8.28.2008

Income Inequality: What the Candidates and the Media Won’t Talk About

by Jeff Siegel

According to a widely accepted measurement of income inequality, the United States is closer to Mexico than it is to Canada. By this measurement, called the Gini coefficient, the U.S. is one of only three wealthy countries where income inequality approaches Third World levels.

Surprised? I am. I knew it was bad here, but I didn’t know it was this bad. The Census Bureau released its 2007 income numbers this week, and there was the U.S. Gini, buried at the bottom of the news release. The number was .463, a touch better the .470 recorded in 2006. But don’t get too excited by the improvement. Canada’s Gini is .326 and most of the European Union is in the high 20s and low 30s. And Mexico, with its consistent economic distress and immigrants fleeing poverty? It’s .461, according to the U.N.

And the numbers just get better.


In 1980, when Ronald Reagan was elected and told the American people he’d get government off our back, the Gini was .403. In other words, after 27 years of Republican and Republican Lite rule,* income inequality has increased by 15 percent. One more comparison: Between 1967, when the Census Bureau started tracking Gini, and 1980, the number hardly increased at all — from .397 to .403.

What does Gini measure? Income equality, where 0 represents perfect income equality, while 1 represents perfect inequality. Is Gini a good measure? Mostly, say the experts, though it has some flaws. It doesn’t do a great job pinpointing which part of the income pie is more unequal; rather, just that income is unequal. A poor country like Bangladesh (.334) could have a relatively low score because so few people who live there have high incomes. Plus, Gini measures income instead of wealth, so that it may actually understate inequality in countries where the rich have assets instead of income. One of which, oddly enough, is Sweden, and which may also explain Mexico’s relatively low Gini.

Obviously, there will always be a little inequality, and this is not a bad thing. It’s the incentive that greases the system, as the collapse of the Soviet Union demonstrated. But, generally, the higher the Gini, the worse off a country is. Would you rather live in Denmark (.247) or Sierra Leone (.629)?

And please don’t argue that inequality is not a problem. It’s a horrible, terrible problem (even if you ignore the moral implications). Income inequality stunts economic growth, decreases political cohesion, and increases social costs. In a skewed system, where most people are too poor to afford health care, they can’t work. This reduces growth, increases unhappiness, and puts an increasing tax burden on what remains of the middle class.

So what does all this mean for this fall’s election? A lot, which no one will dare talk about:

• Neither candidate will mention this. You may hear some corporate salary bashing, but you won’t hear how income distribution has become more skewed. No one will use the word Gini, no one will mention how it has increased since 1980, and no one will tell the American middle class that it is smaller than it was in 1980. If the politicians did that, they’d have to take the blame for causing it.

• Scapegoats will be found. The politicians will blame NAFTA (the North American Free Trade Agreement), immigrants, oil and commodity speculators, or the villain of the moment. Fix those, they’ll say, and the recession we’re not having will go away and all will be wonderful again.

• The media will cover the economy, but in human interest terms that won’t discuss causes or solutions — auto worker Bob who has been laid off or single mom Mary who can’t afford gas. It will also focus on the we said/they said of post-modern politics, in which the story is not about causes or solutions but about the argument. Case in point is this USA Today article about the census income numbers. Most reporters don’t know the difference between Gini and I Dream of Jeannie.

Is it any wonder we’re in the mess we’re in?

*For those who don't regularly read this blog, Republican Lite would be the Clintons, followers of the Democratic Leadership Council, and most of the organization that calls itself the Democratic Party today. For more background on this, please see the short series, "2008 Election Manifesto: Voting Your Conscience isn't Wasting Your Vote."

For more background on the issue that supposedly the public cares about the most — that would be the economy — please check these archival posts:

(Graphic from radicalgraphics.org, which offers its material for free.)








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