To reiterate how poor humans are at judging the differences between big numbers take a look at the Reuters headline regarding Barclays Bank in the UK. “Barclays hit by $361 million penalty over issuance of securities” That is a tremendous amount of money; over a third of a billion dollars. The fine was for a “blunder” where they oversold structured products by $17.7 billion dollars.
Now quickly, how large is the $361 million dollar fine compared to the $17.7 billion dollar overage. Don’t use a calculator just quickly how big does it feel? Would it shock you to learn it is only 2%. Hardly seems like a penalty now, does it?
It isn’t just that we’re bad at big numbers. We’re also terrible at judging change over time. For example, I was talking with some older people and we were discussing how hard it is today for young people to get ahead. Buy a house, save for retirement, you know all the usual stuff. One of the people commented that the younger generation are just lazy and entitled. That she worked for several years before being able to afford a house and she couldn’t understand why young people couldn’t (or wouldn’t) do the same.
The minimum wage in Canada in 1992 was $6.35. It only went up by 50 cents in the following decade to $6.85 in 2002, which is around an 8% increase. The average cost of a house (in Toronto) went from $214,971 to $275,231 which is a 28% increase. Which means home ownership became harder to achieve.
If we change the time frame to say, the last 20 years, minimum wage went from $6.85 to $15.50 which is a 226% increase. But the cost of a house went from 275,231 to 1,095,339 an almost 400% increase.
To put this another way: You would need to work around 40,000 hours (without deductions) to afford a house in 2002. In 2022 you would need to work over 70,000 hours.
What does this have to do with billionaires? Who do you think is getting the difference? Who is getting the profit of those additional 30,000 hours?
Also, how long do you think it would take you to work 30,000 hours? With a regular schedule of 40 hours a week X 52 weeks a year. (No time off you lazy millennials!) It would take an additional 14 years!
No wonder why no one wants to work anymore, it isn’t worth it!