In yesterday’s Wall Street Journal, American University economics professor Brad Schiller takes a closer look at some recent Census Bureau data regarding income inequality. Perhaps the left’s most beloved go-to cliche is about the "rich getting richer while the poor get poorer." At first blush, the recently released Census Bureau seemed to provide fodder to their griping:
"Two observations grabbed the headlines. First, the data indicate that the top-earning 20% of households get half of all the income generated in the country, while the lowest-earning 20% of households get a meager 3.4%. That disparity has widened over time: In 1970, their respective shares were 43.3% and 4.1%. These income-share numbers buttress the popular notion that the ‘rich are getting richer while the poor are getting poorer.’"
Of course, most so-called "progressives" are good at merely reading the headlines while being strongly averse to engaging in critical thinking. Schiller provides some sound analysis of the data to tell us that this supposed "growing inequality" is actually not what it appears:
"Demographic changes in the size and composition of U.S. households have distorted the statistics in important ways.
First, we can easily dismiss the notion that the poor are getting poorer. All the Census Bureau tells us is that the share of the pie consumed by the poor has been shrinking (to 3.4% in 2006 from 4.1% in 1970). But the "pie" has grown enormously. This year’s real GDP of $14 trillion is three times that of 1970. So the absolute size of the slice received by the bottom 20% has increased to $476 billion from $181 billion. Allowing for population growth shows that the average income of people at the bottom of the income distribution has risen 36%.
The "typical" household, however, keeps changing. Since 1970 there has been a dramatic rise in divorced, never-married and single-person households. Back in 1970, the married Ozzie and Harriet family was the norm: 71% of all U.S. households were two-parent families. Now the ratio is only 51%. In the process of this social revolution, the average household size has shrunk to 2.57 persons from 3.14 — a drop of 18%. The meaning? Even a "stagnant" average household income implies a higher standard of living for the average household member."
And lastly, what of this nonsense that only the "rich" have enjoyed economic gains in the last several years?
"The increase in nominal GDP since 2000 amounts to over $4 trillion annually. If you assume that all that money went to the wealthiest 10% of U.S. households, that bonanza would come to a whopping $350,000 per household. Yet according to the Census Bureau, the top 10% of households has an average income of $200,000 or so. The implied bonanza is so absurd that the notion that only the rich have gained from the economic growth can be dismissed out of hand. Clearly, there is a lot of economic advancement across a broad swath of population. Dramatic changes in household composition, household size and immigration tend to obscure this reality."
It’s easy for politicians and pundits to spout class warfare rhetoric to advance their cause. Closer scrutiny, along with a little critical thinking and common sense, typically expose such rhetoric to be intellectually lazy at best, and intentionally misleading at worst.