Rachel at Tinkerty Tonk writes about how inequality in the USA isn’t that bad. She approvingly cites the following number-fudging bit:
How we’re supposed to read this is that the USA has a very uneven income distribution, that the poorest 10% only get 39% of the median income, that the richest 10% get 210%. Compare and contrast that with the most egalitarian society amongst those studied, Finland, where the rich get 111% and the poor get 38%. Shown this undoubted fact we are therefore to don sackcloth and ashes, promise to do better and tax the heck out of everybody to rectify this appalling situation.
But hang on a minute, that’s not quite what is being shown. In the USA the poor get 39% of the US median income and in Finland (and Sweden) the poor get 38% of the US median income. It’s not worth quibbling over 1% so let’s take it as read that the poor in America have exactly the same standard of living as the poor in Finland (and Sweden). Which is really a rather revealing number don’t you think? All those punitive tax rates, all that redistribution, that blessed egalitarianism, the flatter distribution of income, leads to a change in the living standards of the poor of precisely … nothing.
In reality, of course what matters isn’t the median but the mean. The ratio of the median to the mean is an important indicator of inequality, and as it happens, the USA’s ratio appears to be really low. Going by the statistics of the 2005 Human Development report, we get the following picture:
In the USA, the poorest 10%’s average income is 19% of the national mean. In Sweden it’s 36%; in Japan it’s 48%; in Norway it’s 39%. Norway’s GDP per capita, adjusted for inflation, is about the same as the USA’s; Japan and Sweden’s are about 30% less. The Norwegian bottom decile therefore makes twice as much as the American bottom decile; the Swedish bottom decile makes almost half again; and the Japanese bottom decile makes almost twice.
Similarly, the bottom 20%’s average income is 27% of the national mean in the US, 48% in Norway, 46% in Sweden, and 53% in Japan. So the Norwegian bottom quintile makes 70% more than the American one, the Swedish bottom quintile makes 20% more, and the Japanese bottom quintile makes 45% more.
This may not apply specifically to the bottom 20%, but Swedes and Norwegians get to work less than Americans, too. The average American works 1777 hours per year, the average Japanese 1828, the average Swede 1316, and the average Norwegian 1328. So Norway not only has the same inflation-adjusted GDP per capita as the US and gives its bottom decile twice the purchasing power as in the US, but also manages to do that while working its population 25% less.