Aug 28, 2006

The income inequality gap

Tim Worstall translates The State of Working America, a yearly publication of the Economic Policy Institute, and finds a less-than gloomy picture.
How we're supposed to read this is that the USA has a very uneven income distribution, that the poorest 10% only get 39% of the median income, that the richest 10% get 210%. Compare and contrast that with the most egalitarian society amongst those studied, Finland, where the rich get 111% and the poor get 38%. Shown this undoubted fact we are therefore to don sackcloth and ashes, promise to do better and tax the heck out of everybody to rectify this appalling situation.

But hang on a minute, that's not quite what is being shown. In the USA the poor get 39% of the US median income and in Finland (and Sweden) the poor get 38% of the US median income. It's not worth quibbling over 1% so let's take it as read that the poor in America have exactly the same standard of living as the poor in Finland (and Sweden). Which is really a rather revealing number don't you think? All those punitive tax rates, all that redistribution, that blessed egalitarianism, the flatter distribution of income, leads to a change in the living standards of the poor of precisely ... nothing.
I happened to catch Oprah the other day promoting a show--a rerun, I think--in which she laments the growing income gap: "The middle class is disappearing. Disappearing, I tell you!" And I couldn't help thinking that one of the richest women in the world could do an awful lot to narrow that gap if she really wanted to. Yet, somehow, she doesn't.

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