Lying With Statistics?
Scot Winship reviews Thomas Piketty’s book, Capital in Twenty-First Century:
The Piketty and Saez data for the U.S. indicate that between 1979 and 2012, the bottom 90 percent’s income dropped by over $3,000.
But this ignores transfer income, such as Social Security. It ignores employer benefits, such as health insurance. And it ignores charges in household size over time.
When I incorporate these improvements using the Census Bureau data, I find that median post-tax and -transfer income rose by nearly $26,000 for a household of four ($13,000 for a household of one) between 1979 and 2012.
What Piketty and Saez neglect to include is transfer income, so it is not a fair representation of the change in income over time. People are better off because of the government transfers they receive.
Social Security, benefits and government transfers are such a large part of compensation now that not including it misrepresents the data.
It likely will become a larger part of our compensation in the future, it isn’t going away any time soon. It should be included in any other income comparisons present and future.
We are becoming a welfare state, people are earning more but the government is giving them more. Not the most optimal way to sustain economic growth.
Is anyone even thinking about our growing deficit anymore?
Social Security is not a transfer as you pay into the pot before you get money out – Strike 1
Most low-income people are part-timers and do not receive benefits or cannot afford the premium – Strike 2
I don’t know what a “Charges in household size over time means” but most people are waiting longer to have families – Strike 3
Your Out!
“The Piketty and Saez data for the U.S. indicate that between 1979 and 2012, the bottom 90 percent’s income dropped by over $3,000.”
This statement sells a bit better than showing how much income rose. It is all about defending his argument.
Well he is trying to sell a book here.
There are many activists that love to point out what is going wrong in the country. This book is appealing to those individuals. People that are blinded by their beliefs that don’t understand how simple is to alter a statistic to prove a point.
The problem is that because income inequality has become a hot topic, everyone believes that they can write a book about it. Writing is easy, even reading numbers out of a table is easy, but interpreting what those numbers mean and how they relate over time is what makes it challenging. It surprises me that this is a study from Berkeley.
Let’s consider the data is correct. We have experienced the Great Recession (one of the worst recessions thus the great in the name), is to be expected that income significantly fell during that period. The economy suffered a downturn that left us all worse off, and although we have seen some recovery, it is not significant yet, and even if it was, the economic trend line fell, we are in a lower path of economic growth. So are the numbers wrong, probably, but there are reasons why income has decreased, and it is not due to inequality.