Mazzuca: The misleading statistics of economic inequality
Former British Prime Minister Benjamin Disraeli once quipped; “There are three types of lies; lies, damned lies and statistics.”
And no one can manipulate statistical information better than the media that loves comparing “the rich” and “the poor.” But those comparisons are seldom what they appear to be because the government statistics they use are simply snapshots taken at a given point in time, a situation that fails to reveal how “the rich” and “the poor” are in many cases the same people at different stages of their lives.
During a recent broadcast of MSNBC Live, Ali Velshi and Stephanie Ruhle did a story about wealth inequality in America. The liberal canard was transparent as the cable hosts self-righteously described how the wealth of the upper 1% of Americans had increased by $16.8 trillion during the last 30 years while the bottom 50% saw a $900 billion decrease.
If one accepted those figures at face value, one might conclude there’s a problem with our system. But the cable hosts conveniently omitted the fact that Americans in the lower echelons of income and net worth do not stay there because we live in a dynamic society where people move within economic brackets, and the upper and bottom quintiles don’t comprise the same people from year to year.
Velshi and Ruhle are educated people and surely understand when referring to people in particular income brackets as “the rich” or “the poor” they are implicitly assuming these are enduring conditions and the residents in these brackets remain the same from one year to the next when nothing could be further from the truth.
As the American Enterprise Institute points out, we live in a society where the vast majority of people move from one set of economic circumstances to better ones and few Americans remain in the same quintiles over time. Lest we forget, the founders of Microsoft, Google and Apple didn’t start off as billionaires; each of these iconic corporations began in a garage, and through diligence and innovation, Bill Gates, Steve Jobs and their fellow hi-tech entrepreneurs moved up through the economic quintiles.
During my working years, I took part in a study conducted by the University of Michigan illustrating that very point. The study followed the economic fortunes of a given set of working Americans over a 20-year period and revealed that 29% of the people initially in the bottom 20% rose to the top 20% during the study period, while just 5% remained in the bottom 20% throughout the study.
But it’s this second statistic that’s so revealing, to wit: high school algebra teaches us that 5% of 20% is 1%, which means that as an economic matter, only 1% of the people in the study never moved out of the bottom quintile.
Another misleading yet “accurate” statistic occurs when using household income as a barometer of income inequality. By definition, we know the number of households in each of the five quintiles must be identical (if that weren’t’ the case it wouldn’t be a quintile).
However, according to 2017 data from the United States Census Bureau, nearly 40 million more Americans were living in the top quintile of households than the bottom quintile; and even more telling, four times as many people were working in that quintile than in the bottom quintile, so it shouldn’t surprise anyone that the average household income was far greater in top quintile than in the bottom quintile.
While the aforementioned illustrations bear out Disraeli’s oft-repeated quip about statistics, the truly troubling aspect of this matter is the common theme, i.e., each distortion is designed to create the illusion that there’s a problem when in reality none exists. And of course, by extension, the remedy to this “problem” is always the same — more government intervention in the economy.
Yes, income inequality does exist in America — some of it self-inflicted, some not. And to address this matter we must keep in mind the great achievements of civilization have not come from government bureaus; history has proven repeatedly that the only way to raise the standard of living for people on a mass scale is with an economic system that creates wealth, not one that simply redistributes it.
Quote of the day: “When looking at the biggest study of the American dream, the No. 1 correlate for upward mobility is having two parents in a home.”— Stephen Marche
Butch Mazzuca, of Edwards, writes biweekly for the Vail Daily. Follow him on his blog at butchmazzuca.com.