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 political philosophy?

Read a little or read a lot:

Let's 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 payments.

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 government intervention?

• Can we achieve some level of income distribution and also economic growth?

These and other questions are answered, a question such as how does the government management of the money supply affect the income distribution?

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 fairness?

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.