As we all know, politics is banned on METAR. The subject of income inequality is like a red flag in front of a bull for some knee-jerk political types on METAR. Political partisan posts will be deleted as usual.
It is important to understand the REAL spending power of U.S. households to gauge the direction of the Macro economy. Statistics that measure household income can distort the real spending figures by excluding transfer payments (“noncash sources of income”) and taxation.
Official government measures greatly exaggerate income inequality by ignoring taxation and noncash sources of income.
By Charles W. Calomiris, The Wall Street Journal, Dec. 26, 2022
…“The Myth of American Inequality,” by Phil Gramm, Robert Ekelund and John Early…
Average living standards have improved dramatically. Real income of the bottom quintile, the authors write, grew more than 681% from 1967 to 2017. The percentage of people living in poverty fell from 32% in 1947 to 15% in 1967 to only 1.1% in 2017.
Opportunities created by economic growth, and government-sponsored social programs funded by that growth, produced broadly shared prosperity: 94% of households in 2017 would have been at least as well off as the top quintile in 1967.
Bottom-quintile households enjoy the same living standards as middle-quintile households, and on a per capita basis the bottom quintile has a 3% higher income. Top-quintile households receive income equal to roughly four times the bottom (and only 2.2 times the lowest on a per capita basis), not the 16.7 proportion popularly reported. …
Government statistical reports exclude “noncash” sources of income, which excludes most transfers from social programs. Taxes (paid disproportionately by high earners) are also ignored in official calculations. Furthermore, even the government’s “cash” income numbers are reported in a way that understates improvements in real (inflation-adjusted) income over time because government inflation measures fail to use the appropriate chained price indexes or take account of new products and services. …
The equality of consumption between the bottom quintile (in which only 36% of prime-age persons work) and the middle quintile (in which 92% of prime-age persons work) is a striking finding. … [end quote]
Do NOT turn this into a discussion of whether income support and taxes are good or bad! Partisan and political opinion posts will be deleted!
It is clear that the Macro economy of goods and services is supported when consumption is spread through the entire population. It is clear that a demand-driven economy like ours is maximized when only 1% of the population is poor instead of 1/3 of the population.
I will recommend that my local library buy this book because I would like to read it. It’s necessary to have accurate information to make investment decisions.