This Got My Attention

by Jimmy Akin on May 30, 2007

in Economics

Here’s how the story starts:

Imagine a line composed of every household with children in the United States, arranged from lowest to highest income. Now, divide the line into five equal parts. Which of the groups do you think enjoyed big increases in income since 1991? If you read the papers, you probably would assume that the bottom fifth did the worst. After all, income inequality in America is increasing, right?

Wrong.

FIND OUT HOW IT FINISHES.

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I think people in this country who cannot even afford to finish college because they cannot pay day care for their kid (and NO, the government will not help) have a right to be a bit miffed. I think some of you are confusing capitalism and the "American Dream" with Catholic belief.
Good for some of you that you're fabulously rich through your hard work. Many aren't.

Wow, our society is fair, awesome, and totally rewards hard workers instead of lucky schmucks who got a break or were born into blue blood.
Well, as I posted two posts above you, we put ourselves through college and did it without being blue-bloods (my family were immigrants, my husband's were dirt poor). It is not necessarily about worker harder, but worker smarter - that is, making the decisions that will lead somewhere.... I am not a "prosperity theology" person - I don't believe for a minute that God "wants us rich" above all else - but I will say that you have to get rid of the anger and envy first and be gratefulfor what you have before you can move forward. Your post was very bitter. May God bless you and your family.

And then there are those who bust their butts at 40 hour a week jobs that pay crappy, just so they can still see their kids, instead of trying to work two minimum wage jobs to "work hard and get ahead like they should". Which they'll have to rely on NFP to have less of because they can't afford them unlike the rich people with a 40 room mansion that have 1 or 2 kids tops.
Wow, our society is fair, awesome, and totally rewards hard workers instead of lucky schmucks who got a break or were born into blue blood.

We had no family money (hardly any family!) and out ourselves through college and grad school. It CAN be done.
anonymous two,
Congratulations on such a tremendous success!!!
Hope you and yours continue to reap such blessings!

I just went to my file cabinet and checked our income taxes, and sure enough, we fit into this category - last year our business cleared almost $250,000. When we got married my husband was doing whatever work he could find, from selling health club memberships to hourly landscaping, and I was a part-time "gypsy" college teacher making no more than $4,000 a year (my best year). During that time we raised three children, none of whom needed loans for college.
We had no family money (hardly any family!) and out ourselves through college and grad school. It CAN be done.

"Larry, what makes you think that J. K. Rowling didn't work hard?"
You're right - a quick assumption on my part. I was trying to show support of one of Esau's previous posts that while there are those who have started with nothing and worked through trials and overcame obstacles and "worked their fingers to the bone" - the Horatio Alger-esque way, in other words - there are still others who have become wealthy by 'apparently' easier methods. Just a different type of hard work. Writing best selling novels is not easy. I used Rowling as an example because she just came to mind. I'm not jealous or envious, mind you - more power to her. We're fortunate to be living in a society where it's still possible to improve one's lot and still get to keep some, and sometimes most, of what is earned.

Esau,
We cross-posted; when I checked back, I saw the Star Wars Origins link.
Thanks very much for posting it. Those similarities are toooo much. Lucas really should have mentioned a "Thank You" to Herbert, among others.
I'm going to have fun poking around that website for a while.

Nothing under the sun is new, neither is any man able to say: Behold this is new: for it hath already gone before in the ages that were before us. (Ecclesiastes 1:10)
As for Dune, I've never gotten around to reading that book, but I've heard that it's pretty good. I once looked at it when I was much younger, just after the 1980s feature film came out, but decided against it when I saw a glossary(!) at the end of the book. Maybe I'll take another look at it after I finish Pope Benedict's Jesus of Nazareth (if my local library gets around to ordering a copy).

Cajun Nick,
If you don't believe me about Dune and Star Wars, here's a site I just ran into that practically summarizes my suspicions:
Star Wars Origins

Cajun Nick,
Thanks for that!
You can actually do the same between Dune and Star Wars as well!
Nothing's original these days, unfortunately.
It's all recycled.

Touching on the commment by LarryD and subsequent question by labrialumn:
Happy Catholic recently posted this little gem concerning Harry Potter and Star Wars.

I thought that the Roman Catholic Church held to a theology of the Cross, not a theology of glory, Esau.
labrialumn:
14 But God forbid that I should glory, save in the cross of our Lord Jesus Christ: by whom the world is crucified to me, and I to the world. (Gal 6:14)

I thought that the Roman Catholic Church held to a theology of the Cross, not a theology of glory, Esau.
Larry, what makes you think that J. K. Rowling didn't work hard?

Esau - problem with me is, I work too hard at not working too hard :-)
And the pay isn't that great, either.

...it's possible to improve one's life by applying oneself, and either reaping the rewards of hard work, striking it rich through opportunity, and/or being in the right place at the right time with the right idea.
LarryD:
So true!
Hey, JK Rowling was penniless until she wrote "Harry Potter" and now she's probably the richest person in the UK - so it's possible to become wealthy without working hard, too.
Now, if only that happened to me! ;^)

Hey, JK Rowling was penniless until she wrote "Harry Potter" and now she's probably the richest person in the UK - so it's possible to become wealthy without working hard, too. I'm not holding her up as a role model or anything, only as an example that it's possible to improve one's life by applying oneself, and either reaping the rewards of hard work, striking it rich through opportunity, and/or being in the right place at the right time with the right idea.

"The U.S. Treasury found that 85.8 percent of tax filers in the bottom income quintile in 1979 had moved on to a higher quintile by 1988 — 66 percent to second and third quintiles and 15 percent to the top quintile."
I am one of those!
In 1979 I filed income taxes to get back the $15 or so that was witheld at my evening job when I was in high school. In 1988 I was making enogh that they were not taking SS out of my checks by years end.
But note: My family whom I lived with in 1979 was in the top quintile.

"Trying hard" means trying to do all you can to make every opportunity possible.
Opportunities are like gold mines. Some strike it rich with little work, while many do lots of work and gain little.

Thanks Blackadder for the article!

"The U.S. Treasury found that 85.8 percent of tax filers in the bottom income quintile in 1979 had moved on to a higher quintile by 1988 — 66 percent to second and third quintiles and 15 percent to the top quintile."
http://www.jewishworldreview.com/cols/williams0104...
If 15% of people in the bottom income quintile have moved into the top quintile ten years later, it's not surprising that Esau might know some of them.

...those who do not (no matter how hard they work) are ignored and told "You just don't try hard enough."
A Non,
Perhaps that may very well be true.
These folks may not be trying hard enough at all.
They're probably your typical Americans sucked into complacency, merely "thinking" they're working hard.
For example, some Americans go to work 9 to 5 every day of the week and call that working hard.
But if their goal is to become wealthy, are they trying hard enough to achieve just that?
The folks I know who became successful and affluent held full time jobs, went to school at the same time, planned out what they wanted to accomplish, conceived and carried out every possible action to achieve just that.
In other words, they didn't sit on their asses complaining "I'm working hard and getting nowhere", wondering why they're not rich.
Also, mind you, these folks came from impoverished families, but, in the end, they achieved the American dream by taking advantage of every opportunity, if not, making every opportunity possible by attending schools and networking.
Some started their own businesses (there were a few who even took advantage of the dot com boom back then and raked in the dough that way) and others who became wealthy through wise investment strategies (e.g., Qualcomm), while still others who in the end took up well-paid careers (e.g., investment banking) that offered them handsome salaries and signing bonuses.
This is what's meant by "trying hard".
"Trying hard" does not mean sitting on your ass, complaining why you're not rich and doing nothing about it.
If what you're presently doing is not producing the desired results (i.e., "getting rich"), then plan and carry out other contingencies. I mean, it's simply insane to do the same thing over and over again, expecting different results. That simply is NOT "Trying Hard".
"Trying hard" means trying to do all you can to make every opportunity possible.

"The 2% that actually do make a profit are paraded around as if anyone and everyone can make a million by buying the stuff and using it."
This is also true with the scam known as "capitalistic society." The people who "make it big" are paraded around showing "see, it is possible," but then those who do not (no matter how hard they work) are ignored and told "You just don't try hard enough."

M.Z. Forrest,
I believe your original remarks went:
Let me get this right. You know people who came from lowest 5th in income strata (under $16,500) with children who later were earning over $175,000/year (top income strata). (I'll ignore $1mil per year) You are being silly.
Both Mike Petrik and even Mary have personal experience as well.
Yet, I don't believe anyone of us here claimed it's an everyday occurence but that it DOES occur and IS possible!
Just what silver-spoon background did you come from exactly that you don't know similar folks?
I know folks who lived in slums, who came from third-world countries with their wife and children, earned meager pay and then became entrepreneurs and now live in great affluence.
Also, something similar to what Mary mentioned, even in academia, there have been people I had the pleasure of meeting, who came from poor families (which I can relate) and the way they got to where they are now was only through a lot of hard work and sacrifice.
While the "rich kids" complained about trivial things like their dada and mama giving them a Mercedes instead of a BMR, these people were doing as many as 25 or more units a quarter while at the same time holding a full time job, memorizing bus schedules, collecting bus transfers, all the while maintaining the grades and a paycheck.
Mind you, these are sons and daughters of janitors, fast food cooks, cherry pickers -- you know, your typical "low-lifes" (at least, this is the opinion of some who look down on such people); yet, these people made something of their lives and never took their family and where they came from for granted.
Of course, they now fear that the kids they may one day raise will become the spoiled brats they had encountered in school, but I guess that's life though when the parents try to provide for their kids things the parents didn't actually have the luxury of having when they were growing up.
In this way, rich people and those who become rich are alike in that they only want what's best for their children.

I'm glad so many not only know so many in the top 20%, but people who rose from the bottom 20% to the top 20%. It's an everyday occurence. Someone should have told me that I was posting to readers from the Upper East Side of Lake Woebegon.

Dr. Eric,
Hmmm. Poor attempt at anonymity apparently.
Indeed, please be assured that he already is.
And don't give up on a call from the Lord!

Let me get this right. You know people who came from lowest 5th in income strata (under $16,500) with children who later were earning over $175,000/year (top income strata). (I'll ignore $1mil per year) You are being silly.
Don't be silly.
Lots of people in this country know graduate students and people who have started businesses. Both can be quite poor (while in school or starting the biz) and see a great jump in their income very quickly.

Relative income is actually an important meter in understanding the distribution of wealth in a nation.
We're talking about poverty, not distribution of wealth.

Mike,
Would your friend/s be interested in funding my seminary training?

I am intimately acquainted with a very nice, handsome, and smart Catholic fellow who was married with children earning, and living off, $7-11K per year in the early 1980s. That fellow -- did I mention he is very handsome? -- is earning about $1MM per annum today. And that fellow knows quite a few gents similarly situated. I doubt most American high income earners were born into high income families. Economic and social mobility in the US is the highest in world history.
Thank you, Mike Petrik!
Although I don't think your fellow being handsome have much to do with it.
I know some of the ugliest buggers in the world and they were able to become equally rich.
In a nutshell, if one really has steel determination to make something of him/herself, it doesn't matter the poverty they come from, they can still rise to the top!
There are those who lived in slums who became entrepreneurial millionaires even.

I am intimately acquainted with a very nice, handsome, and smart Catholic fellow who was married with children earning, and living off, $7-11K per year in the early 1980s. That fellow -- did I mention he is very handsome? -- is earning about $1MM per annum today. And that fellow knows quite a few gents similarly situated. I doubt most American high income earners were born into high income families. Economic and social mobility in the US is the highest in world history. Western Europe is another story altogether.

Esau,
The trick is in the testimonials.
The 2% that actually do make a profit are paraded around as if anyone and everyone can make a million by buying the stuff and using it. Unfortunately, most who buy the stuff won't use it and it may or may not work.

JamedD:
My bad.
I was multi-tasking between things and quickly read your post, thinking you were promoting that egalitarianism that often puts such a bad taste in my mouth, as you can see here by my response to it.
Dr Eric:
Yeah, like really!
It still amazes me that people buy in to those infomercials!
If it's not those two midgets (excuse me, little people), it's that Vietnamese guy.
I hear that Donald Trump is now actually getting into the act.
In fact, just the other day, I heard on a respectable CBS news radio station that he's even offering a free tape if you're one of the first callers (or something like that) to go for a seminar he's holding.

Esau,
Wow. I may not be the best writer but I am still surprised you took it the way you did.
I think we are in agreement. My point was that the change in difference between tiers is irrelevent And the simplistic example I tried to propose would make it clear that egalitarianism is not the common good.
We would want to choose this policy because it is THE MOST beneficial to the lowest even though it causes the richest to get richer even faster.
Jim

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Let me get this right. You know people who came from lowest 5th in income strata (under $16,500) with children who later were earning over $175,000/year (top income strata). (I'll ignore $1mil per year) You are being silly.
Oh, like that didn't happen in the past???
You haven't read the biographies of Captains of Industry in America who did just that even!
Those who've accomplished that today are merely following in the footsteps of those in the past who had the huegos to do just that!
Oh, by the way, thanks for practically calling me a liar, M.Z..
But, yes, I do know folks who have --

I know poor people who did just that and became millionaires -- not by sitting on their asses and doing nothing about it, but by being proactive and doing something to resolve their predicament.
Let me get this right. You know people who came from lowest 5th in income strata (under $16,500) with children who later were earning over $175,000/year (top income strata). (I'll ignore $1mil per year) You are being silly.

Personally, I prefer desserts to deserts, but to each their own! ;-)
Thanks for the correction there, LarryD!
yeah -- I think nobody wants a desert -- unless it's Vegas! j/k
;^)

"People who work hard and capitalize on their talents deserve their dues and just deserts!"
Personally, I prefer desserts to deserts, but to each their own! ;-)

"People who work hard and capitalize on their talents deserve their dues and just deserts!"
Personally, I prefer desserts to deserts, but to each their own! ;-)

at the same time will cause the largest increase in diference between the richest and everyone else or between each tier.
JamesD,
I think Tim J. said it best here:
"I have what I need... I don't care HOW much Bill gates has. That is irrelevant. Some people are taller and better looking than me, too. Is that a problem?"
You don't see Tim J. living in a mansion, do you? But he doesn't seem to be complaining about the disparity between his income and that of the richest man in the world.
Are you telling me that everybody should have equal wealth?
Go form your Communist country then -- but from what I hear, it's an economic failure!
Even China can't help but take advantage of Capitalism -- although I fear their current intentions in heavily investing in American corporations, which speaks of an ominous Chinese take-over of Corporate America just waiting to happen.
If folks really want to earn BIG MONEY, they should rightly get off their asses and STOP COMPLAINING, for goodness sake!
I know poor people who did just that and became millionaires -- not by sitting on their asses and doing nothing about it, but by being proactive and doing something to resolve their predicament.
If your egalitarian solution is to force an equal-pay increase for each and every citizen, then I'll have no part in this tyranny.
People who work hard and capitalize on their talents deserve their dues and just deserts!

So what is it that we want?
If it can be known that a policy will provide the largest income increase to every tier than any other policy, and at the same time will cause the largest increase in diference between the richest and everyone else or between each tier. All else being equal, would this not be the moral choice for the common good?

"It is a paradoxical truth that lowering tax rates increases tax revenues."--President John F. Kennedy, December 1962.

"not really needed"
Ami, it's really dangerous to refer to any wealth held by anyone as "not really needed." It makes you sound like someone is the arbiter of what is needed an what is not. It's also classic class-envy speak - it makes you sound like Hillary Clinton. You need to note what was said earlier - high achievers don't eat their "extra" money, they invest it, which creates jobs for others. If some entity were to gather up all the "not really needed" excess money, and then redistributed it out to those who didn't have any excess money, then would that create jobs?
People made fun of Reagan's "trickle-down" economics concept, but it really holds true. That's why the economy in the US has been growing by leaps and bounds, and our unemployment rate is at nearly an all-time low, following the income tax cuts a few years ago - gov't takes less tax money from all of us, including a lot less from the "rich". Did the rich just sit on that money that they weren't handing to the gov't? No, they have invested it, which grows our economy, increases jobs, etc. Incidentally, it also increases tax revenues, which the left can't understand at all (they don't see how you can increase revenues without increase taxes.)

Percentages lie. The middle class is dead.
Really? I didn't see the obit. in the paper.

OK, so maybe Bill Gates won't pay for me to go to the Seminary, but what about Tom Monaghan? ;-)

M.Z. Forrest,
That's all well and good, but as a matter of fact production hasn't been decreasing in the U.S. in the last 10 years.

From the econ standpoint, there are 3 possibilities in any economic trasaction.
1) The production cost is greater than what is saleable. (Implies production will decrease over time.)
2) The production cost is equal to what a good is saleable. (Implies production stability.)
3) The production cost is less than what a good is saleable. (Implies production will increase.)
Taking a bunch of shortcuts, economists are prefectly willing to stipulate than any one of these conditions may be present at a given and all these conditions are present in specific instances at a given time. Economics describes the general tendency of prices to approach circumstance #2.
If Bill gates has a $1 mil more dollars and I have $1K more dollars, it is a logical leap to say that condition #2 is present. Saying economics isn't a ZSG doesn't overcome this, because economics describes a central tendency, not a specific instance. For example, if a throw a ball in the air, the central tendency is for the ball to fall due to the law of gravity. At any given point, the ball may in fact be rising. Similarly, Bill Gates may indeed be getting richer, and I may be growing poorer.

The rich still got richer because the percentage of millions which is not really needed overwhelms a percentage of $16,000.
EEEEEK.
How do we explain the fact, found the the USCCB webpage that a million more people fall under the poverty line each year for the last many years?
Don't buy this.

One shouldn't confuse an increase in income inequality with an increase in poverty. If Bill Gates gets a million dollars richer and I get a thousand dollars richer there has been an increase in income inequality, but there hasn't been an increase in poverty. Both he and I are better off.

Seems to me that this is showing a decrease in income inequality. The poor are catching up to the middle class. Not that I think that equal income is all that valuable. I am hopefull that this trend increases with the increases in the min wage (a good thing IMO). I can't see it hurting them with the projected demands for labor.
One thing to take note of is that this is for "households with children", and does not include other households. I think these are the groups to be most interested in. However, this would seem to eliminate a substantial amount of the population and therfor may not be adequate in understanding the shanges in income equality.

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