Iron Ladies
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Iron Ladies

The Triumph of Math Over False Narratives

People have ulterior motives and preconceived ideas — numbers don’t.

I love you, math. You solve so many arguments and misconceptions.

I love watching a false narrative — especially a narrative that’s accepted by BOTH sides of the political spectrum — get destroyed, not by some flowery rhetoric by a jailhouse lawyer, but by math.

As an example:

As the Income Inequality narrative goes, we have a “hollowing out” of our population, economically speaking. Our middle class is shrinking. All the profits from the last “X*” years have been vacuumed up by the rich. The people in the middle class are falling into the lower income brackets, down into poverty. If this inequality keeps growing, we’ll be re-enacting the French Revolution within another decade or so.

(*If you’re on the political left, you always date “X” to the inauguration of Mr. Reagan. However, “X” is actually back in the late 60’s. See charts below.)

The GINI ratio, the internationally accepted standard to measuring income inequality (there are other methods as well), seems to validate this grim narrative, having risen at about the same slope line since the late 1960's….

Income Inequality (GINI Ratio) United States

…. as do the statistics on real average hourly income, which peaked back in the early 70’s. We’ve been trying to get our wages back back up there ever since. Unsuccessfully. Even with all those rich people vacuuming up all the money.

Average real hourly income, historical

This inequality narrative, reinforced by many graphics which we’ve all seen, seems to show an America which is reverting back to the days of the Vanderbilts and the Carnegies, that 1880’s era where the megarich all had mansions in Connecticut, with dozens of servants, who moved seamlessly through the house on hidden floors and staircases so they wouldn’t trouble the family or their guests.

The Vanderbilt Summer “Cottage” (I kid you not. Their main residence was in NYC)

And further, the narrative was brought front and center in the 2016 election, because for the first time, all candidates (Democrat, Independent-Socialist, Green, and Republican) were talking about it. Ultimately, the paid chattering class gave some credit to this inequality narrative for smashing the Blue Wall and electing one of the oddest, most unlikely candidates in US history.

Imagine my surprise, then, when the narrative was shattered by the AEI, who took the time to draw a very simple graph based on data obtained from the Census Bureau.

So, yes, the middle class is still shrinking; that part of the narrative remains unchallenged. However, the assumption that the lower bracket is growing in response is false. As it turns out, the lower income bracket is ALSO shrinking; and since there’s nothing below the bottom in which to fall, that can only mean that the prior lower income earners are moving into the middle class, and that the former middle class is substantially moving into the upper income group, which has shown explosive growth since 1967.

I’m not going to lie to you; I need to noodle on this a bit more, because it seems counterintuitive. If I use the Measuring Worth Calculator, I find that at most, the equivalent to making 100K in 1967 was $17,800; from what I can remember about prices in my childhood…..that SEEMS about right. The median home price in 1967 was about 20K, for example.

However, the ratio of median housing price to median income has not stayed the same over the years, which could explain why people who earn 100K feel “less rich” today than somebody who earned $17.8K back then. That would also explain why somebody who earns 35K today might feel “more poor” than somebody who earned the equivalent to 35K back in the late 60’s.

At any rate, however, this information explains why “income inequality” doesn’t resonate with the average voter, no matter how hard the political left tries to beat its drum; only those dropping down into the lower bracket would respond to that messaging, and the data shows that that the number of people who are “slipping” is smaller than one would expect.

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Kady M.

Kady M.

765 Followers

Free markets/free minds. Question all narratives. If you think one political party is perfect and the other party is evil, the problem with our politics is you.