Stuck On Stupid Studies

Surprise, surprise!  A 'new' study finds that the gap between rich and poor is increasing in America.

ALBANY, N.Y. - The disparity between rich and poor is growing in America as the federal minimum wage has remained flat for years, union membership has declined and industries have faced global competition, according to a study released Thursday.

The report by the Center on Budget and Policy Priorities and the Economic Policy Institute, both liberal-leaning think tanks, found the incomes of the poorest 20 percent of families nationally grew by an average of $2,660, or 19 percent, over the past 20 years. Meanwhile, the incomes of the richest fifth of families grew by $45,100, or nearly 59 percent, the study by the Washington-based groups said.

Families in the middle fifth saw their incomes rise 28 percent, or $10,218.

The figures, based on U.S. Census data, compare the average growth from 1980-82 to 2001-03, after adjusting for inflation.

The poorest one-fifth of families, the report said, had an average income of $16,780 from 2000-03, while the top fifth of families had an average income of $122,150 — more than seven times as much. Middle-income families' average income was $46,875.

More socialist drivel.  Here's the point: Absent socialist redistribution, income disparities between the highest and lowest income groups will always increase.  In fact, it's impossible to stop it from occurring without those socialist redistribution schemes.  Let me walk you through a little math, to make this point clear.

Let's say that the average poor person (lowest 20%), using the data above, earns $16,000 and the average rich person (highest 20%) earns $120,000.  Let's further assume that their incomes increase by the same 4% in one year.  For the rich person that translates to an extra $4800, bringing their income to $126,800.  The poor person's income, by contrast, would increase by $640, bringing their income to $16640.  Both incomes have increased by 4%, and yet after one year the gap has increased by $4160.

What would happen if the rich person's income only increased by 1%?  Well, what do you know?  Even though the poor individual's income increased by four times as high a percentage the income gap still widened by $560.  Go figure.  So a small percentage of a large number can still be bigger than a larger percentage of a small number?  Sacre bleu!

Is there another factor that keeps the lowest incomes from jumping dramatically?  Absolutely.  It's called entry level work.  There is a steady stream of people entering at the lowest levels, but there is no cap on the upper levels of income.  I'm an orthopaedic surgeon now, and I make a lot more money than I did in my first job, washing dishes in the hospital, or even my second job as a hospital orderly, or, for that matter in my third job as a teaching assistant in college.  My income rise was not due to unfairness in the system, but to 14 years of education, college and beyond, and another 14 in practice.  Those just starting out and with the most menial tasks will have a low income, guaranteed.

For the income gap to remain stable year to year using my example above would require about a 30% jump in the average poor person's income.  That is simply impossible, and so the gap is destined, forever and ever, to increase.  Ah, but is it impossible?  The report doesn't say whether this study includes the effect of the EITC.  Looking at the numbers I suspect that it does not.  If so, the income level for the lowest 20% will be higher than listed.

This is the kind of fake statistic that is constantly used by the left to demonstrate the "unfairness" of the capitalist system.  In fact, it demonstrates only the nature of work and its value in such a system.

1/28/06 2100: Linked to Wizbang's COTT XLVIII.

1/30/06 2130: Oops.  I neglected to link Sensible Mom's post on the same topic.  She covers it from a different angle.  Well worth a look.