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Have US Income and Wealth Inequality Actually Increased?

29 points by mchusma 13y ago

qwerta 13y ago
This type of statistics is useless, it does not include army of unemployed people.
- cobrausn 13y ago
  That statistic is compiled by the census bureau, and last I checked, unemployed people are part of the census and likely part of the statistic, especially since it can indicate when one person has all the income. What I find odd is the article mentions 0.0 as the 'one person has all the income', where the wikipedia article on the Gini coefficient says 'A Gini coefficient of one (or 100%) expresses maximal inequality among values (for example where only one person has all the income).'
  - camdez 13y ago
    It does appear that he got that backwards.
- camdez 13y ago
  Fine, I'll bite. How do you figure "it does not include army of unemployed people"? Census data should reflect members of the population regardless of employment status.
  - sabbatic13 13y ago
    From a quick read of the census website linked, it appears that what unemployment data there is comes from the 2000 Census, whereas income data is much more current and numerous. That's rather concerning. It's also the case that unemployment numbers are always underreported, something which gets worse during periods of extended unemployment. The government bases its estimates primarily on unemployment benefits filings. People who are unemployed beyond the period of available benefits don't get counted. So, the unemployed are somewhat factored into the study, but it doesn't seem like a very clear picture of the situation. That's my prima facie judgement at least.
  - qwerta 13y ago
    There are many people who are not in census: illegal immigrants, homeless..
keithwarren 13y ago
I have yet to see a solid discussion of wealth inequality that removes the outliers. Given that 85 people have half the worlds wealth, it would appear to me that a study which looks at the numbers without those people would be more interesting in helping us understand how our systems and markets are moving wealth for 99.999% of us. Even still, the goal should not be balanced wealth but continual upward mobility for all people - or more aptly distance from poverty. There will always be rich and poor but the standard of living and equity of opportunity for the poor is what we should focus on. It is more important that a poor kid have good education, healthcare and living standards than it is to rebuke the rich guy for having a yacht. It seems we are in this stage where we recognize something isn't right but we are immaturely blaming the rich guy and saying he should give his money to the poor kid rather than finding real solutions to the plight of the poor kid.
- HarryHirsch 13y ago
  Why would you remove the outliers? There is information in the sample distribution, and if you are removing everything outside 3sigma (or even 6sigma) you are squashing the data. A high level of wealth comes with disproportionate political power. One shouldn't disregard this aspect and confine the discussion to most people having a fairly comfortable life.
- abduhl 13y ago
  The problem is that poverty is continually redefined as standard of living and opportunities increase. Poverty used to be living in a shanty town during the dust bowl where you could possibly die of dehydration any day. Poverty now is living in a house where you only get basic cable and don't have the money to buy a nice steak dinner.
  - ctdonath 13y ago
    Some 87% of world population lives below the "poverty line" as defined in the USA. Without everyone sharing a sensible consistent definition of the word, the discussion will come to nothing but blows.
ruchir_21hj 13y ago
Are welfare payments included in income of an individual or not?
- baldfat 13y ago
  If the US gave all the money to people below the poverty line (46.5 million; 15% of the population) $175 Billion we would have zero poor in US. That is a 1% of our GDP. Military budget = $700 billion in comparison. If we just gave $3,000 to each person below poverty we would have 23 million people above the poverty line. Please tell me that this can't even be a question on inequality of the super rich and the poor? Next thing Global Warming is a fraud?
  - ctdonath 13y ago
    Problem is, those who's own wealth/power depends on a large population in "poverty" will just redefine "poor" up - as they've done many times already. The value of money would reduce because recipients thereof trade nothing for it, thus raising the cost of goods accordingly, pushing some things back out of reach of the "poor". We already give an enormous amount to the "poor". If you make less than a given amount, various welfare programs will fill the gap (some pushing you WAY above the line). It's enough that another problem is arising: many on welfare receive so much that they can't afford to work, lest they lose all those benefits and reap less net income as a consequence. Again, I come back to the issue of defining the word "poor". As is, it's not objective relative to the recipient's survival.
alaithea 13y ago
[edit: the author has since corrected the Gini definition in the article] I've never encountered the Gini coefficient before, but reading up on it on Wikipedia, the author appears to have the measure flat backward. "A score of "0" on the Gini coefficient represents complete equality, i.e., every person has the same income. A score of 1 would represent complete inequality, i.e., where one person has all the income and others have none." Source: http://en.wikipedia.org/wiki/List_of_U.S._states_by_Gini_coefficient http://en.wikipedia.org/wiki/List_of_U.S._states_by_Gini_coe... Also see the chart here, with the US rising toward inequality ever since the 60's. Again, the caption says "where 0 is perfect equality, and 100 is perfect inequality." http://en.wikipedia.org/wiki/Gini_coefficient#Gini_coefficient_of_income_distributions http://en.wikipedia.org/wiki/Gini_coefficient#Gini_coefficie...
- bicknergseng 13y ago
  Glad someone else caught that. Another glaring issue with the Gini coefficient is that it tracks income inequality and not wealth inequality. It's well known that the rich don't make their money via income but rather through ownership. TL;DR: The Gini coefficient is a shitty metric to make any conclusions, especially when taken in a vacuum.
  - dragonwriter 13y ago
    > Another glaring issue with the Gini coefficient is that it tracks income inequality and not wealth inequality. Well, people more frequently cite the Gini coefficient of income, but you can take a Gini coefficient of any measure, including wealth [1]. > It's well known that the rich don't make their money via income but rather through ownership. The money made through ownership is income -- making money is equivalent to income. Its true that source of that income is different for the richest than most other people (most of the richest derive most of their income through capital, while most of the rest derive most of their income through labor), but its still income. [1] Gini coefficients of wealth are, e.g., presented here: http://en.wikipedia.org/wiki/List_of_countries_by_distribution_of_wealth http://en.wikipedia.org/wiki/List_of_countries_by_distributi...
- drewying 13y ago
examancer 13y ago
This is a side show. Whether or not the statistics show rising or falling income inequality is irrelevant. There is massive income inequality. Its trajectory isn't nearly as large of an issue as the status quo, which is pretty dismal. Until that gini coefficient is much better, and we have no one living below the poverty line, we still have a ton of work to do. This article seems to be making a shallow point only to encourage inaction on the core problem. The trajectory of income inequality is a red herring trying to distract us from the harsh reality of our present wealth, opportunity, and income inequality. The right thing to do is to keep working to solve the core problem. Restore the US to a progressive tax system instead of regressive. Pass living wage laws. Improve the social safety net. Maybe even consider doing what Switzerland is considering, and give everyone (rich and poor) a reasonable guaranteed income as an alternative to expensive and sometimes ineffective welfare programs. At the small scale, volunteer locally, especially anything having to do children and improving their education. Unfortunately, along the way we will be fed a constant stream of garbage articles like this, held up with straight faces by a chorus of onlookers telling us there is no problem to fix. Look outside. There are poor and hard working people out there who aren't being rewarded for their hard work and are severely struggling. No amount of fancy statistics bending will justify inaction.
- ctdonath 13y ago
  Institutionalized theft isn't an acceptable solution. Such class jealousy does not, historically, end well.
  - splawn 13y ago
    "Institutionalized theft" could be used to describe both sides of the gap issue.
  - examancer 13y ago
    Calling progressive tax systems institutionalized theft is incredibly clever, and incredibly false. No one who has wealth created it by themselves. You don't print your own money, you don't extract wealth from a vaccum. Wealth is built by extracting that wealth from a shared economy. Asking those who were able to extract the most wealth to help the most in paying to protect this shared system, and help those who were exploited by it, is not theft. You are being intellectually dishonest. I would not be surprised if deliberately so.
unmole 13y ago
Stopped reading after his absolutely incorrect Gini definition.
- ww520 13y ago
  Yeah, his Gini definition is backward.
skywhopper 13y ago
Lots of things are wrong with this article, not least of which is that the writing is so unclear that it's hard to make enough sense of his argument to point out what's wrong. That said, the main takeaway here is that the author doesn't consider growing income disparity to be a problem. Perhaps a better way to look at it is this: growing income disparity is a symptom of the real problem, which is that the economy hasn't really done all that well since the end of the 90s. A strong economy that's serving all individual participants well would result in shrinking income disparity over time. The fact that we don't see this is indicative of some major problems.
- stretchwithme 13y ago
  No, a marketplace where people are rewarded for what they produce yields more unequal incomes. Because people in a free society with access to capital and mass production and distribution can be incredible productive. And others can do manual work with no mastery of technology at all and not sell their work to the world. Those two extremes are going to get more extreme over time, not less.
- mchusma 13y ago
  Author here: I write for mostly my own thinking and hadn't actually put something out in a week so wanted to get it out the door. Sorry to the extent it was unclear. I think psychologically you are correct in that most people would probably be less upset with income disparity if the economy was doing better overall. We are in a long, slow recovery. I do disagree with your main premise. I think in the technology economy we would see increasing income disparity over time. My only real solution to this problem is basic income.
CWuestefeld 13y ago
A new blog post [1] from Ross Douthat addresses this in an interesting way. Part of the inequality picture is that demographic changes in recent decades, with women becoming a significant part of the workforce, and the rise of single-parent households, has skewed family-based inequality significantly. In the referenced article, Douthat considers the underlying causes of that. Essentially, are the changing rules in society (taboos about sex, marriage, divorce, etc.) dooming those who already don't have a strong societal backdrop to guide them? [1] http://douthat.blogs.nytimes.com/?module=BlogMain&action=Click&region=Header&pgtype=Blogs&version=Blog%20Post&contentCollection=Opinion http://douthat.blogs.nytimes.com/?module=BlogMain&action=Cli...
paul_f 13y ago
For those caught up in what I think is a cause-de-jour, income inequality, I'll pose these two questions: 1. Is anyone worse off because Mark Zuckerberg is very rich? 2. If policies to reduce income inequality made the poor worse off, would you be in favor of them?
- base698 13y ago
  Yes, if he brings in hoards of H1Bs lowering the salaries of software engineers across the board. http://www.fwd.us/ http://www.fwd.us/
- PhasmaFelis 13y ago
  > 1. Is anyone worse off because Mark Zuckerberg is very rich? Mark Zuckerberg? Probably not directly; Facebook's employees are treated well, as far as I'm aware. But that's an awfully narrow example to cherry-pick. How about the Waltons, or Jeff Bezos? Employees in Wal-Mart stores and Amazon warehouses go without benefits, unemployment compensation, a living wage, and sometimes basic climate control, so that the wealthy can line their pockets. The wealth of CEOs does not descend upon them from heaven as a divine reward for good management. Every million dollars they get is a million that is not being spent on compensating employees. (Or on growing the business, etc.) Obviously CEOs deserve compensation for their work just like anyone else, and I haven't done the math on how much the Waltons and Jeff Bezos are worth vs. how much it would cost to treat all of their employees decently; but when a boss is worth billions and their employees can't afford food or medicine for their children, it's obscene. > 2. If policies to reduce income inequality made the poor worse off, would you be in favor of them? No. Obviously. I favor policies in general that aid those who need it most. Reducing income inequality is only one obvious way to help do that. You've got a "gotcha" planned here, I assume?
- gopher1 13y ago
  The very rich (Mark Zuckerberg included) use their wealth to influence government, therefore the answer to #1 is yes, the average person is worse off because they don't get the same opportunity to affect policy. #2 is an odd hypothetical which is unlikely to be the case and without further context (what is defined as poor? etc.) it's a useless question.
nullc 13y ago
Beyond having it backwards, gini over persons looking at timescales going to the 40s is probably distorted by women entering the workforce massively increasing the baseline equality.
cryoshon 13y ago
Where is this guy getting his numbers? From wikipedia[1]: 2011 had a pre-tax Gini coefficient of 0.477 whereas 1967 had 0.397 (the first year the Gini was actually measured), demonstrating considerable increase in inequality. There's an Economist article[2] that puts the US's pre-tax Gini at 0.57 for 2013. So yeah, income inequality has increased astronomically, undeniably, conclusively. The author seems to write off income inequality as a metric because it "doesn't track societal progress" and "isn't helpful for policy making purposes" both of which I would strongly reject. First, let's explicitly state the axiom that money is equal to political and social power. An increasing Gini means we're moving farther and farther away from an equitable society and closer to feudalism or a plutocracy where the richest control everything via their ability to manipulate the political process with money. I think that it's fairly clear that our current government has been repeatedly bought, sold, and manipulated by a few plutocrats with special interests for the sake of making them and their buddies even more money. If you're looking for an example to support this argument, consider the billionaire Koch brothers and their political empire. Next, let's consider what a rising Gini means for policy making purposes. If you are a policymaker whose primary constituents are the rich, a rising Gini is a stat which you can bring out at your fundraisers (a bit ridiculous, sure) to show that you're on average channeling wealth into the right pockets with your policies. On the flip side (and more realistic side), if you're an Elizabeth Warren type, you can connect your constituent's cries for a stronger safety net to a statistic which proves they're not just perpetually hungry for more. If you bring a piece of information like a Gini to the public, it's possible to win over people who may have been skeptical about supporting stronger social programs because they're unwilling to support "deadbeats" or the like-- after all, this Gini thing says that even if they're productive members of society, they're still not as well off as before. Their piece of the pie has actually become smaller over time, and their complaints are not baseless. That said, I like the author's plug for basic income. The sooner we chop up the concept of capitalism and move on to a more just system, the sooner we'll unlock the underclass from the survival grind and free them to pursue more socially useful ends. [1]: http://en.wikipedia.org/wiki/Gini_coefficient http://en.wikipedia.org/wiki/Gini_coefficient [2]: http://www.economist.com/blogs/democracyinamerica/2013/11/inequality-america http://www.economist.com/blogs/democracyinamerica/2013/11/in...
- mchusma 13y ago
stretchwithme 13y ago
Income inequality is not a bad thing. People are very different in what they are capable of producing. If you want to produce paper napkins by hand 10 hours a week and someone else chooses to make them by machine 40 hours a week and its the same product, why should you both take home an equal income? "Oh" they say "we just want to make it less unequal than it is, not equal." Isn't that why we pay all these taxes and have all these government programs? It literally never ends.
- mjn 13y ago
  Why should you take home a different income? I don't feel that the fact that I'm a computer scientist, which at the moment happens to pay well, ethically entitles me to more resources than other people. If anything I feel a bit guilty taking home several times the income of the guy who's been showing up at 7am every morning to replace my roof; my job is a lot more pleasant and enjoyable, and yet that in itself isn't reward enough, but I get paid more too! One plausible answer could be, "because there's no workable way of making it otherwise". I could buy that, although then we're arguing pragmatics, not ethics.
  - cobrausn 13y ago
    For better or for worse, the guy working hard to replace your roof is easier to replace than you are - this is because you have a skill set he doesn't that takes a lot of time and resources to develop. In addition, your work (likely) brings in more money to a company than his. As such, you get paid more. As an aside, have you ever noticed that (certified) plumbers and electricians make a lot of money? Same reasoning. I don't have a problem making more money now that I made myself valuable. I started off in retail, where you literally are one step away from being replaced by an automated kiosk.
    - mjn 13y ago
      > I don't have a problem making more money now that I made myself valuable. That could be part of our differences in outlook. I don't feel I've really "made myself" valuable, I just have skills and interests that happened to be valuable. I've liked computers since I was a kid, and am reasonably adept with them. When I grew up, somewhat to my surprise, I found out people paid quite a bit of money for that kind of thing. It feels sort of like playing careers on easy-mode; even if I were to totally wash out into a low-end programming position, I could still easily make high 5 figures slinging web templates or Ruby or PHP or something. Other people who're harder-working and more talented than me make less, because they happened to be adept in the wrong thing (art or carpentry instead of coding, say). Were the era different, it could be the other way around, so I have a bit of a "there but for the grace of god go I" outlook: there are times when engineering was a poorly paid blue-collar occupation and skilled painters were highly rewarded. In that economy, I'd be poorer and some of my friends would be richer, through no change in our own skills...
bluedino 13y ago
Wouldn't any capitalistic economy simulation end up with a great inequality, once it's run for N amount of time? You can't just do a 'reset' and re-allocate everything. And even if you did, the people who are smarter (sneakier?), work harder/more, and are luckier are going to end up winning out again.
pmorici 13y ago
This isn't very convincing one way or the other. As the title suggests there are two components to the issue, 'income' and 'wealth'. This argument only looks at the income half and in the process conflates the two terms. Income can't tell the whole story by itself. For example if you own your home outright, your living costs will be substantially lower than someone who has to rent or has a mortgage. In other words having wealth allows you to substantially lower the income you need for the same standard of living. This argument doesn't account for wealth at all as I'm reading it.
Zigurd 13y ago
Every chart and data set I can find says the US has returned to 1920's levels of income inequality since things started getting worse in the mid/late 1980's. So, yeah, income and wealth inequality have gotten worse, and are at a level that was considered very bad for social stability.
socrates1998 13y ago
Using 2009 is very problematic. It's when the SP 500 bottomed out. He picked the worse possible moment to measure rich people wealth in the past 40 years. I don't know his deal, but it's obvious that income inequality has been on the rise around the world the past 40 years.
logfromblammo 13y ago
I'm not all that impressed with graphs over several decades of certain government-published statistical indices, because they have a nasty habit of redefining them, and those fractures are almost never indicated on the charts. So when you show me the Gini coefficient over time, the first thing I wonder is if either the methods of calculating it or the methods of collecting the data have changed during that time. Anecdotally, it is readily apparent to me that inequality is increasing, and not just in wealth or income. It is also increasing with respect to health care, legal processes, job satisfaction, consumer confidence, and trust in institutions. It feels a lot like the guy trying to figure out what is stuck to the seat of his pants in the instant before the bartender gives him the bum's rush out the door. And the bartender himself doesn't realize that the guy is the only one left in the bar that actually intends to pay for his drinks. So really, just cruel and sad all the way around--America since 1970. The only people who now have the ability to change the system see absolutely no benefit to themselves in doing so.
base698 13y ago
I do think income inequality is an issue. In part because people above a certain threshold have no pain when they get towed, get a traffic citation or go to the doctor. The people below suffer greatly and enter economic ruin even if they get a parking ticket. Hell, skipping jury duty isn't even an issue, $1000 fine is nothing for some. On the other hand people aren't really starving, and I don't see things like the Haymarket Affair yet. Maybe it won't be an issue this time around because factory farming has fed the world for cheap enough that people don't starve. http://en.wikipedia.org/wiki/Haymarket_affair http://en.wikipedia.org/wiki/Haymarket_affair
coldtea 13y ago
>There has been a lot of press recently about income inequality diverging recently. There are two issues with this. First, it isn’t a metric that should matter. Sure, let's just leave it at that then...
asn0 13y ago
> (2) Policy should look at what the post-redistribution (in the form of taxes, credits, subsidies, etc) income and wealth disparities are. It seems as though that is lost in the conversation. It's pretty hard to have a conversation about a problem and how to fix it, when the data being flung around doesn't measure the problem, and doesn't measure the fix either. As an example, looks like any data on poverty (often the basis economic inequality conversations) from US govt prior to 2011 is useless to measure the "war on poverty", because it doesn't measure most of the financial efforts to fight poverty. http://www.nytimes.com/2011/11/04/us/experts-say-bleak-account-of-poverty-missed-the-mark.html http://www.nytimes.com/2011/11/04/us/experts-say-bleak-accou...
foobarqux 13y ago
> It is unclear if there actually has been a enormous shift in incomes in the way it is being presented in the media. It's pretty clear: http://www.youtube.com/watch?v=akVL7QY0S8A&t=6m30s http://www.youtube.com/watch?v=akVL7QY0S8A&t=6m30s
deleted 13y ago
[deleted]

29 points by mchusma 13y ago

qwerta 13y ago

This type of statistics is useless, it does not include army of unemployed people.

cobrausn 13y ago
That statistic is compiled by the census bureau, and last I checked, unemployed people are part of the census and likely part of the statistic, especially since it can indicate when one person has all the income. What I find odd is the article mentions 0.0 as the 'one person has all the income', where the wikipedia article on the Gini coefficient says 'A Gini coefficient of one (or 100%) expresses maximal inequality among values (for example where only one person has all the income).'
- camdez 13y ago
  It does appear that he got that backwards.
camdez 13y ago
Fine, I'll bite. How do you figure "it does not include army of unemployed people"? Census data should reflect members of the population regardless of employment status.
- sabbatic13 13y ago
  From a quick read of the census website linked, it appears that what unemployment data there is comes from the 2000 Census, whereas income data is much more current and numerous. That's rather concerning. It's also the case that unemployment numbers are always underreported, something which gets worse during periods of extended unemployment. The government bases its estimates primarily on unemployment benefits filings. People who are unemployed beyond the period of available benefits don't get counted. So, the unemployed are somewhat factored into the study, but it doesn't seem like a very clear picture of the situation. That's my prima facie judgement at least.
- qwerta 13y ago
  There are many people who are not in census: illegal immigrants, homeless..

keithwarren 13y ago

I have yet to see a solid discussion of wealth inequality that removes the outliers. Given that 85 people have half the worlds wealth, it would appear to me that a study which looks at the numbers without those people would be more interesting in helping us understand how our systems and markets are moving wealth for 99.999% of us. Even still, the goal should not be balanced wealth but continual upward mobility for all people - or more aptly distance from poverty. There will always be rich and poor but the standard of living and equity of opportunity for the poor is what we should focus on. It is more important that a poor kid have good education, healthcare and living standards than it is to rebuke the rich guy for having a yacht. It seems we are in this stage where we recognize something isn't right but we are immaturely blaming the rich guy and saying he should give his money to the poor kid rather than finding real solutions to the plight of the poor kid.

HarryHirsch 13y ago
Why would you remove the outliers? There is information in the sample distribution, and if you are removing everything outside 3sigma (or even 6sigma) you are squashing the data. A high level of wealth comes with disproportionate political power. One shouldn't disregard this aspect and confine the discussion to most people having a fairly comfortable life.
abduhl 13y ago
The problem is that poverty is continually redefined as standard of living and opportunities increase. Poverty used to be living in a shanty town during the dust bowl where you could possibly die of dehydration any day. Poverty now is living in a house where you only get basic cable and don't have the money to buy a nice steak dinner.
- ctdonath 13y ago
  Some 87% of world population lives below the "poverty line" as defined in the USA. Without everyone sharing a sensible consistent definition of the word, the discussion will come to nothing but blows.

ruchir_21hj 13y ago

Are welfare payments included in income of an individual or not?

baldfat 13y ago
If the US gave all the money to people below the poverty line (46.5 million; 15% of the population) $175 Billion we would have zero poor in US. That is a 1% of our GDP. Military budget = $700 billion in comparison. If we just gave $3,000 to each person below poverty we would have 23 million people above the poverty line. Please tell me that this can't even be a question on inequality of the super rich and the poor? Next thing Global Warming is a fraud?
- ctdonath 13y ago
  Problem is, those who's own wealth/power depends on a large population in "poverty" will just redefine "poor" up - as they've done many times already. The value of money would reduce because recipients thereof trade nothing for it, thus raising the cost of goods accordingly, pushing some things back out of reach of the "poor". We already give an enormous amount to the "poor". If you make less than a given amount, various welfare programs will fill the gap (some pushing you WAY above the line). It's enough that another problem is arising: many on welfare receive so much that they can't afford to work, lest they lose all those benefits and reap less net income as a consequence. Again, I come back to the issue of defining the word "poor". As is, it's not objective relative to the recipient's survival.

alaithea 13y ago

[edit: the author has since corrected the Gini definition in the article] I've never encountered the Gini coefficient before, but reading up on it on Wikipedia, the author appears to have the measure flat backward. "A score of "0" on the Gini coefficient represents complete equality, i.e., every person has the same income. A score of 1 would represent complete inequality, i.e., where one person has all the income and others have none." Source: http://en.wikipedia.org/wiki/List_of_U.S._states_by_Gini_coefficient http://en.wikipedia.org/wiki/List_of_U.S._states_by_Gini_coe... Also see the chart here, with the US rising toward inequality ever since the 60's. Again, the caption says "where 0 is perfect equality, and 100 is perfect inequality." http://en.wikipedia.org/wiki/Gini_coefficient#Gini_coefficient_of_income_distributions http://en.wikipedia.org/wiki/Gini_coefficient#Gini_coefficie...

bicknergseng 13y ago
Glad someone else caught that. Another glaring issue with the Gini coefficient is that it tracks income inequality and not wealth inequality. It's well known that the rich don't make their money via income but rather through ownership. TL;DR: The Gini coefficient is a shitty metric to make any conclusions, especially when taken in a vacuum.
- dragonwriter 13y ago
  > Another glaring issue with the Gini coefficient is that it tracks income inequality and not wealth inequality. Well, people more frequently cite the Gini coefficient of income, but you can take a Gini coefficient of any measure, including wealth [1]. > It's well known that the rich don't make their money via income but rather through ownership. The money made through ownership is income -- making money is equivalent to income. Its true that source of that income is different for the richest than most other people (most of the richest derive most of their income through capital, while most of the rest derive most of their income through labor), but its still income. [1] Gini coefficients of wealth are, e.g., presented here: http://en.wikipedia.org/wiki/List_of_countries_by_distribution_of_wealth http://en.wikipedia.org/wiki/List_of_countries_by_distributi...
drewying 13y ago

examancer 13y ago

This is a side show. Whether or not the statistics show rising or falling income inequality is irrelevant. There is massive income inequality. Its trajectory isn't nearly as large of an issue as the status quo, which is pretty dismal. Until that gini coefficient is much better, and we have no one living below the poverty line, we still have a ton of work to do. This article seems to be making a shallow point only to encourage inaction on the core problem. The trajectory of income inequality is a red herring trying to distract us from the harsh reality of our present wealth, opportunity, and income inequality. The right thing to do is to keep working to solve the core problem. Restore the US to a progressive tax system instead of regressive. Pass living wage laws. Improve the social safety net. Maybe even consider doing what Switzerland is considering, and give everyone (rich and poor) a reasonable guaranteed income as an alternative to expensive and sometimes ineffective welfare programs. At the small scale, volunteer locally, especially anything having to do children and improving their education. Unfortunately, along the way we will be fed a constant stream of garbage articles like this, held up with straight faces by a chorus of onlookers telling us there is no problem to fix. Look outside. There are poor and hard working people out there who aren't being rewarded for their hard work and are severely struggling. No amount of fancy statistics bending will justify inaction.

ctdonath 13y ago
Institutionalized theft isn't an acceptable solution. Such class jealousy does not, historically, end well.
- splawn 13y ago
  "Institutionalized theft" could be used to describe both sides of the gap issue.
- examancer 13y ago
  Calling progressive tax systems institutionalized theft is incredibly clever, and incredibly false. No one who has wealth created it by themselves. You don't print your own money, you don't extract wealth from a vaccum. Wealth is built by extracting that wealth from a shared economy. Asking those who were able to extract the most wealth to help the most in paying to protect this shared system, and help those who were exploited by it, is not theft. You are being intellectually dishonest. I would not be surprised if deliberately so.

unmole 13y ago

Stopped reading after his absolutely incorrect Gini definition.

ww520 13y ago
Yeah, his Gini definition is backward.

skywhopper 13y ago

Lots of things are wrong with this article, not least of which is that the writing is so unclear that it's hard to make enough sense of his argument to point out what's wrong. That said, the main takeaway here is that the author doesn't consider growing income disparity to be a problem. Perhaps a better way to look at it is this: growing income disparity is a symptom of the real problem, which is that the economy hasn't really done all that well since the end of the 90s. A strong economy that's serving all individual participants well would result in shrinking income disparity over time. The fact that we don't see this is indicative of some major problems.

stretchwithme 13y ago
No, a marketplace where people are rewarded for what they produce yields more unequal incomes. Because people in a free society with access to capital and mass production and distribution can be incredible productive. And others can do manual work with no mastery of technology at all and not sell their work to the world. Those two extremes are going to get more extreme over time, not less.
mchusma 13y ago
Author here: I write for mostly my own thinking and hadn't actually put something out in a week so wanted to get it out the door. Sorry to the extent it was unclear. I think psychologically you are correct in that most people would probably be less upset with income disparity if the economy was doing better overall. We are in a long, slow recovery. I do disagree with your main premise. I think in the technology economy we would see increasing income disparity over time. My only real solution to this problem is basic income.

CWuestefeld 13y ago

A new blog post [1] from Ross Douthat addresses this in an interesting way. Part of the inequality picture is that demographic changes in recent decades, with women becoming a significant part of the workforce, and the rise of single-parent households, has skewed family-based inequality significantly. In the referenced article, Douthat considers the underlying causes of that. Essentially, are the changing rules in society (taboos about sex, marriage, divorce, etc.) dooming those who already don't have a strong societal backdrop to guide them? [1] http://douthat.blogs.nytimes.com/?module=BlogMain&action=Click&region=Header&pgtype=Blogs&version=Blog%20Post&contentCollection=Opinion http://douthat.blogs.nytimes.com/?module=BlogMain&action=Cli...

paul_f 13y ago

For those caught up in what I think is a cause-de-jour, income inequality, I'll pose these two questions: 1. Is anyone worse off because Mark Zuckerberg is very rich? 2. If policies to reduce income inequality made the poor worse off, would you be in favor of them?

base698 13y ago
Yes, if he brings in hoards of H1Bs lowering the salaries of software engineers across the board. http://www.fwd.us/ http://www.fwd.us/
PhasmaFelis 13y ago
> 1. Is anyone worse off because Mark Zuckerberg is very rich? Mark Zuckerberg? Probably not directly; Facebook's employees are treated well, as far as I'm aware. But that's an awfully narrow example to cherry-pick. How about the Waltons, or Jeff Bezos? Employees in Wal-Mart stores and Amazon warehouses go without benefits, unemployment compensation, a living wage, and sometimes basic climate control, so that the wealthy can line their pockets. The wealth of CEOs does not descend upon them from heaven as a divine reward for good management. Every million dollars they get is a million that is not being spent on compensating employees. (Or on growing the business, etc.) Obviously CEOs deserve compensation for their work just like anyone else, and I haven't done the math on how much the Waltons and Jeff Bezos are worth vs. how much it would cost to treat all of their employees decently; but when a boss is worth billions and their employees can't afford food or medicine for their children, it's obscene. > 2. If policies to reduce income inequality made the poor worse off, would you be in favor of them? No. Obviously. I favor policies in general that aid those who need it most. Reducing income inequality is only one obvious way to help do that. You've got a "gotcha" planned here, I assume?
gopher1 13y ago
The very rich (Mark Zuckerberg included) use their wealth to influence government, therefore the answer to #1 is yes, the average person is worse off because they don't get the same opportunity to affect policy. #2 is an odd hypothetical which is unlikely to be the case and without further context (what is defined as poor? etc.) it's a useless question.

nullc 13y ago

Beyond having it backwards, gini over persons looking at timescales going to the 40s is probably distorted by women entering the workforce massively increasing the baseline equality.

cryoshon 13y ago

Where is this guy getting his numbers? From wikipedia[1]: 2011 had a pre-tax Gini coefficient of 0.477 whereas 1967 had 0.397 (the first year the Gini was actually measured), demonstrating considerable increase in inequality. There's an Economist article[2] that puts the US's pre-tax Gini at 0.57 for 2013. So yeah, income inequality has increased astronomically, undeniably, conclusively. The author seems to write off income inequality as a metric because it "doesn't track societal progress" and "isn't helpful for policy making purposes" both of which I would strongly reject. First, let's explicitly state the axiom that money is equal to political and social power. An increasing Gini means we're moving farther and farther away from an equitable society and closer to feudalism or a plutocracy where the richest control everything via their ability to manipulate the political process with money. I think that it's fairly clear that our current government has been repeatedly bought, sold, and manipulated by a few plutocrats with special interests for the sake of making them and their buddies even more money. If you're looking for an example to support this argument, consider the billionaire Koch brothers and their political empire. Next, let's consider what a rising Gini means for policy making purposes. If you are a policymaker whose primary constituents are the rich, a rising Gini is a stat which you can bring out at your fundraisers (a bit ridiculous, sure) to show that you're on average channeling wealth into the right pockets with your policies. On the flip side (and more realistic side), if you're an Elizabeth Warren type, you can connect your constituent's cries for a stronger safety net to a statistic which proves they're not just perpetually hungry for more. If you bring a piece of information like a Gini to the public, it's possible to win over people who may have been skeptical about supporting stronger social programs because they're unwilling to support "deadbeats" or the like-- after all, this Gini thing says that even if they're productive members of society, they're still not as well off as before. Their piece of the pie has actually become smaller over time, and their complaints are not baseless. That said, I like the author's plug for basic income. The sooner we chop up the concept of capitalism and move on to a more just system, the sooner we'll unlock the underclass from the survival grind and free them to pursue more socially useful ends. [1]: http://en.wikipedia.org/wiki/Gini_coefficient http://en.wikipedia.org/wiki/Gini_coefficient [2]: http://www.economist.com/blogs/democracyinamerica/2013/11/inequality-america http://www.economist.com/blogs/democracyinamerica/2013/11/in...

mchusma 13y ago

stretchwithme 13y ago

Income inequality is not a bad thing. People are very different in what they are capable of producing. If you want to produce paper napkins by hand 10 hours a week and someone else chooses to make them by machine 40 hours a week and its the same product, why should you both take home an equal income? "Oh" they say "we just want to make it less unequal than it is, not equal." Isn't that why we pay all these taxes and have all these government programs? It literally never ends.

mjn 13y ago
Why should you take home a different income? I don't feel that the fact that I'm a computer scientist, which at the moment happens to pay well, ethically entitles me to more resources than other people. If anything I feel a bit guilty taking home several times the income of the guy who's been showing up at 7am every morning to replace my roof; my job is a lot more pleasant and enjoyable, and yet that in itself isn't reward enough, but I get paid more too! One plausible answer could be, "because there's no workable way of making it otherwise". I could buy that, although then we're arguing pragmatics, not ethics.
- cobrausn 13y ago
  For better or for worse, the guy working hard to replace your roof is easier to replace than you are - this is because you have a skill set he doesn't that takes a lot of time and resources to develop. In addition, your work (likely) brings in more money to a company than his. As such, you get paid more. As an aside, have you ever noticed that (certified) plumbers and electricians make a lot of money? Same reasoning. I don't have a problem making more money now that I made myself valuable. I started off in retail, where you literally are one step away from being replaced by an automated kiosk.
  - mjn 13y ago
    > I don't have a problem making more money now that I made myself valuable. That could be part of our differences in outlook. I don't feel I've really "made myself" valuable, I just have skills and interests that happened to be valuable. I've liked computers since I was a kid, and am reasonably adept with them. When I grew up, somewhat to my surprise, I found out people paid quite a bit of money for that kind of thing. It feels sort of like playing careers on easy-mode; even if I were to totally wash out into a low-end programming position, I could still easily make high 5 figures slinging web templates or Ruby or PHP or something. Other people who're harder-working and more talented than me make less, because they happened to be adept in the wrong thing (art or carpentry instead of coding, say). Were the era different, it could be the other way around, so I have a bit of a "there but for the grace of god go I" outlook: there are times when engineering was a poorly paid blue-collar occupation and skilled painters were highly rewarded. In that economy, I'd be poorer and some of my friends would be richer, through no change in our own skills...

bluedino 13y ago

Wouldn't any capitalistic economy simulation end up with a great inequality, once it's run for N amount of time? You can't just do a 'reset' and re-allocate everything. And even if you did, the people who are smarter (sneakier?), work harder/more, and are luckier are going to end up winning out again.

pmorici 13y ago

This isn't very convincing one way or the other. As the title suggests there are two components to the issue, 'income' and 'wealth'. This argument only looks at the income half and in the process conflates the two terms. Income can't tell the whole story by itself. For example if you own your home outright, your living costs will be substantially lower than someone who has to rent or has a mortgage. In other words having wealth allows you to substantially lower the income you need for the same standard of living. This argument doesn't account for wealth at all as I'm reading it.

Zigurd 13y ago

Every chart and data set I can find says the US has returned to 1920's levels of income inequality since things started getting worse in the mid/late 1980's. So, yeah, income and wealth inequality have gotten worse, and are at a level that was considered very bad for social stability.

socrates1998 13y ago

Using 2009 is very problematic. It's when the SP 500 bottomed out. He picked the worse possible moment to measure rich people wealth in the past 40 years. I don't know his deal, but it's obvious that income inequality has been on the rise around the world the past 40 years.

logfromblammo 13y ago

I'm not all that impressed with graphs over several decades of certain government-published statistical indices, because they have a nasty habit of redefining them, and those fractures are almost never indicated on the charts. So when you show me the Gini coefficient over time, the first thing I wonder is if either the methods of calculating it or the methods of collecting the data have changed during that time. Anecdotally, it is readily apparent to me that inequality is increasing, and not just in wealth or income. It is also increasing with respect to health care, legal processes, job satisfaction, consumer confidence, and trust in institutions. It feels a lot like the guy trying to figure out what is stuck to the seat of his pants in the instant before the bartender gives him the bum's rush out the door. And the bartender himself doesn't realize that the guy is the only one left in the bar that actually intends to pay for his drinks. So really, just cruel and sad all the way around--America since 1970. The only people who now have the ability to change the system see absolutely no benefit to themselves in doing so.

base698 13y ago

I do think income inequality is an issue. In part because people above a certain threshold have no pain when they get towed, get a traffic citation or go to the doctor. The people below suffer greatly and enter economic ruin even if they get a parking ticket. Hell, skipping jury duty isn't even an issue, $1000 fine is nothing for some. On the other hand people aren't really starving, and I don't see things like the Haymarket Affair yet. Maybe it won't be an issue this time around because factory farming has fed the world for cheap enough that people don't starve. http://en.wikipedia.org/wiki/Haymarket_affair http://en.wikipedia.org/wiki/Haymarket_affair

coldtea 13y ago

>There has been a lot of press recently about income inequality diverging recently. There are two issues with this. First, it isn’t a metric that should matter. Sure, let's just leave it at that then...

asn0 13y ago

> (2) Policy should look at what the post-redistribution (in the form of taxes, credits, subsidies, etc) income and wealth disparities are. It seems as though that is lost in the conversation. It's pretty hard to have a conversation about a problem and how to fix it, when the data being flung around doesn't measure the problem, and doesn't measure the fix either. As an example, looks like any data on poverty (often the basis economic inequality conversations) from US govt prior to 2011 is useless to measure the "war on poverty", because it doesn't measure most of the financial efforts to fight poverty. http://www.nytimes.com/2011/11/04/us/experts-say-bleak-account-of-poverty-missed-the-mark.html http://www.nytimes.com/2011/11/04/us/experts-say-bleak-accou...

foobarqux 13y ago

> It is unclear if there actually has been a enormous shift in incomes in the way it is being presented in the media. It's pretty clear: http://www.youtube.com/watch?v=akVL7QY0S8A&t=6m30s http://www.youtube.com/watch?v=akVL7QY0S8A&t=6m30s

deleted 13y ago

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