So-called Income Equality Issue - hot topic
The concerns over the equality of income and wealth are growing as they
have become a key part of the Presidential campaign this year. So much
has been made of this question with regards to income and the fairness
associated but few venture past the emotional back stop. With so much
riding on the outcome of this campaign, it would appear that at least a
closer look at the data is in order. A good deal of the media has kept
this point of inequality alive and well, citing instances of large bonuses
and instances of poor folks suffering. Both may warrant concerns
in specific instances, but is there sufficient reason to make this question
the central point in a major election and even the core point in the
Read a little or read a lot:
take a look at this issue in a manner that also offers a summary of the
information largely contained in this website, where this issue is
looked at in depth. To use this website well, one can dive into
any aspect of the details or the select topics in any order. Most
will perhaps read this summary, jump ahead to the chapter on forces
acting on income distribution, go over the conclusions and then back up
to any aspect warranting a further look. This information is in
the form of a knowledge base and as such will be added to over time.
So let's begin.
Income Quintiles - good to know:
In the graph at right there are 5 quintiles represented along the
x-axis, from the lowest 20% to the highest 20% of income. So each
quintile captures the average income for 20% of the number being
represented. This is before taxes and transfer
Born Poor remain poor?
If in judging this to be fair or unfair we would want to know more.
If the distribution was static, meaning that there was a fixed
population and no mobility between quintiles (born poor remain poor),
and the education given to this number was uniformly (across the
country) competitive with the world, and that the opportunities were
equally accessible (no incentives to remain poor and no special
treatments preventing competition) then one could make a case for a lack
of fairness, however one wishes to define this word "fairness."
However there is a lot more to the story than that. The nature
of income is quite dynamic, with mobility between each quintile up at
the low end and down at the high end. The number along the x-axis
is not population but either households or tax filers, or about half of
the population. The number of households has gone from a
little over 50K to about 115K from the mid-60's to 2010. The
size of households varies from quintile to quintile. The
educational outcomes were world competitive up to the 80's and have
since then degraded more in the inner city public schools than in
private or even home schooling.
Education matters, a lot:
Education is a major parameter in correlating income to cause.
Also the changes in the tax code are also quite significant in that more
income was reported. What is discussed is that the USA already has
a very progressive tax system, taxing the rich. We also show
that the income redistribution done in this country is highly
ineffective and therefore wasteful. Welfare certainly has affected
incentives for poor to strive to be better off.
Clearly in this time period of interest, the decades since the
60's, the economy has transformed itself to a skill based economy,
relying more on productivity gains and technology then on simple skills.
The outcomes have given us more consumption equality over time than the
inflation corrected income would suggest. What we define as poor
today is not the same as what is defined as poor some many decades ago.
So if the focus is on the rich and how they are not paying their
fair share, why is not the focus on a series of questions:
What is a fair share?
Why are the poor not getting richer?
How many of the rich are receiving an advantage based on
Can we achieve some level of income distribution and also
These and other questions are answered, a question such as how does
the government management of the money supply affect the income
One can also be struck with the question does it really matter and
if so why?
Attending a concert recently I was struck by the
reality that I was witnessing one of the very best jazz pianists,
clearly in the top 0.01%. Everyone was enjoying his prowess, skill
and above all else his performance. Where this applies why are so
many wanting to view income success differently? What else is
going on here in general? Does the Buffet tax make sense and make
taxes more fair? Does Occupy Wall Street represent a movement of a
positive change in our approach and outlook to this question of
If you need to understand the validity of the arguments used to
declare capitalism as dead (as many leftists have), then sink your teeth
into any piece of this that entices you. As citizens we are being
asked to take a position on these issues, and so I offer you the
material in this website to hopefully assist you in forming an answer.
If you spend the time and perform the vigilance then perhaps you have
done something quite meaningful to enhance your freedom.
Fairness: take from those I do not like to give to those I do like.