The Free Market 21, no. 1 (January 2003)
As details of the 2000 Census emerge, commentators across the country are spinning “somebody done somebody wrong” economics to describe the US economy in the 1990s. Their recurring theme is that rich Americans got richer because poor Americans got poorer.
Some put a racial/ethnic slant on the theme. Others focus on neighborhoods and regions—for example, incomes in inner-cities lagging incomes in suburbs. Still others drop any pretense of racial/ethnic/area concerns, opting instead for raw class envy.
Tracing causation is unimportant to the commentators. That some Americans fared better economically in the 1990s, while others lagged, “proves” for the commentators that those who gained did so at the expense of those who lost. Correlation establishes causation, especially when everything can be wrapped in politically correct platitudes.
What about the research amassed by economists about income differences? The commentators typically ignore it. Should we be surprised? No.
After all, the research shows that our incomes—be they large, small or somewhere in between—reflect (1) our usefulness to our fellow citizens and (2) the ease with which fellow citizens can find substitutes for us. People don’t steal their incomes; people earn them!
Needless to say, neither factor explaining income differences supports a “somebody done somebody wrong” story, does it?
Notwithstanding the gulf between commentators and logic/evidence, income variations decompose into the influence of the above two factors. Shaquille O’Neal, for example, has an income in the economic stratosphere because Americans back their love for basketball with lots of dollars, and there are very few 7’ 3”, 330 lb. men who can play the game at his skill level. Take away Americans’ love of basketball, or the uniqueness of O’Neal’s basketball attributes, and O’Neal’s income falls.
More generally, US government statistics confirm that high-income families in the United States (those in the top 20 percent) are headed by well-educated people in their prime working years (age 35–64), whose income is supplemented by earnings from other family members, especially spouses. At the other end of the spectrum (the bottom 20 percent) one typically finds, along with non-working retirees, people who have little education, are younger (below age 35), and in single-parent-family settings.
For example, 34 percent of the low-income householders in 2000 had not completed high school, compared to only 3 percent for high-income householders. Likewise, only 8 percent of low-income household heads had completed college, while 58 percent of high-income household heads had finished college.
In addition, only 44 percent of low-income household heads were in their prime working years, whereas 79 percent of high-income household heads were in this category. Only one parent was present in 49 percent of low-income households, whereas 94 percent of high-income households were husband-wife families. People don’t steal their incomes; people earn them.
Interestingly, the average number of workers in a high-income household in 2000 was 2.2. The corresponding figure for low-income households was 0.84. As far as work effort is concerned, the 20 percent of households classified as high-income households were responsible for 26 percent of the total number of hours worked. The bottom 20 percent of all households contributed 9 percent of total work time. In other words, high-income families worked about 2.9 times as many hours as low-income families. Again, people don’t steal their incomes; people earn them.
Since the late 1960s and early 1970s the percentages of American households that are either single parent families or dual-earner families have both been rising. These joint trends increase measured income inequality in the United States. Household arrangements that generate more income are rising, while other household arrangements that generate less income are simultaneously rising. Rather than “proving” that “somebody’s done somebody wrong,” the rising income disparity demonstrates, yet again, that people don’t steal their incomes; they earn them.
Is evidence like this buried in government vaults? Does it take a “top secret” clearance to access it? Not at all! Indeed, I found it featured in a widely used economics textbook for college/university freshmen and sophomores. The textbook, Economics: Public and Private Choice by James Gwartney, Richard Stroup, Russell Sobel, and David Macpherson, is currently in its tenth edition. The textbook cites readily-available US-government publication sources. The evidence is easily accessible.
Alas, these commentators are guilty of either shoddy work or deceitfulness. There is no excuse for either.
T. Norman Van Cott is professor of economics at Ball State University (tvancott@bsu.edu).
