Income, Wealth and Statistics

russ_watters

I'm aware that inflation is a problem in general, but I'm still not even seeing where one would put an inflation adjustment in a single-point-in-time snapshot. The income data, as it was posted, says something very important to me:

Age Median Income
15-24 $31K
25-34 $50K
35-44 $60K
45-54 $65K
55-64 $55K
65+ $28K

This says that if I were a typical 22-year old, and the US economy held status quo (flat unemployment rate, just enough growth to counter population growth, etc.) I should expect to see annual 5% over inflation raises for the next 10 years or so, which will increase my annual before tax earnings by a net 61%.

Could you tell me, specifically, where you would apply an inflation adjustment and what it might tell us?

russ_watters

I'm just not clear on why that matters or how you could apply that to the numbers given. If the first bracket makes $31k now and the second bracket makes $50k now, it should not be seen to imply that in 10 years the second bracket (those formerly in the first bracket) will still be making $50k. I think that's the wrong thread.... That's fine, but I really don't see how it applies to the age-dependent income data.

WhoWee

I think the outcome desired by the progressives is permanent political power. Accordingly, they're willing to spend whatever it takes to achieve control.

As an unrepresented independent conservative small businessperson - I favor the checks and balances of a two party system but would like to see the emergence of a third party. I hoped at one point the TEA Party would evolve into a Party of small business owners, managers, and professionals - but the media (IMO) made certain that did not happen.

russ_watters

Could you source that please? When I noticed the poverty rate provided for the US in Laurie's link was much higher than the US gov't reports, I googled and found this: http://en.wikipedia.org/wiki/Poverty

That may also be some sloppy wording on my part, as that isn't gini per se, but something related --- still, that doesn't seem to match what you said. You misread: I'm saying their definition doesn't match their measurement. But until we get the measurement clarified, that might be moot... Clearly, but I also don't think it would be all that difficult to use surveys of those actual quality of life items. But then, if we did a survey for lack of food, lack of housing and lack of clothing, we'd get virtually zero poverty in every developed nation and I don't think that that's a desirable result.
I strongly disagree. I think that while there is often some obfuscation, there is no other reasonable way to characterize forced redistribution of resources than "equality of outcome". Not exactly equal, no, just more equal (with rarely a definition of how equal). If you thought I meant that "equality of outcome" was intended to be complete, that's not what I intended to convey.

mheslep

From the source referenced in the Wiki article on poverty measurement. Russ is correct:

http://www.poverty.org.uk/summary/eapn.shtml

To my mind such a measurement would be better defined as the "social engineering line", or the "envy line", with only a vague correlation with poverty.

Vanadium 50

I don't know the right answer; just that an uncorrected income or wealth percentile is not it.

Interestingly, they use dollars spent as a proxy for educational quality. Since we have statistics for educational outcomes, wouldn't that have made more sense? (Not that the US does particularly well there either, but at least that directly measures what they want to know)

mheslep

The correlation is worse yet: the NY Times table uses percent of GDP dollars spent.

Vanadium 50

"Economic distance" seems like an interesting statistic, but it seems odd to equate it with poverty:

In the Republic of Upper Slobovia, 20% of the people make 59,000 euros a year, 60% make 100,000, and 20% make 125,000. The median is therefore 100,000 euros and 20% are "below the poverty line".

In the People's Democratic Republic of Lower Slobovia, the 1% party elite make 1,000,000 euros a year, and the other 99% make 1000 euros a year. According to this metric, nobody is "below the poverty line."

This metric is interesting, but seems not really related to its name.

russ_watters

Please note: I think it is perfectly fine to have a desired minimum standard of living in a country and to name it and have statistics measuring and tracking it (I'd call it "minimum acceptable standard of living"). But to reiterate: it is just a misuse of the word "poverty" to use that name to describe it if neither the goal nor the measure bear any resemblance to the definition of "poverty". Heck, the EU measure isn't even tied to standard of living at all!

John Creighto

I guess I missed the point you were trying to make. If we are trying to answer if things are better or worse then they were in the past then we do need to include other points in time and thus would have to account for inflation somehow.

You can argue that you can conclude from a single snapshot in time of the income or wealth averages that there is an economic progression with age. However, for this to tell the complete picture, you would need to establish some constraints. An example of such a constraint would if both of the following conditions hold:
1)The income ratio differences between age groups remains relatively constant with time. 2)For some age group the income/wealth remains relatively constant with time when adjusting for inflation.

One might alternatively look at second order statistics like the average percentage income gain someone made over 10 years in each age group and see how this changes with time.

Now with regards to social mobility perhaps some kind of measure similar to diffusion could be used.What is the probability of an individual making a given percentile change in their income or wealth in a given period of time. This would sort of be analogous to thermodynamic mixing. In cases were very few people hold most of the wealth the distance measure could be based on the integration of wealth/income share instead of population share.

apeiron

Like ParticleGrl says, the strawman of "equality of outcome" is one you frequently use. But can you point to a single post about inequality measures where that has been the actual stated goal of a poster?

Many may like to see more equality. But they would still accept that there has to be a balance between incentivising people and promoting social cohesion.

russ_watters

Your second paragraph contradicts your first, probably because you didn't read my post properly and are assuming I must be seeing people argue for absolute equality, which I just said I'm not. I'm seeing people argue for - as you just said - more equality. And they want that equality to be created by force of government. And they want that equality to be in the form of living conditions, financial resources, etc: the outcomes of our efforts in life. Put those words in bold together and you get forced [more] equality of outcome.

This is just too basic for me to readily believe you guys are misunderstanding that badly.

[Edit] What is difficult to pin down for you guys is exactly how much equality you want to force. But we have some hints:

-In one recent thread, the OP advocated a 95% top marginal tax rate.
-In another, based on a botched survey, the OP advocated a wealth distribution that equalled Sweden's income distribution(see V50's #1...) and argued that most Americans want that.
-Not hot lately, but we've also discussed affirmative action, whic is forced complete equality.

Now income is a proxy for virtually every standard of living issue, from food and clothes to what kind of car you drive. As I said, it is tough to pin down, but it seems a number of people in your camp want income or wealth inequality forced down by half or even much more.

But in other specific areas - expanding areas - people do actually argue for forced complete equality. Recent discussions have included healthcare and college education.

But again, the question of how much outcome equality you and others like you advocate forcing is something you will have to clarify.

mheslep

The $20/hour minimum wage demand floated by some in the Occupy Whatever protests is another example of complete equality of outcome, as distributing that wage across the US labor force would eat up the entire $7.8 trillion in US annual income.

John Creighto

Might be doable without much tax changes if you cut a lot of government administration costs. That is do it with a negative income tax. Of course I’m only speculating but I’ll try to work out the numbers later.

mheslep

The point is at that level of minimum wage nearly everyone must be paid the same, from the late Steve Jobs to the 16 year old on the first job: the $7.8 trillion national income distributed at $20/hour=$40k per year is 195 million people in a country with 205 million working age adults.

LaurieAG

The Australian old age poverty rate was 39% and second last behind South Korea.

Vanadium 50

Which is maybe a good example of the points I was making.

OECD measures poverty by income, not wealth. A person who has a comfortable retirement nest egg and is drawing it down will appear poor. A person who has the same standard of living from a pension will not.

The fraction of people in poverty in old age, according to OECD's metric, is a function of the number of people in old age. Imagine I have two countries: one with 20% of the people in old age (however it is defined) and one with 10%. Assume that the income distribution of old people is the same in the two countries, as is the income distribution of non-old people. Because retirees have less income than workers, the median income is lower in the group with the 20%. Therefore, the fraction defined as poor in the 20% is smaller.

I think most of us would agree this is not a desirable feature in the definition of poverty.