Wage Disparity

The Good people at the Economic Policy Institute have written a report on The State of Working America. Thankfully, Tim Worstall at TCS has read it so you don't have to.

Of the EPI, Worstall says "They are, as you may know, the people who urge that the USA become more like the European countries, most especially the Scandinavian ones. Less income inequality, more leisure time, stronger unions and so on."

Worstall points out that they have manipulated the data in a way that favors the EU economies in the chart, to get this damning chart:



Now don't you feel bad living here! Look at that chart -- something must be done!

How we're supposed to read this is that the USA has a very uneven income distribution, that the poorest 10% only get 39% of the median income, that the richest 10% get 210%. Compare and contrast that with the most egalitarian society amongst those studied, Finland, where the rich get 111% and the poor get 38%. Shown this undoubted fact we are therefore to don sackcloth and ashes, promise to do better and tax the heck out of everybody to rectify this appalling situation.

But hang on a minute, that's not quite what is being shown. In the USA the poor get 39% of the US median income and in Finland (and Sweden) the poor get 38% of the US median income. It's not worth quibbling over 1% so let's take it as read that the poor in America have exactly the same standard of living as the poor in Finland (and Sweden). Which is really a rather revealing number don't you think? All those punitive tax rates, all that redistribution, that blessed egalitarianism, the flatter distribution of income, leads to a change in the living standards of the poor of precisely ... nothing.

After they manipulate the data so it does not show how badly we are kicking EU asses, the disparity the find is that we have richer people.

Economics and Markets Posted by jk at August 29, 2006 1:35 PM