James Q. Wilson writing in the WaPo last month:
We could reduce income inequality by trying to curtail the financial returns of education and the number of women in the workforce — but who would want to do that?
The real income problem in this country is not a question of who is rich, but rather of who is poor. Among the bottom fifth of income earners, many people, especially men, stay there their whole lives. Low education and unwed motherhood only exacerbate poverty, which is particularly acute among racial minorities. Brookings Institution economist Scott Winship has argued that two-thirds of black children in America experience a level of poverty that only 6 percent of white children will ever see, calling it a “national tragedy.”
Making the poor more economically mobile has nothing to do with taxing the rich and everything to do with finding and implementing ways to encourage parental marriage, teach the poor marketable skills and induce them to join the legitimate workforce. It is easy to suppose that raising taxes on the rich would provide more money to help the poor. But the problem facing the poor is not too little money, but too few skills and opportunities to advance themselves.
Income inequality has increased in this country and in practically every European nation in recent decades. The best measure of that change is the Gini index, named after the Italian statistician Corrado Gini, who designed it in 1912. The index values vary between zero, when everyone has exactly the same income, and 1, when one person has all of the income and everybody else has none. In mid-1970s America, the index was 0.316, but it had reached 0.378 by the late 2000s. One of the few nations to see its Gini value fall was Greece, which went from 0.413 in the 1970s to 0.307 in the late 2000s. So Greece seems to be reducing income inequality — but with little to buy, riots in the streets and economic opportunity largely limited to those partaking in corruption, the nation is hardly a model for anyone’s economy.
Poverty in America is certainly a serious problem, but the plight of the poor has been moderated by advances in the economy. Between 1970 and 2010, the net worth of American households more than doubled, as did the number of television sets and air-conditioning units per home. In his book “The Poverty of the Poverty Rate,” Nicholas Eberstadt shows that over the past 30 or so years, the percentage of low-income children in the United States who are underweight has gone down, the share of low-income households lacking complete plumbing facilities has declined, and the area of their homes adequately heated has gone up. The fraction of poor households with a telephone, a television set and a clothes dryer has risen sharply.
In other words, the country has become more prosperous, as measured not by income but by consumption: In constant dollars, consumption by people in the lowest quintile rose by more than 40 percent over the past four decades.
Income as measured by the federal government is not a reliable indicator of well-being, but consumption is. Though poverty is a problem, it has become less of one.