To the general public, the question of income distribution is an
emotional black hole, one is either sucked into the notion that the
“rich are getting richer and the poor are getting poorer;”
even though this is not literally true.
We are reminded
daily that income distribution is a key issue today, and one that is
rarely looked at with critical reasoning. Although most want to
simplify this issue, it is by its nature complex.
of Occupy this or that leaves little more than an emotional attachment
or rejection of the growing frustration on income disparity as it is
labeled. Placards declaring "Eat the Rich" or "Occupy
everything" seem to have become strong iconic statements of this movement.
A detailed look at the question of fairness, income
and wealth distribution is the purpose of these pages. One must look upon this question and begin by asking what is the data and how good is it?
What are the causes of whatever outcomes are real and what can be done
about these? And what are the forces that are acting on us all and what
is healthy for our society? All these are all pertinent questions.
A summary of each chapter is below, or click on the link at right and
delve deeper into each topic.
If one had to pick one political driving subject to understand more
critically, then this is
The flow in the chapters is intended to first have the reader
gain an appreciation for the data and the analysis (Chapter 1 and 2),
followed by definitions of terms commonly used (Chapter 3), leading to
how individuals have been impacted by all of this (Chapter 4).
Perhaps the most important chapter is on the critical forces that are
acting on all of us (Chapter 5). This can then lead the reader to a
level of understanding while engaging with various theories on what to do
(Chapter 6 and 7). This then leads us to some conclusions and
finally to hearing your comments.
The conclusions on income and wealth distribution are not likely to be the same as
those represented in much of the press.
Krugman has been the most demonstrative in the NYT’s on the theme of unfairness of income distribution, and he would rather define it as the
capitalism, and that the declining impact of unions and government drove the
However the impact of the market economy has
actually been to
increase wealth and income for all.
The disparate theories of how to achieve some status of fairness are examined
So dive into the topic several times from whatever entry point, for this
composite information will allow you to think more critically about the
general subject of income distribution, topics you will be able to discuss with
clarity, and well-founded insight. Such topics as the Buffet Rule and the
purpose of the Occupy Wall Street, among other related topics are
The chapter headings will link to that section of the website.
And please add your comments on the comments page, and trust that the audience is open to a well-formed
Most folks have seen a form of the graph at right. Where does it come from
and how valid are the conclusions being drawn? In brief, the
conclusions are not complete and therefore not correct. Delving into
how it is to be interpreted due to the changing conditions and
even definitions over a time line are critical to forming insightful
What is the Gini coefficient, how good is it, and how well does it describe income
distribution over time? It is a good index, but the complete
analysis will be surprising to some. A spreadsheet
calculating Gini is presented for review, and various cases
IRS, Census Bureau, and even Forbes data are compared. CPI
is defined and examined. It is a flawed concept in income
trend analysis, but some qualitative conclusions can be drawn.
Various graphs showing various distributions over time are
Now that presumably you have seen the data section, you know that the
data and conclusions are not, shall we say, obvious or black and white.
Much however has been made of the "inequality" of income, and in many
discussions this quickly becomes a very emotional issue. What is the
validity of these claims? The answer lies in the comprehensive
analysis of the data.
So much of the conclusions that are drawn never examine the mobility,
which we will in Chapter 4. There is also the
conundrum between having such a growing percentage of income in the
top 1% and the wealth attributed to the top 1%. As you can see
in the diagram at right, the percentage of wealth of the top 1% is
determined to be fairly constant over time, despite the growing
percentage (by the same author) of income in the top 1%.
This can lead one to ask more questions as to why and what are the
forces acting on the different quintiles.
What we do see in review of the data of Chapter 1 is that the
rich do get richer and there are various reasons. As well the
poor face daunting incentives to remain poor and without a quality
Contrary to the somewhat popular belief, the rich are not getting richer at the expense of the middle
class or even the poor. It is simply not a zero sum game, but
a very dynamic one.
There are many parameters changing
from the years in the mid-60's to the current day. Much
in key aspects of income generation or reporting: changes of the tax code, the money supply, the number and
makeup of the households, etc. Even the variation of the divorce rate
by quintile is entering into the
equation of drivers or forces acting on us (see Chapter 5).
Even the characteristics of what is referred to as the rich is
important to consider, and how this changes over time.
Forbes tracks the richest 400 in the country and world, and seeing
the data over time is worthy of closer examination. It
also is quite dynamic.
And yet the bottom line is that in this period of a skill based
economy, one can raise their standard of living.
is a bit surprising to see how much money has been spent in transfer
payments each year, all legislation justified on the basis of
helping the poor. And how do we define the "poor"?
Some might be surprised also at the level of consumption equality
that increasingly exists over time in our country.
Can we find poor people who are in need? Of course, but how
best to help them and propel them forward? What real
percentage of the populace are they? How does the public
define poor in their minds and how does that compare with how the
government administers programs?
What is the amount spent on assisting the poor and what per capita
dollar amount does that add up to? This will surprise you and
is a must read.
Clearly by any measure the amount of top end income heavy income is not fixed
Nor are the individuals in each sector or quintile (amounting to 20% of the population in each quintile) fixed in any way.
The movement or dynamic nature between quintiles is quite high, as
you will see if you follow this Link.
How long does it take for a millionaire to remain a millionaire?
How often is the list of the top 400 richest people changing?
What are the major factors in mobility between income quintiles?
The various forces or factors operating on the population since
1967 are identified and cataloged. As any complex
problem they are numerous and the causal nature of each is clear. Realizing these
forces and their causes can lead with clarity to a much better
public policy and social institutions. The other various
proposals for redistribution that are prevalent in the news
(Chapters 6 and 7) are assessed in the coming chapters. One must also ask what dictates a
just and fair distribution of income? Is there such a thing as
the ideal distribution as some have suggested?
OWS began in New Your City and spread across the country.
It was passionate and spirited. it changed shape and intent as it
went. Lawless conduct was justified on the basis of the need
for a revolution. Clearly the frustrations of many were on
display every day in the news. What is the basis and the
comments of this mostly left wing outburst? The sounds of the
99% versus the 1% are still ringing in our ears, and indeed will
throughout the campaign in the 2012 elections. The
bottom line here is that the Occupy movement stands for forced
redistribution, the negation of property rights, and in making many
This is the movement to tax the rich, well-aligned in general
philosophical tenants to the Occupy movement.
Buffet has lead
the charge to ask Congress to raise taxes on the very rich.
However much can be learned by looking deeper into the data behind
his statement and intent. The concept of fairness is
under question once again especially since he feels strongly that he
can spend the money in pursuit of social causes better than the
What is the history of taxes and tax rates?
How much do the top 1% pay and what has been the history?
Is raising the tax rate going to solve the current deficit issue or
is it another aspect of the redistribution driver found in OWS?
Having covered the forces pertinent to income generation over time, leaves us with the question what
would should our society best do now?
Is the Occupy movement going in the right direction in
conjunction with Obama's intent to increase taxes on the rich? If we are truly concerned about the poor, what is the best
action to take? Does removing incentives for stagnation while
improving innovation, educational opportunity, and therefore income
mobility now make more sense?
The bottom line is that we should be promoting more economic growth and better educational approaches, rather
than forced leveling and enhanced central control over education.
For those promoting the latter case, it has not worked thus far, and will not likely work to improve
the conditions of the poor. Another useful question to ask is why
are the poor not getting richer? And the answer is some are,
and some are not. The devil is in the details, as the data set and
all of its parameters is complex.
"The worst form of inequality is to try to make unequal things equal." Aristotle