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In the United States, the measures we use for income inequality are outrageously flawed In almost all measures of the Gini coefficient two significant flaws ex

In the United States, the measures we use for income inequality are outrageously flawed In almost all measures of the Gini coefficient two significant flaws exist: 1. Incomes are counted on a pre-tax basis 2. Incomes are counted on a pre-government transfers basis The consequence of this is that income inequality appears to be increasing _regardless_ of the level of social subsidies and redistribution. When you correct for these measurement flaws, income inequality in the US has been decreasing over recent decades. If you are in the “Tax the Rich” camp as a result of looking at the Gini coefficient, you may need to strongly update your priors. Sources: https://www.wsj.com/articles/incredible-shrinking-income-inequality-11616517284 https://www.wsj.com/articles/incredible-shrinking-income-ine... https://www.economist.com/briefing/2019/11/28/economists-are-rethinking-the-numbers-on-inequality https://www.economist.com/briefing/2019/11/28/economists-are...

jszymborski 6y ago
> Few dispute that wealth shares at the top have risen in America, nor that the increase is driven by fortunes at the very top, among people who really can be considered an elite. The question, instead, is by just how much. The Economist article concludes that the rich are indeed, getting richer and the poor are getting poorer. That's the heart of OP's article.
dghlsakjg 6y ago
I may heave misread the article, and the first graph, but it appears that the article confirms that inequality is growing. It just suggests that inequality is growing at a slower rate than the raw numbers suggest. The most generously adjusted estimates show a doubling of adjusted income for the 1% over the past few decades rather than the higher multiples that we are used to hearing about. Is it really good news that no matter how you try to tweak the numbers, the income gap is growing?
timoth3y 6y ago
These are not so much "outrageous flaws" but conscious and reasonable choices. For example, not counting things like SNAP as income makes sense because a government policy targeted at reducing inequality is not the same as that inequality not existing. It is far more desirable for those programs to be minimized by eliminating the inequality in the first place. Also, keep in mind that Gini is most useful as relative index. Making the changes you suggest would obviously result in a better number in the US, but when recalculated for all thee other countries it would not change the situation much. In fact, since both taxes and the social safety net are low in the US, it would probably drop the rankings.
- refurb 6y ago
  That doesn’t make a lot of sense. The EITC is a direct cash transfer to low income individuals that offsets inequality and is there money to do with as they wish. Why would you not include that?

jszymborski 6y ago

> Few dispute that wealth shares at the top have risen in America, nor that the increase is driven by fortunes at the very top, among people who really can be considered an elite. The question, instead, is by just how much. The Economist article concludes that the rich are indeed, getting richer and the poor are getting poorer. That's the heart of OP's article.

dghlsakjg 6y ago

I may heave misread the article, and the first graph, but it appears that the article confirms that inequality is growing. It just suggests that inequality is growing at a slower rate than the raw numbers suggest. The most generously adjusted estimates show a doubling of adjusted income for the 1% over the past few decades rather than the higher multiples that we are used to hearing about. Is it really good news that no matter how you try to tweak the numbers, the income gap is growing?

timoth3y 6y ago

These are not so much "outrageous flaws" but conscious and reasonable choices. For example, not counting things like SNAP as income makes sense because a government policy targeted at reducing inequality is not the same as that inequality not existing. It is far more desirable for those programs to be minimized by eliminating the inequality in the first place. Also, keep in mind that Gini is most useful as relative index. Making the changes you suggest would obviously result in a better number in the US, but when recalculated for all thee other countries it would not change the situation much. In fact, since both taxes and the social safety net are low in the US, it would probably drop the rankings.

refurb 6y ago
That doesn’t make a lot of sense. The EITC is a direct cash transfer to low income individuals that offsets inequality and is there money to do with as they wish. Why would you not include that?