Growing income disparity: real or illusion

November 2, 2011

I present you two charts on income inequality in the United States.

The first suggests that income inequality between 1994 and 2010 hasn’t changed at all. The chart presents the “Gini Coefficient”: a measure of income inequality. The data comes from a US Census survey of households.

In another post on the same site, it contends that the appearance of income inequality is created by the way people are grouping themselves into households (or something like that… I couldn’t really follow their point).

With a near rock-steady level of income inequality among individual income earners over time, it is only possible for income inequality to rise among families and households if the most successful income earners group themselves into families and households and if the least successful income earners likewise group themselves together into families and households as well.

If people with very high income earning potential join together to form families and households, and increasingly do so over time, perhaps because such people might have things in common that make forming themselves into families and households an attractive proposition, then income inequality among families and households will increase.

The same holds true for the opposite end of the income earning spectrum. If people with really low income earning potential join together to form families and households, or perhaps if they choose to split apart, and increasingly do so over time, then the resulting low income family and household will also make income inequality among families and households rise, even though there has been no real change in the amount of actual income inequality among individuals.

That last paragraph really stumps me. Apparently, whether low-income earners form households together or split apart, either way this results in increasing income inequality. Yet, according to the first paragraph, the illusion of inequality is merely due to the way we group together into households.

Perhaps I’m just too dense to “get it”. Either that, or this website is trying to coax bullshit down my throat, like trying to force a dog to swallow its medicine. You decide.

Fortunately, there’s a second chart, from the CBO (via Krugman), based on actual tax returns, which I can understand more readily:

…and a pretty easy to understand summary:

CBO finds that, between 1979 and 2007, income grew by:

  • 275 percent for the top 1 percent of households,
  • 65 percent for the next 19 percent,
  • Just under 40 percent for the next 60 percent, and
  • 18 percent for the bottom 20 percent.

So, according to tax data, income in the top 1% grew by 275% over the last 30 years, while the bottom 99% improved by an average of about 40%. But according to the first chart, based on US Census surveys, income inequality hasn’t changed at all. Which one feels like a more accurate depiction of reality to you?

I guess my point is that anyone can get you to believe almost anything, and have some sort of data or chart or fancy-sounding argument to back up their claims. But that doesn’t mean they’re giving you very accurate or useful information.

Unfortunately, the ideologues are out there in droves, deliberately spreading mis-information to anyone who will give them a perch, trying to convince you that black is white, up is down, the earth is flat, or whatever else suits their particular bias.

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