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Income inequality myths!

Posted: November 30, 2014 at 12:45 pm   /   by

Reprint: Originally published on Oct 30, 2011

As it is usually cited by the left—”the rich are getting richer and the poor are getting poorer”—it is absolutely a myth:

There have been a lot of news stories today about a study by the Congressional Budget Office that compares incomes earned in 1979 and 2007. The Associated Press describes the study’s findings:

The richest 1 percent of Americans have been getting far richer over the last three decades while the middle class and poor have seen their after-tax household income only crawl up in comparison, according to a government study.

After-tax income for the top 1 percent of U.S. households almost tripled, up 275 percent, from 1979 to 2007, the Congressional Budget Office found. For people in the middle of the economic scale, after-tax income grew by just 40 percent. Those at the bottom experienced an 18 percent increase.

These trends were the sign of a healthy economy (the economy got significantly less healthy, of course after 2007).

The left focuses on the fact that the top 1%’s income went up way more than the others. But that ignores the fact that gives the lie to their “poor are getting poorer” meme: EVERYONE’S INCOME WENT UP! The rich are getting richer, and so are the people at the bottom of the income ladder.

Moreover, why should anybody be surprised that the so-called “poor” haven’t experienced the same increase as the top 1%? The bottom rungs of the economic ladder are populated with younger people just entering the job market; people with fewer skills; people with less education; people who, by the whim of fate and nature, have fewer of the gifts required to excel (intelligence, drive, good health, looks, talent, etc.). Why would we expect their income also to go up by 275%

I have also read data that indicate that the top 1%’s growth was wildly disproportionately large even in comparison to the next cohorts down, like the top 5% or 10%. But even if we look at the top 1%, it’s not as if they don’t deserve it. The image of the idle rich is fun for movies and tabloids, but it describes a very small percentage of rich people. And usually it’s the idle kids or grandkids that we’re seeing. Stay idle for more than a couple of generations, and that wealth will start to run out.

Moreover, the rich are making far more of their money from income than ever before:

The composition of income for the 1 percent of the population with the highest income changed significantly from 1979 to 2007, as the shares from labor and business income increased and the share of income represented by capital income decreased. That pattern is consistent with a longer-term trend: Over the entire 20th century, labor income has become a larger share of income for high-income taxpayers, while capital income has declined as a share of their income.

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More resources:

7 reasons why Obama is wrong on income inequality

5 reasons why income inequality is a myth — and Occupy Wall Street is wrong

 

Christopher Cook
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Christopher Cook

Managing Editor at Western Free Press
Christopher Cook is a writer, editor, and political commentator. He is the president of Castleraine, Inc., a consulting firm providing a diverse array of services to corporate, public policy, and not-for-profit clients.

Ardently devoted to the cause of human freedom, he has worked at the confluence of politics, activism, and public policy for more than a decade. He co-wrote a ten-part series of video shorts on economics, and has film credits as a researcher on 11 political documentaries, including Citizens United's notorious film on Hillary Clinton that became the subject of a landmark Supreme Court decision. He is the founder of several activist endeavors, including AnyStreet.org (now a part of Western Free Press) and Liberatchik.com. He is currently the managing editor of and principal contributor to WesternFreePress.com.
Christopher Cook
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Income inequality myths!