‘The goose lays more golden eggs every year’: Warren Buffett explains why the concept of capitalism doesn't work for young people today — and the straightforward way he says he’d solve it
It’s no secret that many young Americans balk at the idea of supporting big corporations along with the wealthy 1% who profit at the expense of the poor — but that may come as no surprise considering they’re also less likely to benefit from the U.S. market system than their parents did.
And they’re beginning to reject the systems their parents simply resisted. Nearly two-thirds (60%) of young adults told Pew Research in 2022 that they don’t view capitalism positively — the highest share of any age group and 33 percentage points higher than those aged 65 and older.
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Capitalism, of course, is also what made billionaire business magnates like Warren Buffett so rich and renowned.
But the Oracle of Omaha believes one of the reasons why the economic system might not work for young people today may come down to the market simply becoming more specialized and niche — which in turn widens the wealth gap and leaves more folks in the dust.
“We’re in an economy where specialized talents bring incredible sums,” Buffett told CNN back in 2016, in response to a question regarding a study from Harvard University published that year on growing anti-capitalism sentiments in young adults.
“If you're a little bit where you really don't fit as well into the market system, you are left behind.”
Does capitalism need to evolve?
Buffett remains a big proponent of capitalism and believes the market system still works — but says it needs to accommodate more folks and broaden the distribution of wealth.
“You want to keep a system where the goose lays more golden eggs every year — we've got that,” he says. “Now the question is, how do those eggs get distributed? And that is where the system needs some adjusting.”
For example, the top 10% of households by wealth boast $7 million on average and collectively hold 69% of America’s total household wealth, according to St. Louis Fed data.
In comparison, the bottom 50% held around $51,000 on average per household, adding up to just 2.5% of the total household wealth. There’s a major racial wealth gap as well, with Black and Hispanic families owning about 24 cents for every dollar of white family wealth.
The economy in more recent years has only seen the unequal distribution of wealth become more exacerbated. Folks who purchased homes before the COVID-19 pandemic or during the years when mortgage rates were between 2% and 3% have seen their equity soar, while those who haven’t bought yet are no longer sure they’ll ever be able to.
And young people are bearing the brunt of the fallout — saddled with student loan debt and confronted with rising prices during a time when they should be kick-starting their careers and building wealth. Compared to previous generations, they're falling behind on that goal. But, to be fair, in the face of those challenges, their priorities have also shifted.
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Buffett has two solutions
More Americans are getting creative outside of their 9-to-5 jobs in order to make ends meet, like taking on side hustles for some extra cash.
But Buffett, who’s self-admittedly a “card-carrying capitalist,” told CNBC in 2020 that he doesn ’t believe somebody who’s willing to work 40 hours a week and has a couple kids should need to work a second job in order to support their family.
“I believe in having a higher income for people — not necessarily a higher minimum wage,” he says. “I do not think it’s at all unreasonable that the income tax credit produces at least $15 an hour, maybe higher in certain areas.”
The earned income tax credit gets low- to moderate-income workers a much-needed tax break, and in 2023, ranges from $600 to $7,430 based on your family size and income.
Buffett has advocated for an expanded version of the earned income tax credit as the best way to put more funds into the pockets of deserving Americans who don’t fit into the traditional market system.
In a 2015 piece for The Wall Street Journal, he wrote raising the minimum wage in America — which is $7.25 an hour — to $15 an hour “would almost certainly reduce employment in a major way, crushing many workers possessing only basic skills,” while smaller increases would still leave plenty of Americans entrenched in poverty.
Of course, earning even $15 an hour isn’t enough today. The Massachusetts Institute of Technology’s Living Wage Calculator puts the living wage for a family of four at just over $25 an hour before taxes — but notes the cost of living can be significantly higher depending on where you live.
The other solution, Buffett has said, comes down to raising taxes on the wealthy. That's something Democrats have been pushing for over the last few years.
“This country has the productive capacity to let people like me live extraordinarily well — or sports stars, or entertainment stars, all kinds of good managers — and still make sure that nobody is really left [behind],” he told Yahoo Finance in 2020.
“We can do it. We have the resources to do it.”
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
