Talkin' trash to the garbage around me.

09 November, 2007

Lies, damn lies, and statistics

Hey, did you know that being poor in the United States is totally awesome? It's true, according to economist Walter F. Williams, who somehow garnered a job at George Mason University spouting gibberish like this:
Poverty is not static for people willing to work. A University of Michigan study shows only 5 percent of those in the bottom fifth of the income distribution in 1975 remained there in 1991. What happened to them? They moved up to the top three-fifths of the income distribution — middle class or higher. Moreover, 3 in 10 of the lowest income earners in 1975 moved all the way into the top fifth of income earners by 1991. Those who were poor in 1975 had an inflation-adjusted average income gain of $27,745 by 1991. Those workers who were in the top fifth of income earners in 1975 were better off in 1991 by an average of only $4,354. The bottom line is: The richer are getting richer and the poor are getting richer.

To summarize:
  • 95% of the bottom fifth of income earners in 1975 made into the top 60% of the income distribution by 1991.
  • 30% of the "lowest income earners" (which he never defines, but I'll assume he means those in the bottom quintile) in 1975 made it into the top 20% of the income distribution by 1991
  • The average income of the bottom quintile grew seven times as much as the top quintile from 1975 to 1991

Cute. Williams is actually right, as far as income goes, but relying on that measure omits aggregate measures of wealth. Income only measures what people bring home in a paycheck (does it also include income from rents?), but measures of wealth factor in the value of property, stock holdings, and - most importantly - debt, as well as income. Using those measures, the growth in wealth of the top quintile has far outpaced everyone else (and we won't even talk about the top 5 or 10%). In 2000 (see p. 8), the net worth of the top quintile of households increased by some $24,000 since 1998, while the net worth of the bottom quintile increased by $1300 (to $7300). The middle three quintiles showed much more modest gains as well. The median net worth of the top quintile is nearly 27 times that of the bottom quintile. I don't have comparable income measures from the 1998-2000 period, but the 1991 figures that Williams refers to (tables 5, 6, & 7 - good lord, how many people are spouting this shit?) show the median income of the top quintile to be less than twice that of the bottom quintile.

Where I'm from, having a net household worth of $7300 is not good. Sure, it's more assets than a huge chunk of the developing world has, but it's hardly the good times that Williams makes it out to be. Williams is an asshat (as I would expect a GMU economist to be) and is trading in on the statistical and economic ignorance of Americans in order to push the line that any sort of income redistribution program is completely unnecessary because, hey, the poor are getting richer faster than the rich! Which is bullshit. But what do I know - 97% of poor people have a color TV. Laissez les bons temps rouler!

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