Inequality isn't rising after all?

[Theben]

Originally posted by rmsharpe
Yes, you did.

Don't blame me for the article.

[Vanguard]

Originally posted by ramseya
Well I suppose the research is predicated on the assumption that the poor would never have used the services as much as the rich anyway. With that assumption held, the simple fact that inflation rates are different between services and goods and between certain goods and other goods means that the rich man's dollar buys technically more but relatively less of the same basket of goods and services as it did 30 years ago while the poor man can buy both absolutely more and relatively more than he could 30 years ago.

That would basically mean that there isn't a greater disparity in inflation-adjusted purchasing power than the disparity of 30 years ago.

So, since poor people can't afford to buy services, they are richer? This is nonsense.

There is no law saying that rich people can't buy goods from China. Nor is there any reason to think that poor people don't want medical services.

If the greater selection of goods available to poor people means that they are "richer", then the greater selection of goods and services available to rich people also must mean that they are richer.

[Provost Harrison]

Originally posted by Dauphin
The rich still get the cheaper "non-durables" if they so wish, and the chances of the poor ever using the "services" used by the wealthy decreases. How does that reduce inequality?

Because it sounds like typical right-wing thinktank bollocks?

[snoopy369]

While I haven't examined the evidence presented, you guys are slightly misunderstanding the core argument (perhaps due to the presentation).

If you look at it like this, it makes a bit more sense:

1970s: Lower middle class person spends income in these percentages:
30%: Housing
25%: Food
15%: Automobile
10%: Clothing
10%: Education (ie, of children)
10%: Disposable (entertainment, nicer clothes, etc.)

Rich person:
15%: Housing
1%: Food
5%: Automobile
1%: Clothing
5%: Education
73%: Disposable

2008, LMC person:
35%: Housing (slightly more expensive)
20%: Food (slightly cheaper)
15%: Automobile (cheaper, but more gas)
5%: Clothing (yay, made in china)
10%: Education
15%: Disposable

Rich 2008:
20%: Housing
1%: Food
5%: Automobile
1%: Clothing
5%: Education
68%: Disposable

That's roughly what the article is saying... the discrepancy in proportion of disposable income has shrunk, because for the poorer folk, the non-disposable costs are lower (food, clothing, shelter, etc.) Whether that is accurate or not, I have no idea; but if it is accurate, that's a good thing.

Basically, the 'earnings' discrepancy or whatever is largely irrelevant. What those earnings can buy is what is relevant; if you take away the cash, and your employer gave you (in barter, essentially), a house, a car, food, clothes, and your other things, you'd be getting more 'other things' now than you would have in the 1970s. That is important, and the actual monetized difference is not particularly. (It's not irrelevant entirely, but far less relevant than the buying power.)

[Vanguard]

But what does the Lower Middle Class person spend his disposable income on?

He spends it on the same services and goods that this study says have increased dramatically in price (Basically medical care, I guess).

So it doesn't matter if his "disposable income" has increased as a percentage of his total income. Once he has paid for the essentials, he can still afford less "luxuries" (like medical care). He is not richer, he is poorer.

[GePap]

Originally posted by snoopy369

That's roughly what the article is saying... the discrepancy in proportion of disposable income has shrunk, because for the poorer folk, the non-disposable costs are lower (food, clothing, shelter, etc.) Whether that is accurate or not, I have no idea; but if it is accurate, that's a good thing.

Basically, the 'earnings' discrepancy or whatever is largely irrelevant. What those earnings can buy is what is relevant; if you take away the cash, and your employer gave you (in barter, essentially), a house, a car, food, clothes, and your other things, you'd be getting more 'other things' now than you would have in the 1970s. That is important, and the actual monetized difference is not particularly. (It's not irrelevant entirely, but far less relevant than the buying power.)

The arguement though is that the only reason that difference in percentages exists is because the Rich chose to buy goods whose prices have inflated further than if they bought the same goods as the LMC.

To me it is the same kind of arguement made for substituting when taking a measure of inflation. Of course inflation will seem lower if you decide that when it is too expensive people will switch from steak to hamburger, so instead of keeping the same basket of goods all the time, as the inflation for one item gets too high, substitute it for something lesser, whose price hasn't gone up as much. You really have changed what you are measuring. This argument is the same. It decides that rich people won't buy the same goods as the poor, they have the cash to pony up for better things, so lets see how much those things cost. The problem is, the rich can go back and buy the same goods as the poor, but the poor can't move up. To me that seems a obvious case of inequality.

[Dinner]

Originally posted by GePap
This is the bad side of my alma mater....

I think the study is stupid, and why wasn't housing included as a cost for the poor?

Because then they wouldn't have reached their predetermined conclusion?

[Dinner]

Originally posted by Provost Harrison

Because it sounds like typical right-wing thinktank bollocks?

These astroturf groups always try to slant things to fit their predetermined agenda. That agenda is to justify what ever the people paying them to write says they want them to justify. With real science you simply examine all the data and let the chips fall where they may; the special interest astroturf groups don't do that and that's why they're not objective science/studies.

[snoopy369]

Originally posted by Vanguard
But what does the Lower Middle Class person spend his disposable income on?

He spends it on the same services and goods that this study says have increased dramatically in price (Basically medical care, I guess).

So it doesn't matter if his "disposable income" has increased as a percentage of his total income. Once he has paid for the essentials, he can still afford less "luxuries" (like medical care). He is not richer, he is poorer.

That is not necessarily true, actually. First, the 'rich' category services and goods have likely inflated more than the 'poor' category; again, I didn't read the detailed evidence, but it stands to reason; for example, take the television. A TV in the 1970s cost significantly more than a TV in the present day, even for a MUCH better model. You can buy a reasonable LCD TV for $500; that would be a much smaller CRT TV in 1970. On the other hand, a rich person can buy a $4000 TV easily.

Second, there are many more 'rich' goods and services now than ever before. Back in the 70s, a 'rich' person bought a Betamax player, a TV, a dishwasher, and spent maybe $50 on the best cable available.

Now, a rich person can buy a new electronic toy every day of the year, for $100s each. They can spend $300 on all-access television. They can buy far more with their money than ever before... and they generally do.

I can't say if this study is accurate or not, but the concept behind it is not erroneous. Obviously you must include things like medical care in your calculations.

I'm fairly confident that you're incorrect, in any event, in saying that your average LMC member is able to buy fewer 'extras' than they were thirty years ago.

[Dauphin]

Originally posted by snoopy369
While I haven't examined the evidence presented, you guys are slightly misunderstanding the core argument (perhaps due to the presentation).

If you look at it like this, it makes a bit more sense:

1970s: Lower middle class person spends income in these percentages:
30%: Housing
25%: Food
15%: Automobile
10%: Clothing
10%: Education (ie, of children)
10%: Disposable (entertainment, nicer clothes, etc.)

Rich person:
15%: Housing
1%: Food
5%: Automobile
1%: Clothing
5%: Education
73%: Disposable

2008, LMC person:
35%: Housing (slightly more expensive)
20%: Food (slightly cheaper)
15%: Automobile (cheaper, but more gas)
5%: Clothing (yay, made in china)
10%: Education
15%: Disposable

Rich 2008:
20%: Housing
1%: Food
5%: Automobile
1%: Clothing
5%: Education
68%: Disposable

That's roughly what the article is saying... the discrepancy in proportion of disposable income has shrunk, because for the poorer folk, the non-disposable costs are lower (food, clothing, shelter, etc.) Whether that is accurate or not, I have no idea; but if it is accurate, that's a good thing.

Basically, the 'earnings' discrepancy or whatever is largely irrelevant. What those earnings can buy is what is relevant; if you take away the cash, and your employer gave you (in barter, essentially), a house, a car, food, clothes, and your other things, you'd be getting more 'other things' now than you would have in the 1970s. That is important, and the actual monetized difference is not particularly. (It's not irrelevant entirely, but far less relevant than the buying power.)

Are those actual stats? I only ask because tax isn't on there and that is one huge chunk of costs that has changed since the 1970s.

[snoopy369]

No, they are not actual stats... I was illustrating how the stats were possible, not that they were actually true.

Besides, for the truly rich person, taxes are optional anyway...

[Provost Harrison]

So hang on, you pulled some numbers out of your arse and posted them? That's a little disingenuous don't you think?

And lower middle class is not the poor either...

[Dauphin]

Originally posted by snoopy369
No, they are not actual stats... I was illustrating how the stats were possible, not that they were actually true.

Besides, for the truly rich person, taxes are optional anyway...

Yeah. I thought so.

I agree with you that it can be true with the right numbers. I just don't think it is true, else it could be shown with numbers very easily - rather than the way it is presented which is rather obfuscatory and reliant on nebulous terms.

The original problem that I was picking on was that whilst the poor may be getting more of what is available, they are losing out on choice. A rich person can choose to get more of what he wants, or get less at a higher quality. With numbers:

A standard car cost $5,000, real terms, about 30 years ago. A good car $10,000. Average earnings were $10,000 for a LMC and $100,000 for the rich (a ratio of 1:10 from the article).
Now, the cost of the good car is $12,000 and the salary of the rich is $110,000 (relative inflation of 20% and an earning ratio of 1:11 from the article).

So now, you have a LMC man better off if he chooses to keep his current car, and a rich man worse off if he chooses to keep his good car. However, the rich man can be better off (relatively and absolutely) than the LMC man by choosing a standard car instead (he could buy 11 times as many as the LMC bloke compared with only ten as many before). The LMC man has no choice as he would be hit hard if he chose to buy the good car.

I guess what I am saying is that whilst Wal-mart may be offsetting the earning disparity, it also means that the poor are stuck with shopping at Wal-mart.

[Vanguard]

Originally posted by snoopy369


That is not necessarily true, actually. First, the 'rich' category services and goods have likely inflated more than the 'poor' category; again, I didn't read the detailed evidence, but it stands to reason; for example, take the television. A TV in the 1970s cost significantly more than a TV in the present day, even for a MUCH better model. You can buy a reasonable LCD TV for $500; that would be a much smaller CRT TV in 1970. On the other hand, a rich person can buy a $4000 TV easily.

Second, there are many more 'rich' goods and services now than ever before. Back in the 70s, a 'rich' person bought a Betamax player, a TV, a dishwasher, and spent maybe $50 on the best cable available.

Now, a rich person can buy a new electronic toy every day of the year, for $100s each. They can spend $300 on all-access television. They can buy far more with their money than ever before... and they generally do.

I can't say if this study is accurate or not, but the concept behind it is not erroneous. Obviously you must include things like medical care in your calculations.

I'm fairly confident that you're incorrect, in any event, in saying that your average LMC member is able to buy fewer 'extras' than they were thirty years ago.

Well, we don't have the actual study, only this article. So we are sort of pulling numbers out of the html white space here.

And I guess poor people probably now can afford more goods than they did in 1970. And those goods generally are of better quality. But you would expect that after nearly 30 years of growth.

However, this concluding passage from the article,

The analysis could also be challenged on its own turf. The research focuses on falling goods prices. But the rising price of some services—health care, for example—may partly reflect quality improvements which, if correctly adjusted for, would bring down the inflation rate of the rich. At the very least, however, the research makes a provocative case that income inequality needs to be thought through carefully; and that the increase in Chinese imports offers some clear benefits to low-wage Americans.

leads me to believe that a large portion of the effect that they purport to discover must come from health care, the price of which has increased dramatically in the past 20 years.

The only way this passage makes sense is if they assume that rich people consume large amounts of inflating health care and that poor people consume little or none. But the fact that poor people can't afford medical care doesn't mean that they don't need it.

So to use the previous LMC example, let's say that the Lower Middle Class person's "disposable income" has increased from 10% of his total income to 15%.

In 1970 he would have spent 8% of his "disposable income" on additional medical care. But since medical care has inflated by (let's say) 50%, today he has to spend 12% of his "disposable income" on additional medical care.

So instead of having 7% of his income available to go bowling and buy sixpacks (like he did in 1970), he now only has 3%. He is poorer, not richer.

Note: I put disposable income in quotation marks because the percentage labeled disposable income in the example is not the correct definition.

Also note: As the quoted passage notes, medical care may have "inflated" or it may have "improved in quality". We'll find out the answer fifty years from now. Or at least we will pretend to.

[GePap]

Well, the notion the article mentioned about healthcare could possibly also be made about the goods and services that the rich have access to. Yes, the poor have a more varied choice of things, but so do the rich, and how do we measure the qualitative edge of the goods the rich buy vs. the goods the poor buy, and how could we judge that quality at the top has advanced less than quality at the bottom?

Then there is the issue of education, which also seems left out, and that is a huge issue with regards to growing inequality.