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Inequality in Ability to Read Statistics

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Alan Reynolds [2], writing in today’s Washington Times [3], points out why some recent laments over growing income inequality should be discounted.  Here’s an especially important passage in which Reynold’s uncovers a significant error in Sebstian Mallaby’s recent column on inquality [4]:

[Mallaby] confuses the number of households with the number of workers. That’s
100 percent wrong. He wrote: "Economic growth no longer seems to help
the majority of workers; the proceeds flow to the top fifth or so of
the work force." Not so. Half the proceeds from work and savings (not
counting taxes or transfer payments) flow to the top fifth of
households, not the top fifth of workers.

"Work Matters" is a chapter in my forthcoming book, "Income
and Wealth," from Greenwood Press. Among much else, that chapter notes
that Bureau of Labor Statistics surveys show an average of 0.6 workers
per household in the lowest fifth, one in the second, 1.4 in the third,
1.7 in the fourth, and two in the top fifth. This is partly because
there are many more singles in the lower-income groups (including
students and widows), and many more two-earner couples with older
children toward the top. There are 1.8 persons per household in the
lowest fifth, but 3.1 in the top fifth.

The Census Bureau found that within the lowest quintile, the
number of people who worked full-time all year in 2005 amounted to 3.2
million in the poorest fifth of households, compared with 9.3 million
in the second fifth, 13 million in the third, 15.3 million in the
fourth and 16.7 million in the top quintile.

That uniquely industrious top fifth — every couple with an
income above $91,705 — accounted for 29.1 percent of all full-time,
year-round workers. The top fifth surely accounts for more than half of
all two-earner college-educated families over the age of 25. It should
be neither a surprise nor complaint that they collect half of all
income — before taxes. If work did not pay off, the top fifth would
not work so hard to produce at least half the U.S. economy’s goods and