For Richer For Poorer

As probably many of you know, there is a cloud hanging over the future of the US and many other countries, the cloud of wealth concentration. There is nothing in life that will not be affected by this phenomenon. It obviously affects our allocation of resources and  it will have tremendous influence on who gets what. It would affect the relations between the social classes and could lead to social unrest if we allow the fissure between the haves and have nots to increase. The following is only one part of an excellent article that speaks to this issue.

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Growing inequality is one of the biggest social, economic and political challenges of our time. But it is not inevitable, says Zanny Minton Beddoes

Oct 13th 2012 | from the print edition of The Economist

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IN 1889, AT the height of America’s first Gilded Age, George Vanderbilt II, grandson of the original railway magnate, set out to build a country estate in the Blue Ridge mountains of North Carolina. He hired the most prominent architect of the time, toured the chateaux of the Loire for inspiration, laid a railway to bring in limestone from Indiana and employed more than 1,000 labourers. Six years later “Biltmore” was completed. With 250 rooms spread over 175,000 square feet (16,000 square metres), the mansion was 300 times bigger than the average dwelling of its day. It had central heating, an indoor swimming pool, a bowling alley, lifts and an intercom system at a time when most American homes had neither electricity nor indoor plumbing.

A bit over a century later, America’s second Gilded Age has nothing quite like the Vanderbilt extravaganza. Bill Gates’s home near Seattle is full of high-tech gizmos, but, at 66,000 square feet, it is a mere 30 times bigger than the average modern American home. Disparities in wealth are less visible in Americans’ everyday lives today than they were a century ago. Even poor people have televisions, air conditioners and cars.

But appearances deceive. The democratisation of living standards has masked a dramatic concentration of incomes over the past 30 years, on a scale that matches, or even exceeds, the first Gilded Age. Including capital gains, the share of national income going to the richest 1% of Americans has doubled since 1980, from 10% to 20%, roughly where it was a century ago. Even more striking, the share going to the top 0.01%—some 16,000 families with an average income of $24m—has quadrupled, from just over 1% to almost 5%. That is a bigger slice of the national pie than the top 0.01% received 100 years ago.
This is an extraordinary development, and it is not confined to America. Many countries, including Britain, Canada, China, India and even egalitarian Sweden, have seen a rise in the share of national income taken by the top 1%. The numbers of the ultra-wealthy have soared around the globe. According to Forbes magazine’s rich list, America has some 421 billionaires, Russia 96, China 95 and India 48. The world’s richest man is a Mexican (Carlos Slim, worth some $69 billion). The world’s largest new house belongs to an Indian. Mukesh Ambani’s 27-storey skyscraper in Mumbai occupies 400,000 square feet, making it 1,300 times bigger than the average shack in the slums that surround it.

The concentration of wealth at the very top is part of a much broader rise in disparities all along the income distribution. The best-known way of measuring inequality is the Gini coefficient, named after an Italian statistician called Corrado Gini. It aggregates the gaps between people’s incomes into a single measure. If everyone in a group has the same income, the Gini coefficient is 0; if all income goes to one person, it is 1.
The level of inequality differs widely around the world. Emerging economies are more unequal than rich ones. Scandinavian countries have the smallest income disparities, with a Gini coefficient for disposable income of around 0.25. At the other end of the spectrum the world’s most unequal, such as South Africa, register Ginis of around 0.6. (Because of the way the scale is constructed, a modest-sounding difference in the Gini ratio implies a big difference in inequality.)

Getting The Number Wrong

The following post is an attempt to explain the unemployment figures that were released last Friday.

By FLOYD NORRIS

Mitt Romney said on Friday that there were 23 million Americans struggling to find work. It looks as if he got that wrong, by engaging in a little double counting. The real number is around 21 million.
The just-released Labor Department report for September says there are 12,088,000 people classified as unemployed, meaning they looked for a job during the previous month and did not find one. That is the seasonally adjusted figure. The actual number the department estimated was 11,742,000.
There are no seasonally adjusted numbers for the other groups that could conceivably fit into the category — people not in the labor force who say they would like work if they could find it and people classified as “marginally attached” to the labor force.
There are 6,427,000 people counted as out of the labor force but wanting to work, and 2,517,000 classified as marginally attached.
Add them together, and use the higher (seasonally adjusted) figure for unemployment, and you get 21,032,000. If you were trying to be fair and compare apples to apples, you’d used all numbers before seasonal adjustment, and get 20,686,000.
Either way, that is a long way from 23 million.
So where did the rest come from? My guess is that Mr. Romney’s aides looked at Table A-16 of the release. That shows the 2,517,000 “marginally attached,” and breaks them into two groups. The first is 802,000 discouraged workers, and the rest — 1,715,000 — are classified as people who are deemed to be marginally attached but are not discouraged workers. That includes people who were ill or had school or family responsibilities that kept them from looking for work. If you add those two groups to the whole, then the number gets to be over 23 million. But that would represent a misreading of the figures.
Even if Mr. Romney had done his arithmetic correctly, it would be a stretch to say there were 21 million people “struggling to find work.” Of the 6.4 million who said they were not in the labor force but would work if they could, 3.3 million said they had not actually tried to find a job in the last year.