or got fired?). Told me that he hated working for someone else and hated the hours. Then he applied his skills to his dad’s roofing business. Made a fortune.
I have no idea how that totally random anecdote fits into this conversation.
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“I did, however, get asked the question about what I would do if my dd decided she wanted to go to art school (because a character in a book was facing it) and whether I would pay for it. I thought about a little bit, and then realized that I wouldn’t really have a choice, because she already has 529 money allocated to her to go to art school, if that’s what she decides.”
Oops.
I think what I’m going to tell my kids is that they get four years of parentally-supported higher education, as long as they’re making satisfactory progress (4 majors in 4 years doesn’t qualify).
Re: blue collar vs. white collar work
An under-appreciated fact is that a lot of people hate school and (not coincidentally) hate working indoors or at sedentary jobs. School and white collar work are things that a lot of people (primarily men) simply cannot cope with. As I’ve mentioned before, I suspect that there are a lot of adult ADD cases working in construction.
“Carpentry is a skilled trade for sure. The problem there is that those without skills put in low bids. To people who don’t know much about construction, cheaper=better.”
Some friends of mine recently did a renovation. They started with a bargain contractor. Eventually they discovered 1) he was a recently released violent felon 2) he’d closed up an exterior wall without putting in any insulation. They had to give the guy a golden handshake and move on to a more reputable contractor.
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Eh, we don’t mind (i.e. not an oops). Of course we have supercompetitive striver children, but if they decide to go to art school (or clown school) that’s a luxury we can afford. After all, someone gets to be an artist and a clown, and our kids will have the safety net to figure out whether it will be them (mind you neither seem like significant possibilities for the kid who we have had to dissuade from getting obsessed about spelling bees).
It was not a decision we analyzed before the fact, but in retrospect, it’s fine. I wonder, though, if other parents will get in trouble with 529 plans, which, as far as I can really do belong to the children (worth doing some research on that).
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1) he was a recently released violent felon
That’s funny. Most contractors are non-violent felons.
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I lost a cleaning lady last year for related reasons. She was so conscientious and scrupulous but disappeared mysteriously for about three months. When she resurfaced, I discovered she’d been in jail. My husband looked it up and discovered that she’d threatened somebody with a weapon. Now, I can imagine circumstances under which she’d be an innocent party, but I couldn’t take the chance of having somebody in my home that I didn’t have total confidence in.
I still miss her, though.
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Laura and Amy, I have heard many stories of men “opting out” of white collar work and entering the trades. When we lived in Cincinnati (our hometown), husband worked with an electrician who had a PhD, in chemistry I think. I have a colleague whose dad is a roofer. Colleague was going on the academic job market one last year, and then he was going to move home to Staten Island and work with dad.
He’s never been diagnosed, but I am positive my husband has ADD, inattentive type. Amy, given all the men I know in the trades, I think your assessment is dead on.
MH, you made me do a spit-take.
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I think part of what I believe about this conversation is that people really *aren’t* compensated by the rules of thumb Laura wrote: “Salaries in this country are based on the difficulty of the work, the rareness of the talent to do the job, and investment.”
Mssing components include the ability to directly measure the *monetary* value of the work and the ability to extract the full value of the work to the employer/employee. Maybe others are convinced that an excellent elementary school teacher is a commonly available talent, but I think an excellent elementary school teacher requires tremendous talent and skills (potentially even as much as Jeter, and almost certainly as much as your average mid-level investment banker). The difference between the banker and the teacher is that the value that the teacher creates can’t be directly monetized (i.e. the banker makes 1 million dollars for you, you can give him 15% of that and feel good about it). The teacher, teaches a child to read? well, how do you monetize that? It might have been worth a million bucks (say, for example, that kid then goes on to be an investment banker or a roofer instead of a felon, well, that was worth a million dollars). But the teacher can’t gain the value because of the way economics works.
(and, note that there’s a risk attached to the banker too, in that decisions they made certain helped to collapse our economy, so the teachers role is not less deterministic, just less measurable).
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“He’s never been diagnosed, but I am positive my husband has ADD, inattentive type. Amy, given all the men I know in the trades, I think your assessment is dead on.”
Gosh, thanks.
I listen to a lot of personal finance radio, and you often run into situations where a guy is super at the actual contracting work, but really struggles with the record keeping/pricing/billing/marketing side of the thing.
My dad did a long stretch of 100% outdoor/blue collar work before hitting middle age. He does a fair amount of white collar stuff these days (community college teaching, doing the bookkeeping for the store), but there’s clearly a tug toward the other stuff. With the least provocation, he’ll be building fence or a shed or doing some brush-cutting or landscaping. And I think this isn’t that unusual. What do white collar guys traditionally do in retirement when their time is their own? It isn’t sit at a desk all day doing spreadsheets.
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Ian’s OCD isn’t getting any better. I think that a traditional liberal arts college education would be torture for him. I hope that he’ll be able to be car mechanic. I think he would be very good at it, too.
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I forgot to add this: my dad, who is quite bright, struggled in school. Born in 1928, he obviously has never been diagnosed with ADD. But he follows the pattern: he was a mechanic before he became a Cincinnati police officer because it was a better way to support us. He still worked on cars after his police shift and on the weekends, though; that money put me through college. He’s now almost 84, and like your dad, he is constantly tinkering. It kills him that his back won’t allow him to get under a car anymore. My late father in law was the same way–constantly working in the barn where he kept all of his carpentry tools.
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Sara,
My husband’s a much more white collar guy than my dad, but once we got our first garage, a funny thing happened. We suddenly needed a drill press and some sort of saw that makes circles and he started spending his evenings out in the garage making stuff: a tire swing for the kids, a couple telescopes (one for a friend, one for our son), a paper towel dispenser for our rental kitchen, a homemade train set tunnel and bridge, a copper pipe glockenspiel, a chin-up bar for our son, etc.
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I would be oh so willing to pay for a roofer, carpenter, or car mechanic who I could treat like an expert (like I’d like my doctors, teachers, professors, and lawyers) to be.
I am surrounded by lawyers, professors, and doctors who have a theoretical relationship with tools (though the men are mostly too macho to admit it) and have respect for people who know how to do something, say, for why two doors in my house no longer close properly because they seem tilted. Knowing how to do that seems generally more useful than knowing how to integrate by parts.
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My spouse gets jealous when I watch Norm Abrams on TV.
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We have an honest, knowledgeable mechanic. It’s very reassuring. Our house inspector was also very impressive. (Note to Laura: that seems like a very good OCD profession.)
I just discovered that a solar telescope is under construction in our kitchen. It’s going to be used in a science demonstration for the 4th grade class.
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PS: the doctors do know how to use stethoscopes, otoscopes, and sometimes even scalpael and sutures.
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Knowing what to do about what you see involves more effort, but I’m going to go out in a limb and posit that the actual operation of an otoscope requires far less skill than a drill press or band saw.
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A 2×4 won’t sue you for malpractice.
Some doctors may have high incomes, but they also have high expenses (not including ex-wives).
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I know more people who’ve lost of finger with a saw than who’ve had their eardrum ruptured by the over-eager employment of an otoscope.
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The researchers examined personal and professional characteristics and found malpractice lawsuits were strongly and independently linked to surgeon depression and career burnout. The stress caused by malpractice litigation was rated as equivalent to that of financial worries, pressure to succeed in research, work/home conflicts, and coping with patients’ suffering and death. Finally, surgeons who experienced a recent malpractice lawsuit reported less career satisfaction and were less likely to recommend a surgical or medical career to their children or others.
(…)
Of the 25,073 surgeons sampled in the study 7,164 participated. The data showed that 24.6 percent of respondents (1,764 surgeons) experienced a malpractice action within 24 months prior to the survey. Compared with surgeons not involved in a malpractice lawsuit, those involved were more likely to be younger, male, work more hours per week, have frequent night call, and be in private practice (p < 0.0001 for all).
Otolaryngology had one of the lowest rates of malpractice suits, 12%.
http://www.news-medical.net/news/20111115/Malpractice-lawsuits-linked-to-surgeon-depression-and-career-burnout.aspx
4,000 table saw finger amputations each year: http://www.huffingtonpost.com/2011/05/25/table-saw-accident-victim_n_866873.html#s283373&title=Adam_Thull.
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I didn’t realize that the flesh-sensing saw-stopper was still uncommon. Of course, it does cost more and prevent you from using your table saw for meat packing purposes.
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prevent you from using your table saw for meat packing purposes.
There are others?
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Laura, people with OCD do very well in software. Is Ian in a robotics club? Or perhaps learning to code out his own small games? You should at least give this a shot.
FWIW many software people are also very, very handy at home. They want to understand how things work, and then build it themselves. The principle holds whether it’s the software in your phone, a video game, your old Celica, or the HVAC in your house.
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Yes, he’s very, very good at software and robotics, but I can’t imagine him ever getting through the liberal arts part of a college education. He needs to avoid very language based work environments with lots of social stresses. He would be happier in a garage than a cubicle.
I didn’t grow up around men who were good with tools. Steve isn’t good with tools. His dad and the rest of the guys in his family are. I love different types of brains.
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Technical colleges understand their students.
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Someone just recommended this book to me:
“JunkBots, Bugbots, and Bots on Wheels: Building Simple Robots With BEAM Technology”
It’s not a big sell in our house, because our builder only likes to build in highly social environments (i.e. he’ll work on legos with someone, but not by himself). But it looks like a cool book.
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“Your R1 don’t understand you, but I do.
I said your R1 don’t understand you, but I do.”
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“I didn’t grow up around men who were good with tools. Steve isn’t good with tools. His dad and the rest of the guys in his family are. I love different types of brains.”
I’m quite puzzled where my husband gets his skills from, although what jen says about a software/handiness nexus rings true. My husband had a very hands-on electronics course in high school, which I think was the source of his life-long urge to solder stuff.
This stuff periodically crosses over from hobby to real income producer. My husband won a rather spectacular color printer from Instructables last year and some binoculars, and he got a check for $900+ from Amazon last month for Kindle programming. This month’s check will be a lot smaller, but hey, it’s all real money. And note that nobody’s checking your paper credentials for this stuff–all you have to do to make money is to make something that works and that people want.
For Ian, I wonder if you shouldn’t be on the look-out for a very technical high school, because typical high school is very verbally demanding. Also, it may be worthwhile to see what kind of summer offerings there are at local technical schools. Our local state technical college runs a summer optics and laser camp for junior high and high school age kids, with the idea of encouraging them to go into that industry.
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LLCC,
At a college admissions fair, two admissions officers spoke to parents. The officer from the _____ institute of technology clearly expected different essays from applicants to his institution than the officer from the liberal arts college had for his applicants.
My cousin’s son is enrolled at an “-________ institute of technology.” He fulfilled many of his liberal arts requirements in summer courses at the local community college.
Not all colleges are liberal arts colleges. Liberal arts colleges do seem to expect students to be well-rounded. That isn’t true for all colleges.
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That was a Simpson’s joke.
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And my lack of tv knowledge rears its head again!
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