President Obama recently attempted to shift the media narrative to economic inequality, calling it the “defining challenge of our time.” I’m glad our President has such a focused drive, because I thought he might take a little time off after single-handedly fixing the other greatest challenge of our time with the Affordable Care Act.
Changing topics is a common tactic liberals employ whenever news negative towards Democrats ramps up. The “War on Women” emerged at the beginning of 2012, just after the investigation into the Benghazi attacks was just beginning to heat up and our deficit was breaking $16 trillion. The Administration expects conservative media outlets to report on issues that cast the liberal agenda in a bad light, but once NBC, CBS, and CNN start spending time on these issues, a new crisis must “emerge.” This time, it’s a classic liberal favorite: economic inequality.
As I have written previously, when combating liberals’ manipulation of populist themes it is important to state the obvious. I want everyone in America to succeed and achieve the level of economic independence that they desire. However, I also realize that while a simplistic view of complex issues sounds attractive, it doesn’t work in real life. I want every American to have access to healthcare and our system needed reform, but as we knew then and still know now, the Democrat fix wasn’t realistic and isn’t fixing the problem. It especially doesn’t work for a nation of hundreds of millions of Americans living in four different time zones.
As with the above examples, the simplistic view of economic inequality is not sufficient here. The data, when examined in depth, certainly raises questions as to the validity of what Obama now calls the “defining challenge of our time.”
The Problem With Data
Most of the data politicians use to make their claims is boiled down to statistics and proliferated throughout the internet so, when we check the accuracy of a “fact,” it is confirmed immediately. However, when a “fact” rings true with our view of the world we rarely explore the analysis itself, which is obviously the most crucial aspect when verifying the validity of an argument based on logos.
A great example of this is the data used by Ed McClelland in a recent article for Slate, which basically boiled down to “North = Good, South = Bad” for economic inequality. Along with using pseudo-history to back up his claims, McClelland also weaved in some hard “data” concerning the Gini Ratio of America. The Gini coefficient is a statistical tool that measures wealth dispersal, with a 0 being perfect equality and 100 being all the money in one persons hand.
McClellend notes that Denmark is a remarkable 24 on the Gini Ratio while America is a detestable 45, similar to the scores of Mexico, Venezuela, and Jamaica. As our minds connect the incredible poverty of these areas with America, we are supposed to get angry. Surely America should not be equal in wealth dispersion with the likes of Venezuela! Liberals and average Americans who see poverty or experience setbacks along the way to prosperity also nod along, never asking the most important question: What the heck is a Gini ratio and what does it actually mean?
Breaking The Simplistic View
The Gini coefficient measures inequality among values of a frequency distribution of income. The way the data breaks down can make it possible for the ratio of a country to rise even as the number of people in absolute poverty decreases. The Gini ratio disregards important factors such as population growth, increased length of life, and income mobility. It’s a simple statistic that makes it easy to purport a dishonest representation of the data when comparing countries mainly because it disregards absolute income.
In terms of per capita income, America is consistently in the top 10 in assessments done by World Bank, IMF, and CIA whereas countries like Venezuela are consistently around 70, a difference between $50k a year and $13k a year. McClelland’s “evidence” completely disregards the most important factors of those championing economic equality, like quality of life and economic opportunity/mobility. Again, as liberals are wont to do, it’s a simplistic view of a complex issue and doesn’t support the claim that economic inequality in America is rising or a problem.
The crux of their argument is based around similar faulty logic as the Gini Ratio. You might hear something like “in 2010, the income of people in the top 20% has risen by 56% since 1970.” This is completely true, but it’s also misleading as proof of growing income inequality: the data used is garnered from income tax returns, and completely disregards changes in tax law over this time period. Since the 1986 tax reforms, more and more small businesses began filing individually rather than using corporate tax schedules. As a result, it would appear that the income of business owners has increased at the expense of workers’ pay when, in reality, the money itself is simply being reported differently.
The fact that many businesses are now filing as individual income earners is just one of a myriad of contextual factors being swept under the rug. Another area with a significant impact on the data is our increasingly aging population.
For example, an elderly widow living off of her social security check moves into the lower income percentile, indicating that she lives in poverty. In reality, her house is completely owned and she has a reasonably comfortable standard of living with the untaxable assets she holds in her name. Liberals don’t like to talk about how the percentage of homes owned debt-free without a mortage is around 10-20% higher in the two lowest fifths of income earners than in the top fifth, where only 18% of homes are owned debt-free. It simply wouldn’t fit the ideology and populist narrative they are trying to get voters to take action on.
A Few Words About The Minimum Wage
While Obama offered no policy proposals in his attempt to shift the narrative off of the Affordable Care Act today he signaled his support towards the growing narrative that the minimum wage needs to be increased to shrink the “growing” inequality gap. A large part of this argument hinges on the assertion that the minimum wage has remained stagnant over the past decades. It’s true that, although the minimum wage has increased 11 times since 1978, the present day federal minimum of $7.25 seems low and stagnant. However, as the Economist notes, a large part of this popular perception is due to “inadequacies in traditional methods for constructing price indices and estimating real income.” In other words, while wages seem to have stagnated, the amount of buying power lower income groups have has increased due to the lowered cost of the goods they frequently buy. The Economist further reports:
Using an updated price index, Christian Broda, Ephraim Leibtag, and David Weinstein find that “the real wages at the 10th percentile increased by 30 percent from 1979 to 2005. In other words, the real wages of low earners have not remained stagnant, as suggested by conventional measures, but actually have been rising on average by around 1 percent per year.”
The fallacy of the Gini Ratio results in the public misunderstanding of a key issue: economic opportunity. This leads to what we are hearing from current minimum wage increase propaganda, which blatantly ignores the resulting outcome of the contraction of the low-skill job market– or in other words, less opportunity. Again, it’s overly simplistic to suggest that every single job available in the American marketplace should be able to support a family as the fast food workers suggest by pushing for a “living wage of $15.”
I held several minimum wage jobs while I was in high school, and I was able to help my family with small expenses while I also gained experience that is now valuable as I apply for a higher-paying jobs. I even worked at a fast food restaurant, and guess what? Within 2 months I asked for a raise to $8 and received it because I did simple things like show up on time and work hard. I witnessed the amount of flakey behavior that exists in this marketplace (not showing up for work, quitting unexpectedly, showing up intoxicated, ect.), and managers actively provided economic incentives to promote employee production. The fast food industry has a high turnover rate, and after witnessing employees quitting without notifying anybody or showing up high to work, I can say that changing the base salary to $15 would destroy managers’ ability to run their workplace.
Income inequality statistics viewed over time also don’t address how these jobs impact economic mobility. Since 1970, 50% of the people in the lowest income bracket have moved up, and 40% in highest quintile have moved down in income. Economic opportunities need to exist in all forms, and disregarding the connection between of these jobs to economic mobility is unrealistic.
I sense that, like the “War on Women,” the mainstream media will latch onto this populist message and stop reporting on the highly flawed Affordable Care Act. Democrats will flock to it in the hopes of attracting votes, and will use it to challenge Republicans next year. Don’t be afraid to engage with your fellow Americans and let them know that prosperity for all Americans is a core value of conservatism. Sadly, the Democrats are approaching income inequality with the same type of flawed logic that led to the Affordable Care Act. A Democrat-pushed fix to this “issue” will garner votes, but it is a dishonest representation of reality that will only lead to more hurtful legislation for Americans.
Taylor Smith | Belmont University | @taylorsmith11_5