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Please Do Your Job

Posted By Russ Roberts On January 27, 2006 @ 1:54 am In Inequality,Media | Comments Disabled

The headline:

Study Finds Rich-Poor Income Gap Growing

The story [1] by Mark Johnson of the Associated Press begins:

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.

Interesting.  Let me try a different first sentence:

The disparity between rich and poor is growing in America as the Red Sox won their first World Series in 86 years, Mars came very close to the earth and the global frog population plummeted. 

I don’t actually believe that the disparity between rich and poor is growing.  At least I don’t believe the numbers that supposedly tell us so.  Or more accurately, I don’t believe that the interpretation of the numbers is the right one.   But even if the interpretation is the right one,  how can an Associated Press story list the supposed causes of that growing disparity as if they were facts rather than the pet agenda items of the groups that put out the study?

The story continues:

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.

This is fake analysis.  It’s comparing two snapshots over time and pretending that the people in the snapshots are the same people.  The implication is that if you were a poor family in 1980, you barely got ahead while the rich families, turbo-charged ahead of everyone else and left them in the dust.  The rich get richer and the poor basically stay poor.

But they’re not the same people in the two snapshots.  The comparison of the two snapshots is close to meaningless.  The bottom quintile of families today includes a bunch of people who weren’t there in 1980.  Some of the families are recent immigrants to the United States seeking opportunity.  Some of the families are young and just starting out.  Some are the result of a divorce that has dumped one or both partners into poverty and it will take time for them to recover. 

And most importantly, some of those rich families today that have allegedly zoomed ahead were poor in 1980 but have become rich in the meanwhile, an experience that is the exact opposite of what the headline would have you believe.

In short, the people who did the study are lazy.  But I expect them to be.  They’re from the  Center on Budget and Policy Priorities and the
Economic Policy Institute.  That’s their job—to produce pessimistic analyses that make people think the rich are getting richer and the poor are getting poorer and to claim a causal connection between bad times and weakened unions.

But that isn’t Mark Johnson’s job.  Mark, your job is to inform.  Or maybe to help sell newspapers.  But either way, it doesn’t speak well of you or your job to simply run the press release from the  Center on Budget and Policy Priorities and the
Economic Policy Institute under your byline.  If your job is to inform, you might want to interview a few people who don’t think about the world in the same way as the CBPP and EPI.  If your job is to sell newspapers, a little tension and counterpoint make more interesting reading.

To be fair to Mr. Johnson, he did call someone who didn’t work for the people who did the study to add some "balance" to the story.  So who did he call?   Another pro-union activist:

Trudi Renwick, an economist with the union-backed Fiscal Policy
Institute in New York, said globalization, the decline of manufacturing
jobs, the expansion of low-wage service jobs, immigration and the
weakening of unions have hurt those on the lower end of the economic
scale.

After some data on state-level inequality, Mark Johnson finally quotes someone "on the other side," someone from the business community:

Matthew Maguire, a spokesman for the Business Council of New York
state, said the money earned by the state’s wealthiest residents is
"something that everybody who cares about New York should be pleased
about."

"New York’s wealthy pay huge sums in taxes and those wealthy people
and their taxes make it possible for New York to provide the nation’s
most generous social service programs to less fortunate New Yorkers,"
he said. "It also reflects the fact the state is a magnet for
immigrants who come from the four corners of the globe to a state they
see as symbol of economic activity."

Isn’t this rich?  (Aren’t we a pair?)  The voice from "the other side" accepts the analysis as true but disputes the implication that rich people getting richer is bad.  It’s good!  What a loveable counterpoint.

And then Johnson closes the piece giving more space for Trudi Renwick’s agenda, the same agenda of the Economic Policy Institute:

Renwick said the government "needs to continue its commitment to
correcting the natural outcomes of the marketplace" by raising the
minimum wage with inflation and by tax policies like the earned income
tax credit.

Renwick also suggested that governments, when giving tax breaks to
companies, insist those companies provide jobs that pay higher wages.

That’s it.  Not one quote from someone who is skeptical of the analysis.  Not one quote from someone without an ax to grind.

Mark, call someone else other than union-backed economists or business lobbyists.  Call someone at a university.  Or if you want to stick with think tanks, call Robert Rector [2] at Heritage.  He can explain why the numbers you swallowed are silly.  Do your job.

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URLs in this post:

[1] The story: http://news.yahoo.com/s/ap/20060127/ap_on_re_us/income_gap

[2] Robert Rector: http://www.heritage.org/Research/Taxes/bg1791.cfm

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