A “Barrier” to Reducing Income Inequality??

by Don Boudreaux on December 28, 2013

in Inequality, Myths and Fallacies, Wal-Mart

Check out this story from the AP that was reported a few weeks ago on Washington, DC’s, WTOP radio.  Here’s part of the caption to a photo that accompanies the report on WTOP’s website:

Fully 20 percent of U.S. adults become rich for parts of their lives, wielding outsized influence on America’s economy and politics. And this little-known group may pose the biggest barrier to reducing the nation’s income inequality. While the growing numbers of the U.S. poor have been well documented, survey data provided exclusively to The Associated Press detail the flip side of the record income gap: the rise of the “new rich.”

The report itself notes that

The new rich have household income of $250,000 or more at some point during their working lives, putting them — if sometimes temporarily — in the top 2 percent of earners….

The new research suggests that affluent Americans are more numerous than government data depict, encompassing 21 percent of working-age adults for at least a year by the time they turn 60. That proportion has more than doubled since 1979.

Even outside periods of unusual wealth, members of this group generally hover in the $100,000-plus income range, keeping them in the top 20 percent of earners.

At the same time, an increasing polarization of low-wage work and high-skill jobs has left middle-income careers depleted.

If I’m reading this report correctly (and if the reporter has interpreted the data correctly), fully 20 percent of Americans are, for some portion of their working lives, in the top two percent of income earners in America.  This fact strikes me as strong evidence against the proposition that Americans are not very economically mobile.

Four other things to note.  First, note the kinds of people who are most likely to be among the “new rich”: they’re married and educated.

Second, note some of the strange conclusions drawn by the reporter (and the caption writer).  For example, in the caption we read that the success of the “new rich” makes them “the biggest barrier to reducing the nation’s income inequality.”  This claim refers to the fact that the “new rich” are less likely than are many other groups to support massive government schemes of ‘redistribution.’  But, my gosh, these people (the “new rich”) are themselves, each and everyone of them, personally working at – and succeeding at – reducing income inequality.  They work hard and are responsible; therefore, they enjoy larger monetary rewards than they’d get were they less hard-working and less responsible.  Through their personal efforts and responsible behaviors they reduce the differences that separate the sizes of their incomes from those of the super-rich.  Far from being the biggest barrier to reducing the nation’s income inequality, such people are proving that income inequality is neither as great nor as insurmountable and stifling as “Progressives” would have us think.

Third, the last sentence quoted above from the report is (albeit unintentionally), taken in the context of the whole report, further evidence that, if the middle-class in America is disappearing, it’s chiefly because more and more Americans are becoming rich.  By “hollowing out” the middle (as conventionally classified), the economic distance between “the poor” and “the (greater numbers of) rich” might appear to be larger, if only because many once-middle-income Americans are now rich Americans.  But surely such “hollowing out” is to be celebrated rather than lamented.

Fourth and finally, note the Mr. James Lott in the photo – one of the “new rich.”  He’s the son of Nigerian immigrants.  He obviously works hard and acts responsibly.  He doesn’t moan about what he doesn’t have, and he didn’t sit around envying other people and hoping and waiting for the government to give him someone else’s money in order to make his income more on par with that of “the rich.” I don’t know anything about Mr. Lott beyond what is reported here by the AP, but he certainly seems to be a testament to the proposition that if you work hard and act responsibly in America, you can still succeed regardless of your starting circumstance.  (Oh, and note also that Mr. Lott is a pharmacist working for, and being paid handsomely by – wait for it! – Wal-Mart!)

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