Link to AAUW report: https://www.aauw.org/aauw_check/pdf_download/show_pdf.php?file=The_Simple_Truth
Tag Archives: income inequality
Some of the rich are getting poorer, and some of the poor are getting richer.
The Des Moines Sunday Register published a lead article (Page 1) titled, “The rich keep getting richer”. (See link below.) Included were a number of misleading statistics or misleading conclusions based on the statistics. For example, according the think tank, Iowa Policy Project, the median hourly wage in 2016 was $16.04 per hour. 37 years ago, the average wage, adjusted for inflation, which is fair, was $15.91. The Register concluded, “This means a typical wage earner working 40 hours per week for a full year would have seen a real increase of $270.40 over a 37 year span.” While the statistics are technically true, you cannot logically conclude and that any specific person or group of people did not move themselves from a lower wage to a significantly higher wage. I’m sure it is true some people moved down while some people moved up. An interesting study would be to see how wages correlate to the number of years in the employment market. It would be interesting to know the median starting hourly rate for a young inexperienced worker versus and an experienced worker who has been in the labor market to 30 years. The fact that the average stays about the same my be a problem, but almost no one stays at the average wage for 37 years.
Another statistic was that the number of people who earned $1 million or more during specific years increased from 5,031 in 2010 to 8,325 in 2015. Their “slice” of the state’s total adjusted gross income grew 37%. Meanwhile, the number of Iowans claiming gross incomes of $40,000 to $99,999 climbed by 23% while their slice of the state’s total adjusted gross income fell 2%. First, I would venture to guess that a significant majority of the $1 million+ earners are people who sold their businesses or had other one-time income. So, again,there is no logical reason to presume that the $1 million+ club is made up of the same people year-after-year. At the same time, from 2010 to 2015 the Iowa economy was generally continuing to improve, so values and prices of businesses likely climbed. Also, in the case of an “expanding pie”, the fact that any group gets a smaller percentage of the total does not mean that their real income is not increasing.
Finally, the Register reported that their analysis of U.S. Census data showed that the bottom fifth of earners saw practically no growth in household income – going from $13,798 in 2006 to $13,848 in 2016, again adjusted for inflation. Here again, there is no logical reason to believe that the specific group of people who were in the bottom 20% in 2006 are the same people who were in the bottom 20% 10 years later. It would be interesting to know what percent of the people in the bottom 20% in 2006 were still in the bottom 20% 10 years later. My guess is there would be some, but not a majority.
As a society we need to make sure we don’t put hurdles in front of people who are trying to improve their lot in life. In many cases this means removing government created regulatory barriers to entry into certain jobs. The Register has done very good work exposing job licensing regulations that are in place more to protect existing businesses from competition and to protect the profits of licensing education businesses, than to protect the public. Yet, the Iowa Legislature has done precious little to address this real problem for low income workers who are trying to work their way up in our economy.
Link to Register article: https://www.desmoinesregister.com/story/money/business/2017/11/25/most-iowa-wages-have-stagnated-but-rich-keep-getting-richer/818770001/
Income inequality is not the problem.
Inequality is unjust and immoral – if government force is used.
Today, 9/16/2014, The Des Moines Register once again reinforced the idea that there is something inherently wrong with increasing income inequality. (See “Ag economy cited in study showing growth in rich-poor gap” – link below.) In a free market, where government does not interfere except to stop fraud and force, people only become wealthy by producing things that others value and purchase voluntarily. Under free market capitalism, voluntary trade only makes every participant richer.
Unfortunately, we don’t have a free market in much of our agricultural sector. So, an important question is how did the wealthy gain their wealth. If they gained their wealth by receiving subsidies from our government, then they gained their wealth by making others poorer. Today, farmers receive various kinds of government subsidies, both directly and indirectly. For example, crop insurance premiums are subsidized 60% by taxpayers, regardless of the income or wealth of the farmer. And, crop insurance not only covers losses from natural disasters, it also covers loss of profits due to lower crop prices. There should be no subsidy at all for crop insurance, but it is particularly distasteful when the subsidy goes to the rich. So, we must blame our own government’s policies for at least some of the unjust and immoral aspects of income and wealth inequality.
Tax increase on the rich – already done.
Beginning on 1/1/2013, individuals with income over $200,000 and married couples with incomes over $250,000 will pay a new 3.8% Medicare tax on interest, dividends and capital gains. This increase will happen whether or not the Bush Tax Cuts are allowed to expire. Currently, the Medicare tax is 2.9% of all earned income, without limit. So, the wealthy pay the Medicare payroll tax on everything they earn. Beginning in 2013, they will contribute even more based on unearned income. This tax was included he Patient Protection and Affordable Care Act (PPACA), commonly called Obamacare. The tax had nothing to do with protecting patients or making care more affordable. It was simply a tax increase on the rich to help reduce the tremendous Medicare funding deficit. So, Obama has already increased taxes on the rich.