Monday, May 30, 2005

Two Americas: One Rich, One Poor?

Here's an interesting, but dated (sort of -- prior to the November election) assessment of "Two Americas: One Rich, One Poor? Understanding Income Inequality in the United States."

The study takes Census data on income distribution and "normalizes" it to account for differences in cash and non-cash income, number of persons, hours worked and effects of taxation.

The results?
"The top fifth of the population has $4.21 of income for every $1.00 at the bottom" vs. the results from the raw Census data which showed that the top fifth have $14.30 for every $1.00 at the bottom.

I think this is an interesting analysis, however, I think the inclusion of Medicare and government benefits should be excluded from the analysis... (That would be the effects of taxation component to "normalizing" the data.)

I agree those benefits have value, however, I think we should try to look at a situation where people (unaided by an outside hand such as government) attempt to earn income, live and survive. Obviously, the government sets the rules, but a direct redistribution and giving the bottom segments income credit for that seems a bit flawed in my opinion. The people at the bottom are not really "earning" that income -- they are just given it.

We should look at the data normalizing for the number of people, the hours worked and non-cash benefits.