03/25/2013 05:43 EDT | Updated 05/25/2013 05:12 EDT

The Myth of the 99 Per Cent

Even after having been debunked countless times over, utterly erroneous conclusions about the poor's well-being have yet again stolen the show because of a spiffy video making its way around the web.

The Daily Conversation, whose self-proclaimed purpose is to "make the world a more informed, thoughtful and engaged place," posted the video, which casted a light on American wealth and income inequality.

"One per cent of Americans hold 40 per cent of the nation's wealth," the narrator of the video alerted, referring to a chart that illustrated the data. "The bottom 80 per cent...only has seven percent of the wealth between them."

"While the richest one percent take home almost a quarter of the national income today, in 1976 they took home only nine percent," he added, "meaning their share of income has nearly tripled in the last 30 years."

To be sure, there are others -- besides those at The Daily Conversation -- who ring alarm bells about the widening income-inequality gap. Many people deem the current trend grossly unfair, for they purport it makes society's poorest even poorer and society's richest even richer.

Though these conclusions are drawn from factual data, the data itself fails to paint a picture that's complete enough to legitimately reach such conclusions about society.

The statistics, which only show the distribution of income among quintiles over a given period, don't illustrate how well real people are truly faring. Indeed, the statistics only illustrate the relative performance of statistical categories rather than the absolute performance of flesh-and-blood people.

The quintiles, which are the five groupings within which households or people are typically placed, aren't composed of the same households or people year after year. People rather regularly move up and down the income ladder.

The most recent data on mobility, which was published by the U.S. Department of Treasury, shows there was "considerable income the U.S. economy." Nearly half of taxpayers who began in the bottom quintile in 1996 had moved up to a higher quintile by 2005. Conversely, roughly 40 per cent of those who comprised the top quintile in 1996 had moved down to a lower quintile by 2005. Perhaps more astonishing, 75 per cent of the richest Americans who accounted for the one per cent of the one per cent no longer held the same status following the same time sequence.

Economic mobility notwithstanding, society's poorest -- namely, those who comprise the bottom statistical category itself -- have also gotten richer over time. But that data on income inequality doesn't and can't possibly demonstrate that.

Comparing the material welfare of society's poorest over the years more effectively gauges how well that statistical category is really doing. By that logic, the evidence suggests the poor are much better off than ever before. The real incomes of the poor today have steadily climbed over the decades, so the poor decidedly hold a larger piece of the economic pie even though it's proportionally smaller.

According to the U.S. Census Bureau, the bottom 20 per cent's real average income has risen by just under 11 per cent since 1970. To boot, not only has the bottom quintile's level of consumption consequently increased, but the general quality of goods and services able to be purchased has also improved since then.

Following the same rationale, that the poor are much better off than ever before holds even truer considering the downtrend of the cost of living.

According to Steve Horwitz, professor of economics at St. Lawrence University, the cost of living for the most part has never been lower. By computing the labour time necessary to produce something at the average industrial wage, which is a way to adjust for inflation, he found that most goods and services are especially cheaper than they were a generation ago.

Admittedly, there are some goods that have become more expensive, although the quality differences of goods then and goods now often justifies the higher price, and adjusting for those differences will reveal that altogether we are generally getting more bang for our buck.

Quite frankly, no matter which way you look at it, we're generally all getting richer.

This article was originally published in the Prince Arthur Herald.

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