Incone inequality myth.The Rich Are Getting Richer Faster than the Poor

[KLATTU]

https://fee.org/articles/5-myths-about-income-inequality-debunked/

This isn't so much an outright fallacy as it has to do with incomplete knowledge and misunderstanding of statistics. The argument falls apart when you consider two things: income mobility and the fact that all households saw increases over time.

The data comes from the Panel Study of Income Dynamics at the University of Michigan. This longitudinal study started in 1968 and has been ongoing ever since.
The reason this data is important is that it follows people over time instead of statistical bins. This is maybe, at first, a subtle point, but it is crucial. Many arguments involving inequality follow statistical bins over time instead of people over time who move through the bins. I might not be as concerned about the bin of the bottom 20 percent between 1970 and 2018 if the people who made up the bottom quintile in 1970 have moved into other higher bins by 2018.

 

[D_NATURED]

https://fee.org/articles/5-myths-about-income-inequality-debunked/

This isn't so much an outright fallacy as it has to do with incomplete knowledge and misunderstanding of statistics. The argument falls apart when you consider two things: income mobility and the fact that all households saw increases over time.

The data comes from the Panel Study of Income Dynamics at the University of Michigan. This longitudinal study started in 1968 and has been ongoing ever since.
The reason this data is important is that it follows people over time instead of statistical bins. This is maybe, at first, a subtle point, but it is crucial. Many arguments involving inequality follow statistical bins over time instead of people over time who move through the bins. I might not be as concerned about the bin of the bottom 20 percent between 1970 and 2018 if the people who made up the bottom quintile in 1970 have moved into other higher bins by 2018.

The thing is, poverty is a component of capitalism as we do it. Our system requires poverty to exist. The money we spend on the poor is just the basics. It does little to lift them out of their socioeconomic place. We have to have poor people so that fabulous wealth can even exist.

 

[KLATTU]

The thing is, poverty is a component of capitalism as we do it. Our system requires poverty to exist. The money we spend on the poor is just the basics. It does little to lift them out of their socioeconomic place. We have to have poor people so that fabulous wealth can even exist.

I'm sorry but that doesn't even begin to make sense to me.

 

[D_NATURED]

I'm sorry but that doesn't even begin to make sense to me.

There's only so much stuff. If you have a thousand times what you need, someone else won't have enough. It's basic math.

 

[MTAtech]

https://fee.org/articles/5-myths-about-income-inequality-debunked/

This isn't so much an outright fallacy as it has to do with incomplete knowledge and misunderstanding of statistics. The argument falls apart when you consider two things: income mobility and the fact that all households saw increases over time.

The data comes from the Panel Study of Income Dynamics at the University of Michigan. This longitudinal study started in 1968 and has been ongoing ever since.
The reason this data is important is that it follows people over time instead of statistical bins. This is maybe, at first, a subtle point, but it is crucial. Many arguments involving inequality follow statistical bins over time instead of people over time who move through the bins. I might not be as concerned about the bin of the bottom 20 percent between 1970 and 2018 if the people who made up the bottom quintile in 1970 have moved into other higher bins by 2018.

Nothing new here. This is why:

In 1996, Cox and Alm tried to make the same case that there is huge income mobility in America. It was unconvincingly. In fact, they repeated in full arguments that had been thoroughly debunked years earlier, specifically, claims of income mobility.

So, my basic reaction to the OP's article is the same as the Cox and Aims piece -- there they go again. There maybe some truth in what they say, but no news.

Dean Baker has similar things to say, with more detail. In particular, he explains what was wrong with that income mobility study:

The first item in this series that I recall was a piece that argued that there was great mobility in the United States because those in the bottom quintile at any point in time were likely to move up to higher quintiles, including even the top quintile, in future years.
This looked very impressive until you found out that Cox used all adults in his sample, not just prime age people, as serious economists would do. This means that the law students and medical students, who are likely to be low income this year, are the basis for much of Cox’s upward mobility story, since they will have relatively high incomes when they are lawyers and doctors.
​

The OP's "study" exhibits the same fallacy.

There is considerable income mobility in the U.S., but by no means enough to make the distribution of income irrelevant. For example, Census data show that 81.6 percent of those families who were in the bottom quintile of the income distribution in 1985 were still in that bottom quintile the next year; for the top quintile the fraction was 76.3 percent. Over longer time periods, there is more mixing, but still not that much. Studies by the Urban Institute and the U.S. Treasury have both found that about half of the families who start in either the top or the bottom quintile of the income distribution are still there after a decade, and that only 3 to 6 percent rise from bottom to top or fall from top to bottom.

Even this overstates income mobility, since (i) those who slip out of the top quintile (say) are typically at the bottom of that category, and (ii) much of the movement up and down represents fluctuations around a fairly fixed long-term distribution. Joel Slemrod of the University of Michigan has provided a useful indicator that suggests how persistent high incomes tend to be: the average income of families whose income exceeded $100,000 in 1983 was $176,000 in that year; their average income over the seven-year period ending in 1985 was $153,000.

In other words, this "mobility" is merely someone in the top of the lower quintile pushing through the barrier of the lower portion of the next highest barrier -- say those earning $198,000 a year going to $201,000 a year -- piercing the $200,000 barrier. The same is true in the opposite direction, those going from the low $200,000s to below $200,000. That's not true mobility.

 

[KLATTU]

TRANSLATION:

It doesn't fit the lw narrative so I'll torture the facts until I come up the answer I want.

This almost always happens when you come to the conclusion FIRST, and then trey to backfill it with the fatcs you like and throw out the facts you don't like.

 

[KLATTU]

There's only so much stuff. If you have a thousand times what you need, someone else won't have enough. It's basic math.

FALSE PREMISE. It's not a zero sum game.

 

[Tanngrisnir]

TRANSLATION:

It doesn't fit the lw narrative so I'll torture the facts until I come up the answer I want.

This almost always happens when you come to the conclusion FIRST, and then trey to backfill it with the fatcs you like and throw out the facts you don't like.

Translation: when the claims in your OP are rationally challenged, you fold like a cheap card table.

 

[ttwtt78640]

There's only so much stuff. If you have a thousand times what you need, someone else won't have enough. It's basic math.

That, of course, assumes a fixed pile (pool?) of stuff and a fixed (static?) method of distribution outside the control of the individual worker. The amount of stuff that I get (or could get) is based on how much I work and how much I can charge (keep?) for doing that work. Even doing exactly the same (type and amount) of work, one could get more stuff if they simply left out the middle man (who currently gets a handsome profit from every hour of work done) and did that work as a self-employed individual (that profit/hour is then yours to buy more stuff with).

 

[ludin]

That, of course, assumes a fixed pile (pool?) of stuff and a fixed (static?) method of distribution outside the control of the individual worker. The amount of stuff that I get (or could get) is based on how much I work and how much I can charge (keep?) for doing that work. Even doing exactly the same (type and amount) of work, one could get more stuff if they simply left out the middle man (who currently gets a handsome profit from every hour of work done) and did that work as a self-employed individual (that profit/hour is then yours to buy more stuff with).

They forget that we do not have a fixed pool.
that is why i find these arguments funny.

The only way they are actually real arguments is if some day the US no longer has it's own currency and can no longer manage
it. That we would be dependent on another currency for some reason.

This is why greece was so bad off they didn't control the euro and there are only so many euro's to go around for them.
they just can't put more euro's in the pool if they need to.

 

[KLATTU]

Translation: when the claims in your OP are rationally challenged, you fold like a cheap card table.

where did I fold?

I'm sticking by it. His refutation had some merit but I think the main point still point still stands. when people talk about the rich getting richer, they mistakenly refer to income quintiles, without acknowledging that people move in and out of those income quintiles all the time.

Liberal like to create the notion that the system is rigged in favor of the rich guy and against the poor guy. And of course guess who can fix it? Yep, Democrats.

 

[ttwtt78640]

They forget that we do not have a fixed pool.
that is why i find these arguments funny.

The only way they are actually real arguments is if some day the US no longer has it's own currency and can no longer manage
it. That we would be dependent on another currency for some reason.

This is why greece was so bad off they didn't control the euro and there are only so many euro's to go around for them.
they just can't put more euro's in the pool if they need to.

That has nothing to do with my point. My point was that if someone wants to have a job done and is willing to pay $X to have that job done for them - the on-site worker (the one actually doing the job) normally gets only a portion of that $X because the company (boss?) gets a significant cut - passing only some of that $X down to the worker.

Matters get more complicated, of course, as the job gets more complicated (requires a crew of workers) but my point was that few will ever get rich by simply working for someone else. When I (a self-employed handyman) have a job that requires more than one person I pay my help exactly the same as what I get paid (per hour of labor) yet few employers operate that way. Most take a significant cut of what they pay "their help" and profit handsomely from the labor of others.

For example, a lawn service may charge each customer $40 to mow and trim a small suburban yard while they pay the person actually doing that work $20. While it is true that "the boss" normally provides the required (mowing and trimming) equipment the worker could easily buy/maintain that equipment for less than $100/day (assuming that they service 5 customers/day).

 

[Tanngrisnir]

where did I fold?

I'm sticking by it. His refutation had some merit but I think the main point still point still stands. when people talk about the rich getting richer, they mistakenly refer to income quintiles, without acknowledging that people move in and out of those income quintiles all the time.

Liberal like to create the notion that the system is rigged in favor of the rich guy and against the poor guy. And of course guess who can fix it? Yep, Democrats.

"It doesn't fit the lw narrative so I'll torture the facts until I come up the answer I want." = folding.

The system is rigged to favor the rich and you haven't demonstrated otherwise.

 

[ludin]

That has nothing to do with my point. My point was that if someone wants to have a job done and is willing to pay $X to have that job done for them - the on-site worker (the one actually doing the job) normally gets only a portion of that $X because the company (boss?) gets a significant cut - passing only some of that $X down to the worker.

Matters get more complicated, of course, as the job gets more complicated (requires a crew of workers) but my point was that few will ever get rich by simply working for someone else. When I (a self-employed handyman) have a job that requires more than one person I pay my help exactly the same as what I get paid (per hour of labor) yet few employers operate that way. Most take a significant cut of what they pay "their help" and profit handsomely from the labor of others.

For example, a lawn service may charge each customer $40 to mow and trim a small suburban yard while they pay the person actually doing that work $20. While it is true that "the boss" normally provides the required (mowing and trimming) equipment the worker could easily buy/maintain that equipment for less than $100/day (assuming that they service 5 customers/day).

In a way businesses have to pay people less than the cost of them to do the business.
If i charge 100 bucks for a job and pass out all 100 bucks then i make nothing.

if i charge 100 bucks for a job and then pay out 75 then i make 25 for future use.

 

[ludin]

TRANSLATION:

It doesn't fit the lw narrative so I'll torture the facts until I come up the answer I want.

This almost always happens when you come to the conclusion FIRST, and then trey to backfill it with the fatcs you like and throw out the facts you don't like.

it is called a begging the question fallacy.

 

[KLATTU]

"It doesn't fit the lw narrative so I'll torture the facts until I come up the answer I want." = folding.

The system is rigged to favor the rich and you haven't demonstrated otherwise.

Define' the system"?

 

[Gaugingcatenate]

The thing is, poverty is a component of capitalism as we do it. Our system requires poverty to exist. The money we spend on the poor is just the basics. It does little to lift them out of their socioeconomic place. We have to have poor people so that fabulous wealth can even exist.

The necessities/basics of life are all one needs [it's definitionally absolute ].

To be given something one has not earned after achieving adulthood is a counter to motivation, productivity and usefulness to oneself or the community. In addition to being so supplied, we have technology that is raising the standards for the majority of people worldwide.

This is just one aspect of capitalism that has been directly and indirectly raising life spans, health, general living conditions on the planet. It also brings lower costs, new improvements and jobs that might give one some pride in self, allow for a realization of dreams and goals.

Sitting on the couch watching Ellen on a huge, bigger and bigger flat screen may feel good for a while, but...

 

[Gaugingcatenate]

There's only so much stuff. If you have a thousand times what you need, someone else won't have enough. It's basic math.

First, define "enough". Give us the exact parameters.

 

[Gaugingcatenate]

The thing is, poverty is a component of capitalism as we do it. Our system requires poverty to exist. The money we spend on the poor is just the basics. It does little to lift them out of their socioeconomic place. We have to have poor people so that fabulous wealth can even exist.

Ahhh... but...

What you leave out is there are two different styles of poverty. Absolute and relative. We practice relative poverty. Tipping on the scale we see the richest, we see those at our bottom. Our bottom being pretty much middle class and above to most the rest of the world.

So, relative poverty.

Absolute poverty, as is the case with much of the rest of the world, means if you cannot beg enough to supplement what little you have, you may starve to death, die suffering from the elements or unable to care for your illness or prevention.

Terms, different concepts entirely, matter.

 

[expat_panama]

There's only so much stuff. If you have a thousand times what you need, someone else won't have enough. It's basic math.

That, of course, assumes a fixed pile (pool?) of stuff....

Most people believe that wealth is fixed and the only way to get it is to take if from someone else:

Reality is that most wealth is information --that's not only something we can always create more of but it's something that's easily turned into more physical assets.

... and a fixed (static?) method of distribution outside the control of the individual worker. The amount of stuff that I get (or could get) is based on how much I work....

--and let's face it, work is hard and doing it is a lot of bother. The good news is that most healthy people like work, and most that don't prefer the alternative:

 

[ttwtt78640]

In a way businesses have to pay people less than the cost of them to do the business.
If i charge 100 bucks for a job and pass out all 100 bucks then i make nothing.

if i charge 100 bucks for a job and then pay out 75 then i make 25 for future use.

True, but why work for 75% (or less) of what the job actually pays? If the boss has 10 workers then he/she is making $25/worker per job (day?) meaning that the boss makes $250 for those jobs even if they do not work on those job sites while each worker makes $75 for actually doing the work.

When I work for myself I get (net) 100% of the labor costs which allows me to use that extra 25% (or more) to invest in tools/equipment as well as making as much (or more) than I could working for someone else. I make no less (per hour) when I must (occasionally) use a helper (who I pay the same as I am getting per hour) on the job but, since they are making decent money too, they tend to work harder and do a better job.

 

[Keridan]

True, but why work for 75% (or less) of what the job actually pays? If the boss has 10 workers then he/she is making $25/worker per job (day?) meaning that the boss makes $250 for those jobs even if they do not work on those job sites while each worker makes $75 for actually doing the work.

When I work for myself I get (net) 100% of the labor costs which allows me to use that extra 25% (or more) to invest in tools/equipment as well as making as much (or more) than I could working for someone else. I make no less (per hour) when I must (occasionally) use a helper (who I pay the same as I am getting per hour) on the job but, since they are making decent money too, they tend to work harder and do a better job.

What about that boss' operating costs? Presumably he provides materials, advertising, time/labor. He keeps those 10 workers fed and clothed by spending out of that $250. He doesn't just take it home and spend it on a new PS4.

 

[ttwtt78640]

What about that boss' operating costs? Presumably he provides materials, advertising, time/labor. He keeps those 10 workers fed and clothed by spending out of that $250. He doesn't just take it home and spend it on a new PS4.

That is true and it requires a significant investment in tools/equipment for me to remain self-employed. However, it doesn't mean that I would make anywhere near as much (net) if I did the same work for someone else's company. Assuming that the boss had to spend $100/day on such overhead then he/she is still making twice as much per day as any of his employees are. Material costs are not a factor, at least in my business, since the customer pays (reimburses me for) 100% of those costs.

 

[Keridan]

That is true and it requires a significant investment in tools/equipment for me to remain self-employed. However, it doesn't mean that I would make anywhere near as much (net) if I did the same work for someone else's company. Assuming that the boss had to spend $100/day on such overhead then he/she is still making twice as much per day as any of his employees are. Material costs are not a factor, at least in my business, since the customer pays (reimburses me for) 100% of those costs.

In my business, these numbers are very different. I actually net less than my employees many times. I spend a lot making sure they keep working. Some of that comes down to how I run the business and some to what the market will allow me to make.

I get your base point, though. Take even my example to the extreme where my 8 employees making me $5/hr become 800 and I'm getting $500 hr.

The problem is all the businesses have different models. That's what makes something as simple as "who holds the money" so hard to pin down. Add in complications like healthcare costs and insurance. It just becomes a mess.

I have yet to find a model that can take these things into account properly.

 

[D_NATURED]

FALSE PREMISE. It's not a zero sum game.

It's you promoting the false premise. If there's an unlimited supply of everything, how do commodities work? Are people choosing to starve?

Look, I've read books by fascists who try to teach wealth acquisition. The first thing they say is to tell yourself exactly what you're saying, that the universe is infinitely abundant. Well, the poor aren't imagining their children don't get the same nutrition and education, it's a fact. And, when you ask the rich to pay their taxes, they don't reply with "What's it matter? There's plenty to go around." do they? No, they greedy up and defend their immorality just as you have.

One thing for which America suffers is our lack of critical thinking. You demonstrate well the ability to recite propaganda but not the ability to dissect it in order to make moral decisions. The conservatives have created a religion out of money and the adherents thereof dutifully repeat the dogma.

The many poor conservatives who know, deep down, that I'm right will never admit it. They are like Jehovas Witnesses who continue to defend a faith that will, statistically, leave them without their reward.

This world IS a zero sum game . If it wasn't there would be no poverty, hunger or illness for conservatives to exploit.