The income inequality story, followup

I received some angry feedback from a reader, who took great issue with this line in my last post:

One of the amazing things about all this is, that almost everybody is pretty much equal.  Look at how flat the line is up to about 95% (~ $200,000): for the vast majority of people, your neighbors, friends, family and community is making pretty much the same amount of money that you are. 

This, the reader said, was patently untrue and made me sound like some out-of-touch egghead.  Because for almost everybody, that line doesn't look flat at all, and $200,000 is an incredibly unattainable sum.

In my last post, I was focusing on the relationship between the super-rich and the rest of us.  And when you compare the super-rich and the rest of us, the first thing to catch the eye is that they are making exponentially more money than everyone else.  That was my point last time.

Now lets look at another graph of the same data:

This is the same graph as last time, just zoomed in on a more reasonable range (income = $0 to $200,000).  This lets you see more readily what percentile you are, if you are the vast majority of people.  And when you plot the numbers this way, my previous statement about equality rings fairly hollow.  

The trap I fell into was simple: when you are considering big numbers, it is easy to lose track of little numbers. As a scientist, I tend to care most about big effects, and so what caught my eye was the insanely rapid increase in order of magnitude of income in the top 10%.  But when you're having trouble making ends meet, an extra $1000 can mean a LOT.

What I began to do at the end of my last post (and what is more ethically informative) was to compare the actual income of people to the income they need to live a healthy life with the possibility of improvement.  How many times the living wage do people make?  Well, that varies from place to place; but I can select a few representative ones*.  Take a look:

I'm plotting the income curve from above, but divided by the living wage in a variety of places (see the legend for details).  This is much more informative ethically speaking.  Dollars mean different things in different places; the living wage is supposed to tell you just how valuable your income is.

The story this graph tells us is that between 20 and 30 percent of Americans earn less than a living wage.  That should mean that roughly 20-30% of Americans are struggling to make ends meet, cutting corners on food, housing, education and healthcare, and getting stuck in cycles of predatory debt.  Moreover, the graph reveals that income inequality is definitely alive in the bottom 90%, even if it's totally blown out of proportion in the top 10%.

It also tells us that eliminating poverty is a problem we can solve.  Look at how much money is in the system, compared to the living wage!  Speaking simplistically, to eliminate poverty all we have to do is fill in that hole on the left of the graph.  Obviously how to do that is a detailed policy and economics question - but the capability to do it is not what is holding us back.

Thanks for reminding me not to get hung up on the little picture (the top 1%), when it's the big picture that matters.



*Living wage numbers taken, once again, from http://www.livingwage.geog.psu.edu/ at the Pennsylvania State University.

The income inequality story

Numbers are fascinating and tantalizing things.  They're kind of like the words of power in some functional magic system* - with the exception that their powers are purely descriptive**, and not constructive.***

My goal is to have a footnote for every sentence in this post.****

Anyway, numbers:  they're liberating, in a sense, and can give a little guidance amidst confusion and doubt.  They can be used to figure out a story about the complex world we're living in, and there's nothing people need so much as a story about their life.

So here's a numerical question: what's going on with the Occupy movement?  When they claim "We are the 99%", what do they mean?  Well, they mean this:

(from nytimes.com, data from taxpolicycenter.org.)  Here we show total cash income in 2010 of all taxpayers in the United States, versus 'percentile' i.e. the percent of people compared to whom you make more money.  So reading this graph, if I make $25,000 a year, I'd be in about the 30th percentile - I'd make more money than 30% of people in the US.  (it's kind of hard to see on the graph, so I downloaded the data.)

Are you, then, in the oft-mentioned 99%?  From this data, the 99% are everyone who makes less than $515,000 a year.  So now you know.

This graph only goes up to the 99.9 percentile.  I read somewhere that the congressional budget office has not released data on the top 0.01% or the top 0.001% since 2005, and you can read what you like into that fact. But roughly speaking, the top 1% of earners make a comparable amount of money to the bottom 99%.

One of the amazing things about all this is, that almost everybody is pretty much equal.  Look at how flat the line is up to about 95% (~ $200,000): for the vast majority of people, your neighbors, friends, family and community is making pretty much the same amount of money that you are.  EXCEPT FOR the super rich!  Their colleagues are making stupendously more or less than them.  This kind of makes sense, since the most financially competitive people are probably also those who rise to the top.  It also probably provokes them to greater competition, as they see bigger swings of perceived prosperity than the rest of us.

Now we know all that, we need to ask: is income inequality a moral problem?  Not in and of itself.  If everyone in the society were taken care of, or able to take care of themselves, if there were a serious shared commitment to working for the good of all our citizens, than there would be no moral dilemma and perhaps the financial gaming of the wealthiest few shouldn't be a concern.

But there's another number that changes the story.  The living wage - an income necessary to pay for housing, food, and other necessities - is greater than the income of a large part of the population.  For Cambridge, MA, living wage for a family of 4 is ~ $66,000, and for a single adult living wage is ~$25,000.  That's (respectively) 45th percentile and 30th percentile nationally.*****  And that's the moral problem.

For the poor end of the spectrum, for whom service jobs are increasingly unsustainable, and for the lower middle class which is losing factory jobs overseas and increasingly to robots, these numbers reveal a rich environment for the growth of discontent.  For the richest of the rich, who subscribe to the Gospel of Pure Capitalism and make the claim that regulation will only ever harm them and (through them) the country,... well I imagine that they don't think too much about it.

I don't know about you, but having pieced together this story, I feel the need to compare it to another narrative, which has such sway over our national consciousness: the American Dream.  The idea that with effort anyone can improve their situation and pass on a better, healthier life with greater potential to their children is a stark contrast to the reality of life for so many millions in our country.  Our society is neglecting them, and leaving them behind, apparently for the sake of protecting the wealthy few.

As a country, is this who we want to be?

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Not steering by the venal chart
That tricked the mass for private gain,
We rise to play a greater part.
Reshaping narrow law and art
Whose symbols are the millions slain,
From bitter searching of the heart
We rise to play a greater part. 
     - from Leonard Cohen, "A Villanelle for Our Time," 2004

*Beware links to tvtropes.org: there be time-wasting dragons here
**Actually, there's an ongoing and unresolved philosophy of science debate regarding why math has been so effective at describing the workings of the universe.  We have observed reality ('the universe') and we have conceptual structures that seem to have predictive power about the universe ('physics', or 'applied mathematics').  We also have something else: the observer ('conscious beings' or 'minds') that construct and note this relationship.  But what is the relationship between these three?  Does math somehow literally form the underpinnings of reality, i.e. the laws of physics are actual laws written on a metaphysical stone tablet?  Is describability an artifact of human intelligence only?  Can we apply the anthropic principle, and say that the universe MUST be intelligible for intelligent life to arise within it?  I need to figure out what the name for this question is - and when I do, I'll write more about it!  In the meantime, I strongly recommend this article from the Institute for Advanced Studies at Princeton: On Math, Matter and Mind.
***I have a neat idea for a functional magic system kicking around the back of my head based on this question.  It's an incredibly arcane and unwieldy type of magic where you have to self-consistently rewrite the local laws of physics to get what you want done.  Lots of unintended consequences.
****JK! no srsly LOL.
*****You can calculate the living wage in your area here: http://www.livingwage.geog.psu.edu/