The Statist Quo

Whether it be the Guardian, the New York Times, the Independent, BBC Radio, or other ultra-statist commentators, the issue of income "inequity" is trumpted loud and long as the most pressing issue of the day (alongside the environment, 'free' healthcare, fuel poverty, neo-protectionism, tax avoidance, 'windfall' taxation, food miles, organic farming, GMOs, too tight underwear, you name it). An issue that if not "fixed" (by higher taxation and more government, natch) will destroy "social justice" by having all but the "mega-rich" in the workhouse. No questions asked, no alternatives envisioned.

The concept of income "inequity" is of course a relative concept. By being a relative concept, income "inequity" is also a concept of some subjectivity. There is no doubt that a poor person in Brasil would heartily change places with a "poor" person in the US or Europe. Doubtful whether that would play out in reverse of course.

Our statist brothers and sisters see this subject as a static truism which will never ever change. We are all stuck in place exactly where we are today for the rest of our lives. No opportunity to change our position, no opportunity to move up in the income stakes, we are all doomed to a Hobbseian existance of peasant farming .......... forever. The exception being the "mega-rich" of course.

As far as the US goes, an interesting report on the ability of US earners to move up the income ladder, a concept called income "mobility". A dynamic concept which by and large only dooms those who choose to doom themselves. If you are in the US, you stand a good chance of movin' on up to that dee-lux apartment in the sky. Conclusions from that report on income "mobility" in the US:

The analysis found that more than half of taxpayers (56 percent by one measure and 55 percent by another measure) moved to a different income quintile between 1996 and 2005. About half (58 percent by one measure and 45 percent by another measure) of those in the bottom income quintile in 1996 moved to a higher income group by 2005.

Economic growth resulted in rising incomes for most taxpayers over the period from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation. In addition, the real incomes of two-thirds of all taxpayers increased over this period. Further, the median incomes of those initially in the lower income groups increased more than the median incomes of those in the higher income groups.

The analysis also found that the composition of the very top income groups changes dramatically over time. Less than half (40 percent or 43 percent by different measures) of those in the top 1 percent in 1996 were still in the top 1 percent in 2005. Only about 25 percent of individuals in the top 0.01 percent in 1996 remained in the top 0.01 percent in 2005.