SOWELL: Wealth inequality a numbers game

2011-11-09T06:00:00Z SOWELL: Wealth inequality a numbers gameThomas Sowell Rapid City Journal
November 09, 2011 6:00 am  • 

STANFORD, Calif. — One of the things that has struck me, when I have gone on luxury cruise ships, is that most of the passengers look like they are older than the captain — and luxury cruise ships don’t have juveniles as captains.

The reason for the elderly clientele is fairly simple: Most people don’t reach the point when they can afford to travel on luxury cruise ships until they have worked their way up the income ladder over a long period of years.

The relationship between age and income is not hard to understand. It usually takes years to acquire the skills and experience that high-paying jobs require, or to build up a clientele for those in business or the professions.

But those in the media and in politics who are currently up in arms, denouncing income inequalities, seldom mention age as a factor in those inequalities.

The shrill rhetoric about differences in income proceeds as if they are talking about income inequalities between different classes of people. It would be hard to get the public all worked up over the fact that young people just starting out in their careers are not making nearly as much money as their parents or grandparents make.

Differences in wealth between the young and the old are even greater than differences in income. Households headed by someone 65 years old and older have more than 15 times as much wealth as households headed by someone under 35 years of age.

But these are not different classes of people, as so often insinuated in runaway political rhetoric. Everybody who is 65 years old was once under 35 years of age. And most people under 35 years of age will someday be 65 years old.

Differences in age are just one of the reasons why the insinuations about income and wealth that are thrown around in the media and in politics are often remote from reality.

While the rhetoric is about people, the statistics are almost invariably about abstract income brackets.

It is easier and cheaper to collect statistics about income brackets than it is to follow actual flesh and blood people as they move massively from one income bracket to another over the years.

Currently, we are hearing a lot in the media and in politics about the “top one percent” of income earners who are supposedly getting an ever-increasing share of the nation’s income.

That is absolutely true if you are talking about income brackets. It is totally untrue if you are talking about actual flesh and blood people.

The Internal Revenue Service can follow individual people over the years because they can identify individuals from their Social Security numbers. During recent years, when “the top one percent” as an income category has been getting a growing share of the nation’s income, IRS data show that actual flesh and blood people who were in the top 1 percent in 1996 had their incomes go down — repeat, down — by a whopping 26 percent by 2005.

How can both sets of statistics be true at the same time? Because most people who are in the top 1 percent in a given year do not stay in that bracket over the years.

If we are being serious — as distinguished from being political — then our concern should be with what is happening to actual flesh and blood human beings, not what is happening to abstract income brackets.

A University of Michigan study showed that most of the working people who were in the bottom 20 percent of income earners in 1975 were also in the top 40 percent at some point by 1991. Only 5 percent of those in the bottom quintile in 1975 were still there in 1991, while 29 percent of them were now in the top quintile.

People in the media and in politics choose statistics that seem to prove what they want to prove. But the rest of us should become aware of what games are being played with numbers.

Thomas Sowell’s website is www.tsowell.com.

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(4) Comments

  1. Progstopper
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    Progstopper - November 14, 2011 3:53 pm
    Why is it the left has to always make the poor tag along when they want to push their socialist agenda? Most of us were poor once, but the majority of us did not fall under the lefts spell that we needed them to get ahead. And we are much better off today because we didn't.
  2. Drone
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    Drone - November 10, 2011 9:37 am
    Excellent article. When I was first married, my income was $95.20 a month (1964) in the Air Force. We didn't think about "taking money from the rich", we thought about how to work and get an education to earn money, so our children could have a better life. I always remember a bumper sticker I saw on a Cadillac many years ago, which said; "Like my car. Get it the way I did, work for it". Well we did, and now we have the means to live comfortably, not rich, but comfortable, so please tell me why I should pay higher taxes to support slackers, and losers who don't want to work.
  3. Paleo1
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    Paleo1 - November 10, 2011 8:35 am
    So because you went on a cruise and noticed that a bunch of old people were passengers, you have deduced that young people just need to wait until they are older to cash in on the American dream. So it is ok if most of America's children are being raised in poverty, because they just need to wait until they are old. And you are ignoring the fact that many of our nation's poor include seniors. This article is insulting, insensitive, and typical of a certain inability of many people to see what is across the street from them.
  4. Chase81
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    Chase81 - November 09, 2011 12:17 pm
    Very well written article. The facts are very interesting and telling. So much so, that the far lefties here don't even have any attacks for this one.
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