The Inequality Myth
Posted by Tony Listi on March 10, 2008
http://www.ncpa.org/sub/dpd/index.php?Article_ID=15682
While figures from the U.S. Census give some substance to the fears of widening inequality and middle-class stagnation, the situation is not nearly as clear-cut, says Brad Schiller, a professor of economics at American University and the University of Nevada, Reno.
In its latest report, the Census Bureau tracked changes in incomes all the way back to 1967. Two observations grabbed the headlines.
First:
- The data indicate that the top-earning 20 percent of households get half of all the income generated in the country, while the lowest-earning 20 percent of households get a meager 3.4 percent.
- That disparity has widened over time; in 1970, their respective shares were 43.3 percent and 4.1 percent.
- These income-share numbers buttress the popular notion that the “rich are getting richer while the poor are getting poorer.”
Second:
- The median household income in 2006 was $48,201, just a trifle ahead of its 1998 level ($48,034).
- That seems to confirm the Democrat candidate’s claims of middle-class stagnation.
Demographic changes in the size and composition of U.S. households have distorted the statistics in important ways, explains Schiller:
- All the Census Bureau tells us is that the share of the pie consumed by the poor has been shrinking (to 3.4 percent in 2006 from 4.1 percent in 1970); but the “pie” has grown enormously.
- This year’s real gross domestic product (GDP) of $14 trillion is three times that of 1970. So the absolute size of the slice received by the bottom 20 percent has increased to $476 billion from $181 billion.
- Allowing for population growth shows that the average income of people at the bottom of the income distribution has risen 36 percent.
They’re not rich, but they’re certainly not poorer. In reality, economic growth has raised incomes across the board, says Schiller.
Source: Brad Schiller, “The Inequality Myth,” Wall Street Journal, March 10, 2008.
For text:
http://online.wsj.com/article/SB120511125873823431.html
For more on Economic Issues:
http://www.ncpa.org/sub/dpd/index.php?Article_Category=17
This entry was posted on March 10, 2008 at 7:35 pm and is filed under Government and Politics, Poverty, Socialism. Tagged: America, income inequality, inequality, inequality myth, poor, Poverty, rich. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Conservative Colloquium 
sinblancaporelmundo said
El socialismo es muerte.
http://sinblancaporelmundo.wordpress.com/2008/03/06/una-imagen-una-palabra/
foospro86 said
Gracias. Es muy importante que tu continuas hablar contra el socialismo, especiamente en el mundo hispanico.
sinblancaporelmundo said
Yo estoy totalmente en contra del socialismo. Soy liberal.
Un abrazo.
Jamie Lin said
Mr. Schiller made several fetal mistakes in his arguments. First, when dismissing “the poor are getting poor,” he did not use the same “dollar” to measure the pie. In “2007 dollar” terms, the poor’s pie should have been $471 billion in 2007 versus $218 billion in 1970. Taken 93% increase in number of households into consideration, each household’s pie has only increased by 11.7% in 38 years – while the economy expanded by 307%. More importantly, being poor or rich is relative. Therefore, even if the author did not make the first mistake, the poor indeed has been getting poor with only 36% (or 12%) increase in pie size in comparison to 300+% gain for other classes.
Moreover, the author wrongly accused new immigrants of being a drag to the poor’s advancement. Not only did he raise no evidence to support his assessment, but he also used an largely incorrect model, a ticket line, to explain new immigrants’ entrance into the system. By various measures, new immigrants are a very positive factor to this economy, especially in promoting growth and equality. For example, since the creation of E-class investment visa in 1990, almost 200,000 new immigrants have joined the US economy through each investing more than $1 million and creating more than 10 jobs. Not only have these people not dragged the poor, they have instead increased the pie while distributing a lot of the gain to lower class through paychecks, stock options and other various forms of employee compensations. Besides, over 40% of PhDs that are currently working in US are not native. These PhDs certainly would earn anything but below median income or bring more inequality. It’s very easy to see how the ticket line model is off as new immigrants certainly do not all enter this economy from the back of the line and how dead wrong the author was in blaming new immigrants for bringing inequality.
Jamie Lin
New York, NY
An NYU Stern MBA and a proud new immigrant entrepreneur who has created many jobs
foospro86 said
Are you saying that Schiller did not take into account inflation? Do you really think inflation has outpaced economic growth at all or substantially over the past few decades?
Your comments use a lot of percentages. But I think Schiller’s point was to highlight absolute numbers. He is advocating absolute numbers as a better measure of whether the poor are really getting poorer or not. It is not as important what % the poor get as what they are getting a % of. Moreover, this whole discussion doesn’t take into account social mobility: “the poor” does not contain the same set of people year after year. Many people move in and out of poverty and wealth.
https://conservativecolloquium.wordpress.com/2008/01/12/income-inequality-is-not-a-big-deal/
I’m going to go out on a limb and guess you are not a new Hispanic immigrant entrepreneur. I’m sure that Schiller had our friends to the south in mind for his discussion of how immigration, especially illegal immigration, impacts these statistics. (Schiller really isn’t talking about the impact immigrants have on the economy or the poor, just their impact on economic statistics!)