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We statistical rabble-rousers are back. In an earlier post we talked about the distribution of wealth in this country. Now we’re ready to talk about the distributions of income. Income, remember, includes what you earn from work, and also whatever interest you get on the money you keep in the bank (not much, these days) and from stock dividends, bonds, rents, and so forth.
You probably won’t be stunned to learn that the United States has a very unequal distribution of income. But the actual figures may still shock you. In 2006, the top 1 percent of earners walked off with 21.3 percent of the nation’s income, the next 19 percent below the top took 40.1 percent, and the rest of us, the bottom 80 percent, got a crummy 38.6 percent of the nation’s income.
Economists have come up with a way of measuring income inequality, the Gini coefficient, a ratio which can vary from zero, where everybody earns the same, to 100 where one exceedingly rich person earns all the income in the country. We’re not quite half way to 100. Using that scale, South Africa has a Gini index of 65, U.S. has an index of 45 and Sweden is the lowest with 23. Remember, the goal here is to get a low score.
So, if we make a list with the country which has the most income equality at the top, and we go down the list, we have Sweden at the top with 23, Norway with 25, Austria at 26, Germany at 27, Denmark at 29, Australia 30.5, Italy 32, Canada 32.1, France 32.7 – OK, to make a sad story shorter, you have to descend past Switzerland, the United Kingdom, Egypt, India, Japan, Israel, China, Russia and Iran before you sink to the inequality of the United States.
In 2010 psychologists Dan Ariely of Duke University and Michael I. Nortonof the Harvard Business School, showed pie charts representing various levels of wealth distribution and asked people to choose the one which they thought represented distribution in the U.S. In another, they asked people to choose which society they would prefer to live in. Ninety percent or more of the 5,522 respondents — whatever their gender, age, income level, or party affiliation — thought that the American wealth distribution most resembled one in which the top 20 percent has about 60 percent of the wealth. In fact, as noted, the top 20 percent control about 85 percent of the wealth. Recently the same experiment was carried out by Paul Solman on NPR’s News Hour. No surprises. He got essentially the same results. People not only didn’t realize what an enormous share of the nation’s wealth was owned by the top 20 percent. As the psychologist Dan Ariely pointed out, what was perhaps more disturbing was that they truly had no idea that the bottom 40 percent, getting up toward half the nation, had 0.3 percent of the US wealth, or just about nothing.
But studies show that the great, great majority of our fellow citizens aren’t mean spirited bastards. Yes, they’re uninformed. And yes, they hold the comforting belief that the top 20 percent possess only somewhat more than half the wealth of the country. They can’t believe the top fifth actually controls 85 percent. It’s clear that most Americans would like to live in a country that has a more equal distribution of wealth. A country where a person born poor has a good chance to earn a decent living and to move into the middle class. That would be a country where, after a lifetime of work, you didn’t worry about an impoverished old age, a nation where you couldn’t be bankrupted by sickness, a nation where the poor don’t buy lottery tickets, knowing that the astronomical odds against their winning are no worse than their chance of earning their way out of poverty. A country like, say, one of those wicked socialist European nations our masters warn us against.
(“The Storming of the Bastille” which illustrates this post, was painted by Jean-Pierre Houël who was born in 1735 and died in 1813. He lived through exciting times — the reign of Louis XV, the French Revolution, and Napoleon’s First Empire. He traveled widely, loved to paint landscapes, and was skilled at engraving and guache, and a water colorist famed for his ability to depict light and atmospheric effects. No, we don’t expect any such scenes to occur here. But we do think that class warfare is, in fact, going on right now. At Critical Pages, we’re on the side of the angels.)