The LIE - Alarming Inequality Growth!
The LIE - Alarming Inequality Growth!Whether you read it in The Guardian, USA Today, CNN, CNBC, The Huffington Post, The BBC, or elsewhere, the alarming claim that "the top 1% will own most of world's wealth by 2016" originated from one unreliable source: The Oxfam Report. When looking at the ACTUAL report and examining the underlying data, its alarmist conclusions don't hold up to scrutiny.1. The report's projections are based only on about 4 years of data, from around 2010 to around 2014. [a] Not only is this entirely amateur, as only relying on 4 points of reference is extremely unreliable, but in this case, it's purposely deceitful. On page 2 of their own report, two graphs are displayed which confirm either deceit or incompetence. One graph shows non-alarming wealth inequality measurements from 2000-2014. The other graph, however, IGNORES that first graph, only looks at a few post recession years, and extrapolates based on THAT. As Forbes explains, "they’ve taken four years of data, drawn a straight line off the end of it and predicted out 6 years from that four years of data. A little hint to the wonks at Oxfam: this isn’t how you do social science." [b]2. Here's why that first chart is important. The data from 2000-2014 show wealth inequality doesn't actually continue to sky-rocket in one direction. Rather it appears to waver around the same points throughout the years, sometimes going up, and sometimes coming back down. Thus, in order to "project" a steady incline in wealth inequality, Oxfam simply ignored the data from their first graph. Per Jacob Hacker, director of Yale’s Institution for Social and Policy Studies, “Oxfam simply assumes that recent trends will continue.” [c] That's not how projections work. They need to be rooted in historical trends, and the historical trends. Unfortunately, that didn't prevent news outlets from reporting the irresponsible conclusion.3. Another dishonest representation can be found on page 3 of Oxfam's report. It displays a graph showing nominal wealth for both the world's richest 80 people and for the bottom 50%. Here, too, they play a similar trick.They point to an increase in wealth (for the billionaires) from 2009-2014 without looking at the rest of their data. When examining the entire data set, however, you see that the starting point in 2002 is about the same for the billionaires as it is for the bottom 50% and that the ending pointing is ALSO roughly the same for the billionaires / bottom 50%. In other words, in those 12 years, both the bottom 50% and the richest 80 billionaires each increased their wealth by about the same rate, more than doubling it. (From roughly $700 billion to roughly $1.8 trillion.) [a] The only way to represent that as unfair is to ignore the entire data set.4. Similar to wealth inequality, INCOME inequality is ALSO routinely presented as an alarming issue. In the U.S., we can utilize Census data and a metric known as the Gini Coefficient, which rates income inequality on a scale from 1-100, to look at historical income equality trends. When we do this, we see that, from 1959-2012, there has been no alarming change in equality for income earning individuals. Their rating wavered between a Gini Coefficient of 50 - 52.5. The confusion arises because people commonly cite HOUSEHOLD income rather than INDIVIDUAL income. This is no small oversight. When measuring households, household income inequality HAS grown. But households do not earn paychecks, individuals do. So what you're seeing in the household category is more likely a gradual change in how the people of our society choose to live. For instance, today fewer people live under one household than in the past, there are more divorced couples or split families spreading incomes across two households, and the number of households with only one resident has been increasing. This alters the way household makeup looks, so that today's "household" is not the same thing as a "household" from the 50's. This is why it's very important to observe individuals rather than households. Another important note regarding the household statistics is that there was a significant change illuminated in 1992 regarding the collection and measurement of data and this accounts for much of the sharp increase in apparent household inequality post 1992. "Households were permitted to report up to $1 million in earnings, up from $300,000, and parallel increases were made in the reporting limits for selected other income sources. Both of these changes affected the data. Analysis of the 1993 statistics suggests that the increase in the maximum amounts that could be reported accounts for about 1.8 percentage points or about one-third of the 1992 to 1993 increase of 5.2 percentage points." [f] Regardless of why household income is different than individual income, the truth remains that individual income inequality has remained remarkably steady since the 50's without ANY alarming spikes or notable drops. [d] 5. The last thing to consider is whether Oxfam's definition of "wealth" is appropriate. Time magazine explains, "Wealth, as defined by Oxfam, doesn’t mean what most people think it means. That’s because Credit Suisse’s annual Global Wealth Databook, Oxfam’s primary data source, uses so-called net wealth, defined as 'marketable value of financial assets plus non-financial assets (principally housing and land) less debts.' By that standard, an American with, say, a high salary and a large mortgage might—if the amount owed on the mortgage is greater than his assets—be counted as less wealthy than a subsistence farmer who doesn’t owe anything. ...Consider that U.S. adults under 35 have a negative household savings rate of 2% and you can see how, according to Oxfam, the U.S. has more citizens in the bottom 10% of worldwide wealth than China does. ...It places about 7% of Americans in the bottom decile of wealth and fewer than 0.1% of Chinese citizens."[c] Does anybody truly believe China has fewer impoverished citizens than the U.S.? Of course they don't. Furthermore, people might want to re-think their stance regarding pointing fingers at those of a specific percentile. As of 2012, anybody in the United States earning over $34,000 a year actually qualified as the world's top 1%. [e] The U.S. is a very wealthy nation, and most people here preaching against the 1 percent don't seem to realize that they ARE the 1 percent.CONCLUSION:Despite all the rhetoric, alarming claims regarding wealth or income inequality are quite often exaggerated.-----------------Sources:[a]http://www.oxfam.org/sites/www.oxfam.org/files/file_attachments/ib-wealth-having-all-wanting-more-190115-en.pdf[b]http://www.forbes.com/sites/timworstall/2015/01/20/oxfams-still-wrong-about-the-global-1-and-all-economic-growth-flowing-to-them/[c]http://time.com/money/3675142/oxfam-richest-1-wealth-flawed/[d]http://finance.townhall.com/columnists/politicalcalculations/2013/12/05/the-major-trends-in-us-income-inequality-since-1947-n1757626/page/full[technical note: the underlying income data does not include government transfers from assistance programs of any kind, such as welfare, and therefore understates the income of the lower earning percentiles, however, this is mostly a wash since the data also doesn't count capital gains and therefore slightly understates the income of the top percentiles. These were not decisions of WAC but of the agency which aggregates the data.][e]http://www.dailymail.co.uk/news/article-2082385/We-1--You-need-34k-income-global-elite--half-worlds-richest-live-U-S.html[f]https://www.census.gov/prod/1/pop/p60-191.pdfPosted by We Are Capitalists on Saturday, September 26, 2015