The Motley Monk holds a different view--a conservative view--which holds that there will always be differences between groups, whether the economy of a particular state is capitalist, socialist, laissez faire, or communist. The same goes for its political structure. It matters not one whit whether it is democratic, monarchist, or totalitarian.
"The poor you will have with you always," Jesus said, endorsing neither poverty nor ignoring their plight. Quite the opposite! But, to focus solely upon the poor to the neglect of the wealthy who also will be with you always is to mire the poor in poverty rather than to provide them the means--the "hand up," U.S. House Minority Leader Nancy Pelosi (CA-D) calls it--to participate in leaving poverty behind. Isn't that the goal?
"The rich you will also have with you always," The Motley Monk says. They are a critical element in any society whose members want to eliminate as much poverty as possible...aware that "the poor you will have with you always."
What causes "income inequality" and why are liberals so wrong for decrying it?
A report published by the National Center for Policy Analysis explores 6 of those causes.
Of those causes, 2 are well-known: 1) family breakdown and 2) government welfare programs which incentivize poverty. (As a side note, The Motley Monk would observe that some research suggests the latter may be a causal factor of the latter or, at a minimum, the two correlate.) But, three additional reasons are less well-known. These reasons concern how official measures of income growth make it inevitable that the "rich become richer."
First: Income distribution is split into "fifths" (or "quintiles") of households.
This artificial division gives the impression of greater income inequality than actually exists. How so? The number of individuals in each quintile is not equal. There are far more people--and workers--in the upper-income brackets than in the lower-income brackets. Thus, liberals convey the misleading impression that individuals at the bottom of the income ladder are making fewer gains than they are in reality. To wit:
- In 2013, there were 82% more people in the top 20% of households than in the bottom 20%.
- In 2006, 81% of households in the top 20% had 2 (or more) workers. Only 13% of households in the bottom 20% had 2 (or more) workers. No one worked in ~40% of households in the bottom 20%.
In sum, individuals at the bottom of the income ladder have been making greater gains than liberals are willing to admit.
Second: Assessing income inequality by comparing quintiles of households fails to account for the fact that people in different income divisions don't necessarily remain in those divisions throughout their lives.
Income mobility makes it possible for individuals to accrue greater wealth and lower income inequality--as long as the number leaving poverty is greater than the number of people entering poverty. Thus, when low-income individuals move into higher income brackets, their wealth is correctly reflected in the upper-income brackets they reach, not in the lower income brackets that they leave behind, that is, unless the number of people living in poverty is grows--due to family breakdown and government welfare programs.
What liberals aren't willing to admit is an astounding fact: Income mobility continues to be a characteristic of the United States' economy. To wit:
- The Federal Reserve Bank of San Francisco report that of all adults in America in 2013, 67% have higher levels of incomes than their parents.
- In 1986, 40% of people in the lowest 20% of income earners were by 1996 in a higher income bracket. ~50% of the people in the lowest 20% in 1996 were by 2005 in a higher bracket.
- One study tracked 25- to 60- year-olds over a 44-year period. It found that a majority of Americans spent at least 1 year in the top 10% and 75% spent at least 1 year in the top 20%.
Third: Upper-income individuals have more opportunities to save as well as to diversify their investment portfolios to soften the consequences of risk-taking and to generate greater capital.
This finding is nothing but simple Economics 101. With upper-income individuals having more disposable income, they are able to save more and to invest their savings in a variety of investments (called "diversifying"). Not only are they able to assume greater risk in those investments in the hope of reaping greater rewards, but they are also able to reap greater returns on their investments. To wit:
- If a wealthy individual has $500k in savings/investments and earns a 10% rate of return, that's $50k.
- If a poor individual has $10k in savings/investments and earns a 10% rate of return, that's $1k.
Now: Who's getting richer, faster? Percentage wise, the answer is "Neither." But, in terms of building greater capital, the answer is "The rich."
What liberals are not willing to admit is that "the rich you will have always with you." Furthermore, the wealthy will almost always get richer faster than the poor. Yet, "the poor you will have with you always." They can get equally rich, percentage wise, but almost never will get richer faster than the wealthy, especially capital wise. Yet, as they move up the income scale, they will have more disposable income, they will save more, and they will invest their savings in a variety of investments. Not only will they assume greater risk in those investments in the hope of reaping greater rewards, but they will also able to reap greater returns on their investments when compared to the time when they were poor.
Income inequality is an economc fact of life that liberals are all too willing to exploit in a purely political effort to make the poor believe that the rich are exploiting them, that the poor are not capable of narrowing their personal income gap vis-a-vis the wealthy, and that the poor need the government to protect them.
Why? Three assumptions generally sum up what liberals believe:
- Liberals assume the rich are heartless and take joy in seeing their fellow citizens impoverished.
- Liberals assume the poor are incapable of making the kinds of decisions that will enable them to leave poverty behind.
- Liberals assume the poor need liberals to tell them what they need and ought to do.
Conservatives understand these realities. Their economic and social policies are intended to empower the poor to lift themselves out of poverty, to build capital, and to narrow their personal income gap...all without demonizing anyone or any group for purely political purposes. Moving up the income scale--closing the income gap called "income inequality"--is all about helping people to make informed decisions based upon enlightened self-interest that advance the common good.
Let the discussion begin...
To read the National Center for Policy Analysis report, click on the following link:
"Why the 'Rich' Can Get Richer Faster than the 'Poor'."