NCPA - National Center for Policy Analysis


January 13, 2010

Many of the same kinds of data used to claim a widening income gap between "the rich" and "the poor" -- names usually given to people with different incomes, rather than different wealth, as the terms rich and poor might seem to imply -- have led many in the media to likewise claim a growing income gap between the "super-rich" and the "merely rich," says Thomas Sowell in his newest book, "Intellectuals and Society."

Under the headline "Richest Are Leaving Even the Rich Far Behind," a front-page New York Times article dubbed the "top 0.1 percent of income earners -- the top one-thousandth" as the "hyper-rich" and declared that they "have even left behind people making hundreds of thousands of dollars a year."

Once again, the confusion is between what is happening to statistical categories over time and what is happening to flesh-and-blood individuals over time, as they move from one statistical category to another, explains Sowell:

  • Despite the rise in the income of the top 0.1 percent of taxpayers as a statistical category, both absolutely and relative to the incomes in other categories, as flesh-and-blood human beings those individuals who were in that category initially had their incomes actually fall by a whopping 50 percent between 1996 and 2005.
  • It is hardly surprising if people whose incomes are cut in half drop out of the top 0.1 percent.

What happens to the income of the category over time is not the same as what happens to the people who were in that category at any given point in time.  But many among the intelligentsia are ready to seize upon any numbers that seem to fit their vision, says Sowell.

Behind many of those numbers and the accompanying alarmist rhetoric, says Sowell, is a very mundane fact: Most people begin their working careers at the bottom, earning entry-level salaries.

Over time, as they acquire more skills and experience, their rising productivity leads to rising pay, putting them in successively higher income brackets.

These are not rare, Horatio Alger stories.  These are common patterns among millions of people in the United States and in some other countries.

More than three-quarters of those working Americans whose incomes were in the bottom 20 percent in 1975 were also in the top 40 percent of income earners at some point by 1991, says Sowell.

Source: Thomas Sowell, "How Media Misuse Income Data To Match Their Preconceptions," Investor's Business Daily, January 12, 2010.

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