

Have US Income and Wealth Inequality Actually Increased? - mchusma
http://chawkins.org/post/75162580456/have-us-income-wealth-inequality-actually-declined

======
examancer
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
Institutionalized theft isn't an acceptable solution. Such class jealousy does
not, historically, end well.

~~~
examancer
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.

~~~
mbell
> 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

That is already what happens. e.g. the top 10% by income already contribute
>70% of the total federal income tax revenue.

~~~
dragonwriter
> That is already what happens. e.g. the top 10% by income already contribute
> >70% of the total federal income tax revenue.

Which would be meaningful, if "federal income tax" was the only federal tax,
or even the only federal tax on income.

------
cryoshon
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/in...](http://www.economist.com/blogs/democracyinamerica/2013/11/inequality-
america)

~~~
mchusma
Thanks for digging into the numbers with me. Actually there are 1947 Gini
numbers floating around, and the multiple sources including government census
data, and world bank numbers are all slightly different, which in itself is a
problem.

I understand the concern about political power, and agree that this is the
best reason to be concerned about inequality. I think I have a long term
solution to that problem that I will announce later this year.

------
alaithea
[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_coe...](http://en.wikipedia.org/wiki/List_of_U.S._states_by_Gini_coefficient)

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_coefficie...](http://en.wikipedia.org/wiki/Gini_coefficient#Gini_coefficient_of_income_distributions)

~~~
bicknergseng
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
> 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_distributi...](http://en.wikipedia.org/wiki/List_of_countries_by_distribution_of_wealth)

------
skywhopper
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.

~~~
mchusma
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
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=Cli...](http://douthat.blogs.nytimes.com/?module=BlogMain&action=Click&region=Header&pgtype=Blogs&version=Blog%20Post&contentCollection=Opinion)

------
keithwarren
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.

~~~
abduhl
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
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.

~~~
digikata
Different places in the world should have different poverty lines related to
the purchasing power needed to acquire at least the basic living needs: food,
shelter, and clothing. (and healthcare)

Comparing the numerical figure of the poverty line around to world is
nonsensical.

~~~
bd_at_rivenhill
Absolutely agree, having a single worldwide standard would put ALL US
residents in the 'wealthy' category when compared to places like Haiti.

~~~
ctdonath
I'll agree there. Haitians, on the whole, are indeed objectively poor: given
the limited land to work with, the large & growing population, and the high
cost of import/export infrastructure, there just isn't enough resources to
support residents. This vs the USA, where there _is_ enough resources, and the
best answer to poverty in most cases is MOVE to where there are sufficient
opportunity & resources (like the Dakotas, where even mundane jobs pay very
well because they can't get enough people to do the work needed to facilitate
extracting wealth from natural resources).

------
stretchwithme
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
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
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
> 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...

~~~
cobrausn
That difference in early career opportunities could easily be a part of it
(the difference in outlook). I'm just saying there is no need to feel guilty -
the world and the economy are fairly malleable, and it doesn't value hard work
as much as it values hard work at something that is in demand, so 'following
your passion' may not be the best way to make money. As you have said, it has
never really been much different, it's just what people demand has changed.

------
bluedino
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.

------
asn0
> (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-
accou...](http://www.nytimes.com/2011/11/04/us/experts-say-bleak-account-of-
poverty-missed-the-mark.html)

------
unmole
Stopped reading after his absolutely incorrect Gini definition.

~~~
ww520
Yeah, his Gini definition is backward.

------
base698
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)

------
paul_f
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
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/)

------
pmorici
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.

------
foobarqux
> 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)

------
socrates1998
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.

------
coldtea
> _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...

------
nullc
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.

------
ruchir_21hj
Are welfare payments included in income of an individual or not?

~~~
baldfat
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
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.

------
Zigurd
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.

------
logfromblammo
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.

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

~~~
camdez
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
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.

