Income Inequality Source Links

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    Post your link on income inequality here. One link per post, please.

    The income inequality argument states that income disparity between the richest and the poorest is increasing, and that’s detrimental to society. It’s a false dilemma fallacy, though. Becoming richer does not necessarily come at the expense of the poor. For example, if one year a poor person makes $10,000 and a rich person makes $1,000,000, and the next year the poor makes $20,000 and the rich makes $2,000,000, both parties have doubled their income, but the income disparity has increased from $990,000 to $1,980,000. So, the income inequality crowd argues that income disparity has doubled, ignoring that both parties have increased their income two fold.

    As with many other political topics, it’s important to look for the unseen. In the case of income inequality, it’s important to recognize that most people tend to move between income classes throughout their lives. The concept is called “income mobility.” Young poor people often become older wealthy people. While not as often, we also see plenty of cases where rich people lose their wealth. The old saying “A fool and his money are soon parted” is as true today as ever.

    More to the point, income inequality can not disappear until effort inequality is eliminated. Someone who works a regular 40 hour week or less should not expect to have the same income as a person who works sun up to sun down on their passion who has discovered a market niche. As is often said, “Free people are not equal. Equal people are not free.”

    These points make good cases for income inequality debates.

    • This topic was modified 1 year, 1 month ago by Profile photo of Mark Mark.
    • This topic was modified 1 year, 1 month ago by Profile photo of Mark Mark.
    #224 Score: 0
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    More Evidence that Global Economic Inequality is Decreasing
    https://mises.org/library/more-evidence-global-economic-inequality-decreasing

    “Conclusion

    As we attempt to measure inequality, we see that, in the first place, it is caused by the irregular adoption of market institutions over the world. If we disaggregate the data we see that inequality within countries has plummeted, suggesting that market institutions tend to make the society more equal.

    In the second case, we see that preindustrial societies are equal because of their low income. Disparity of incomes can only be achievable in rich societies. Once we seriously consider subsistence levels, we find that inequality slightly decreases in the last 200 years measured by the Gini index, or strongly decreases when measured with the Theil index.

    The claim that markets are the cause of increasing an “unsustainable” inequality is now less convincing than ever.”

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    INEQUALITY DOES NOT REDUCE PROSPERITY
    A Compilation of the Evidence Across Countries
    by Scott Winship, Senior Fellow, Manhattan Institute
    http://www.manhattan-institute.org/pdf/e21_01.pdf

    From pages 8 and 9:
    “In Figure 6, the dotted line indicates that countries in which the top 1 percent of tax units receive a
    greater share of income generally have higher median incomes, too. In other words, when the richest
    tax filers secure more of the pretax and -transfer economic pie, the middle class still gets more posttax
    and -transfer pie than in low-inequality countries. If, instead of median incomes, Figure 6 showed the
    middle fifth’s gross national income per capita, Japan, Singapore, and New Zealand could be included, but
    the measure of middle-class living standards would suffer. The best-fitting line would still tilt upward
    slightly.21 (The line would also slope upward if Figure 6 showed, instead of the top 1 percent, the share of
    income received by the top 10 percent.)

    Figures 1, 2, 3, and 6 refute the assertion that living standards are lower when income inequality is higher.
    The cross-national relationship between income concentration and living standards at the bottom is,
    however, at least consistent with such an assertion. As shown in Figure 7, there is a readily apparent
    statistical relationship between the share of market income received by the top 1 percent and the
    tenth percentile of disposable income. Among the 13 countries, more income concentration does
    accompany lower incomes at the bottom. At -0.34, the correlation is of moderate strength—about the
    same as in Figure 6. In Western Europe and the four Anglosphere countries, the correlation is negative.
    The correlation is also negative when World Bank–based bottom-fifth income measures are used.

    To reiterate, these negative correlations are no stronger as evidence that income concentration causally lowers
    the incomes of the poor than the positive correlations in Figures 1, 2, 3, and 6 are evidence that inequality
    increases incomes among the poor and middle class. Evidence looking at changes in the living standards
    of the poor and in income concentration, discussed in Part 3, fail to support the assertion that inequality
    hurts the poor. In all the aforementioned analyses, knowing which of the three groups a country falls
    into—the wealthy nations of Western Europe, the Anglosphere, and industrialized Asia; Eastern
    Europe; or the rest of the world—allows for better predictions of living standards than do measures
    of inequality. Indeed, knowing which of the three groups a country belongs to generally predicts its
    inequality as well as, or better than, inequality predicts living standards. This observation suggests
    that larger historical, cultural, and geographical factors are likely behind the correlation between
    inequality and living standards.”

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    Most Ordinary Americans in 2016 Are Richer Than Was John D. Rockefeller in 1916
    by Don Boudreaux

    Most Ordinary Americans in 2016 Are Richer Than Was John D. Rockefeller in 1916

    “Honestly, I wouldn’t be remotely tempted to quit the 2016 me so that I could be a one-billion-dollar-richer me in 1916. This fact means that, by 1916 standards, I am today more than a billionaire. It means, at least given my preferences, I am today materially richer than was John D. Rockefeller in 1916. And if, as I think is true, my preferences here are not unusual, then nearly every middle-class American today is richer than was America’s richest man a mere 100 years ago.”

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    Tracking the same households over time shows significant income mobility
    by Mark J. Perry

    Tracking the same households over time shows significant income mobility

    Bottom Line: In the discussions on income inequality and wage stagnation, we frequently hear about the “top 1%” or the “top 10%” or the “bottom 99%” and the public has started to believe that those groups operate like closed private clubs that contain the exact same people or households every year. But the empirical evidence displayed above tells a much different story of dynamic change in the labor market—people and households move up and down the earnings quintiles throughout their careers and lives. Many of today’s low-income households will rise to become tomorrow’s high-income households, and some will even eventually be in the “top 10% or “top 1%.” And many of today’s “top 1%” or top income quintile members are tomorrow’s middle or lower class households, reflecting the significant upward and downward mobility in the dynamic U.S labor market – an important point in any discussion about “exploding income inequality.”

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