Saturday, October 2, 2010

Skipping through channels, I was attracted by an infographic on CNN. It essentially says that "the top-earning 20% of Americans — those making more than $100,000 each year — received 49.4% of all income generated in the U.S., compared with the 3.4% earned by those below the poverty line, according to newly released Census figures. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968." Income inequality or the ever-widening gap between the haves and have-nots.

But a new book by the economist Thomas Sowell, Intellectuals and Society --chiding many intellectuals ("those who know a little bit about everything") for fitting the world into their scheme of things-- writes what many miss about income inequality. Here's a summary:

"It is true, if you compare the income of those in the top fifth of earners with the income of those in the bottom fifth, that the spread between them increased between 1996 and 2005. But, as Sowell points out, this frequently cited figure is not counting the same people.

If you look at individual taxpayers, those who happened to be in the bottom fifth in 1996 saw their incomes nearly double over the decade, while those who happened to be in the top fifth in 1995 saw gains of only 10 percent on average and those in the top 5 percent actually experienced decline in their incomes.

Similar distortions are perpetrated by those bewailing "stagnation" in average household incomes -- without taking into account that households have been getting smaller, as rising wealth allows people to move out of large family homes."

Comparing just the numbers is not going to help. True, the bottom 50% in America control only 1% of its wealth. But the more important question is what is being done with that extra money. Spending that wealth to see their way through the political maze, lobby for vested interests, etc. That is what has to be tackled!

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