Quote:
Originally Posted by lustylad
Real income of the bottom quintile, the authors write, grew more than 681% from 1967 to 2017. The percentage of people living in poverty fell from 32% in 1947 to 15% in 1967 to only 1.1% in 2017. Opportunities created by economic growth, and government-sponsored social programs funded by that growth, produced broadly shared prosperity: 94% of households in 2017 would have been at least as well off as the top quintile in 1967. Bottom-quintile households enjoy the same living standards as middle-quintile households, and on a per capita basis the bottom quintile has a 3% higher income. Top-quintile households receive income equal to roughly four times the bottom (and only 2.2 times the lowest on a per capita basis), not the 16.7 proportion popularly reported.
What explains the disconnect between reality and belief? Government statistical reports exclude “noncash” sources of income, which excludes most transfers from social programs. Taxes (paid disproportionately by high earners) are also ignored in official calculations. Furthermore, even the government’s “cash” income numbers are reported in a way that understates improvements in real (inflation-adjusted) income over time because government inflation measures fail to use the appropriate chained price indexes or take account of new products and services.
Increased earned-income inequality is the natural consequence of redistributive policies: if one can enjoy median household consumption without earning any income, the incentive to work is substantially diminished. This largely explains the growing distance between earned and total income for poor households (transfers to those households have gone up dramatically). Ironically, it is the very success of redistribution in reducing poverty and inequality that has led mismeasurement to create the false perception of increasing inequality.
The equality of consumption between the bottom quintile (in which only 36% of prime-age persons work) and the middle quintile (in which 92% of prime-age persons work) is a striking finding. As the authors note: “It is hard to see how a middle-income family with two adults both working would not resent the fact that other prime work-age people who are not working at all are just about as well off as they are.”
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So, when you take transfer payments and taxes into account, the bottom 20% is as well off as the middle 20% of American households? I guess you could argue that there's no point in busting your ass, going to work everyday, when you can sit on your ass instead. I don't begrudge efficient programs to alleviate childhood poverty. But it sounds like things have gotten a little out of whack.
