2018-04-21

Demonstrating Disparity



Increasing disparity of incomes has occurred in the United States during the last 50 years, and we can show it.

Some of us suffer little from the gain of national income share by the One Percent. We feel that our income is good and stable. We may see our own fortunes and comfort increasing, which we attribute to our own efforts, talents and deserved rewards.

But some of us do suffer. Our fortunes are crushed. We go to bed hungry. We suppose we made serious mistakes, or didn’t have the knowledge, or the necessary personal connections, or the lucky breaks.

While you might not feel the One Percent absorbing the income, it does happen. You can’t observe it by looking at one person or one example, such as yourself, because idiosyncratic events with multiple explanations interweave with less obvious societal evolutions to shape individual circumstances. And each of us imagines most of the people live much as we do. We have little natural awareness of people who live in economic circumstances different from our own.

One must consider people in groups. One must take a macro view. For this purpose, consider three graphs. They come from different researchers. Let's look at the period 1970-2014, which appears on all 3 graphs on the horizontal axis. For all 3 graphs, the vertical scale shows percent-points of aggregate national income.

In the first graph, we see the aggregate income of the less wealthy 50 Percent of incomes, as a share of national income, declined by about 9 percent-points pretax and 6 percent-points posttax from 1970 to 2014. Share given up by the less wealthy 50 Percent is share gained by the wealthier 50 Percent.

The second graph shows, on the the line studded with black triangles, the share of the One Percent (incomes in the 100th percentile) increased about 13 percent-points of national income between 1970 and 2014. The Nine Percent (incomes in the 91st through 99th percentiles) gained about 4 percent-points pretax. So, these Ten Percent gained about 17 percent-points. Percent-points gained by the Ten Percent are percent-points given up by the 90 Percent (1st through 90th percentiles).

Now, the first graph showed us the less wealthy 50 Percent gave up 9 percent-points, and the second graph shows the Ten Percent gained 17 percent-points.

Since the total of all income shares is always 100 percent, a increase in share by one subgroup compensates for the net decreases in share by other groups, and the increases and decreases must add to zero. 9 percent-points given up by the less wealthy 50 Percent and 17 percent-points acquired by the Ten Percent means the remaining 40 Percent (51st through 90th percentiles) gave up 8 percent-points of national income share (-9 + 17 - 8 = 0).

The 3rd graph shows the top Ten Percent acquired 13 Percent-Points, and the Next Ten percent (81st to 90th percentiles) gave up 4 percent-points.

[Graph by Lansing and Markiewicz 2016]

Though prepared by different researchers, if we allow a percent-point or two of minor and technical differences, the three graphs don't conflict with each other or contradict each other. We can understand a consistent story.

Summary:
From 1970 to 2014...
1st to 50th percentiles of income: ​gave up 6 percent points of aggregate national income share.
51st to 80th percentiles of income: gave up 7 percent points of aggregate national income share.
81st to 90th percentiles of income: gave up 4 percent points of aggregate national income share.
91st to 99th Percentiles of income: gained 4 percent points of aggregate national income share.
One Percent: gained 13 percent points of aggregate national income share.

Figures approximate.
The Ten Percent took what the 90 Percent gave up.
The One Percent took what the 80 Percent gave up.

This analysis doesn’t imply that the One Percent are malevolent, generally speaking. There are a few criminals among them, as with any group of thousands of people. If their behavior is legal and conventional, that doesn’t contradict this analysis. If they seek to increase their personal incomes and wealth, as any humans might do in similar circumstances, then they behave as humans do. This analysis doesn’t explain why the shifting of income shares has occurred among societal subgroups, but it shows the shifting has occurred.




I'm grateful to Dr. Stetson for his communications that inspired this article, and to other friends for their helpful comments in preparation of this article.



Images and Sources

Images may be freely used in reproduction of this article. They used in compliance with fair use doctrines of copyright law.

Alisha Coleman-Jensen, Matthew P. Rabbitt, Christian A. Gregory and Anita Singh, "Household Food Security in the United States in 2015" (Sep 2016, United States Department of Agriculture, https://www.ers.usda.gov/webdocs/publications/79761/err-215.pdf?v=42636)




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