If you listen to Occupy Wall Street-loving media members, you'd think income inequality in America is worse than anywhere else in the world.
Quite the contrary, a chart from World Bank economist Branko Milanovic's book "The Haves and the Have-Nots” paints an entirely different picture:
This was reprinted by New York Times economic writer Catherine Rampell in January with an explanation:
Here the population of each country is divided into 20 equally-sized income groups, ranked by their household per-capita income. These are called “ventiles,” as you can see on the horizontal axis, and each “ventile” translates to a cluster of five percentiles.
The household income numbers are all converted into international dollars adjusted for equal purchasing power, since the cost of goods varies from country to country. In other words, the chart adjusts for the cost of living in different countries, so we are looking at consistent living standards worldwide.
Contrary to the current media meme, when adjusted for international dollars as well as cost and standard of living, there is far greater income inequality in Brazil, China, and India.
Frankly, it's not even close (emphasis added throughout):
Notice how the entire line for the United States resides in the top portion of the graph? That’s because the entire country is relatively rich. In fact, America’s bottom ventile is still richer than most of the world: That is, the typical person in the bottom 5 percent of the American income distribution is still richer than 68 percent of the world’s inhabitants.
That deserves a replay for those whining on Wall Street and the ignoramuses supporting them: "the typical person in the bottom 5 percent of the American income distribution is still richer than 68 percent of the world’s inhabitants."
Rampell further observed in her January book review:
The typical person in the top 5 percent of the Indian population, for example, makes the same as or less than the typical person in the bottom 5 percent of the American population. That’s right: America’s poorest are, on average, richer than India’s richest — extravagant Mumbai mansions notwithstanding.
But there's more:
At a very basic, agrarian level of development, Milanovic explains, people’s incomes are relatively equal; everyone is living at or close to subsistence level. But as more advanced technologies become available and enable workers to differentiate their skills, a gulf between rich and poor becomes possible.
Doesn't that perfectly explain what's happened in America the past 30 years?
The protesters and their media minions want to blame all the income inequality on Reaganomics, Wall Street, and the tax code. Yet radical changes in technology the past three decades allowed a minority of highly-ambitious, creative entrepreneurs to acquire riches most can only dream of.
The first and third wealthiest people in America - Bill Gates and Larry Ellison - are perfect examples of this.
It would actually would be fascinating to find out how many of the nation's millionaires made the bulk of their fortunes during the high-tech boom of the '90s.
Yet this principle is not just true of folks specifically in the high-tech or bio-tech arenas, but on Wall Street as well. The kind of trading most hedge fund managers now engage in wouldn't be possible without computers and the internet.
As such, it is our very advancement as a society that has so enriched the most successful among us.
As Rampell noted in her review, "The possibility of unequal economic outcomes motivates people to work harder."
Indeed, but I would also argue that the existence of various entitlement programs acts as a demotivator.
Social Security and Medicare allow Americans to make less during their income earning years and still be able to retire. Most people plan for their retirement with projections of exactly what these programs will provide for them. In their absence, people would have to earn far more money in their income earning years to even consider retirement.
On the other end of the spectrum, welfare and food stamps allow those at the bottom to subsist without finding work, while unemployment insurance and its extensions allow the jobless to survive without the urgency they would have without it.
Add it all up, and there's a lot more to income inequality both here and abroad than our media care to divulge.
Why might that be?
(H/T @JonHenke)
