Economist - "Claims that US 'poor are getting poorer' is largely a myth" - Is he correct?

Per this videothis economist asserts that the oft repeated claim that the poor in the US are getting poorer is largely a statistical artifact and myth. Is he correct?

It depends entirely on how you chose to define “rich” and “poor”.

Obviously the poor now are not literally poorer than they were, say 30 years ago. The typical poor person today has a higher calorie intake, more consumer goods, better accommodation etc. than someone in the same economic position would have had in 1981. So by that standard the poor are objectively not getting poorer. America, in fact the whole world, is a lot richer now than it was in the past. The world’s economy has grown fairly steadily for the last few hundred years and as a result everybody is richer, including the poor.

However measured as relative wealth, the poor are not getting rich as fast as rich people. In simple terms, the 100, 000th richest person in the US in 1981 might have earned a million dollars a year. Today the person in that spot earns 10 million. Meanwhile the 100 millionth richest person in 1981 earned $30, 000 a year, while today the person in that position earns $60, 000. So while the poor are objectively getting richer, they are getting richer much slower than rich people. By the time you take into account inflation and purchasing power, the “poor” person might only make $100/wk more to spend than they had in 1981, while the rich person makes $100, 000/wk more.

That is what people mean when they say that the poor are getting poorer. It’s not that the poor are literally making less money or have less assets than they did in the past. It is that their relative share of the wealth is actually declining even as their absolute wealth is increasing.

All figures pulled out of thin air with no reference to reality or common sense.

The poor are far better off now than 20 or 30 years ago. The thing is the rich got richer much faster. So the gap between the poorest and richest is huge. Look at TV. If you were on a hit sitcom you’d make money, a lot but when the show ended, you couldn’t live on that. You had to go on acting.

I recall an old “Mary Tyler Moore” episode where the football star says if you’re on a championship winning team, you’ll be able to own a bar or maybe a restaurant. Otherwise you’re stuck selling insurance.

Now you can be on a lousy team and make millions and if you don’t squander it, live off it.

The poor are getting poorer if you compare them to the rich. The rich are getting even wealthier and getting their faster. But in absolute terms no, the poor aren’t getting less. It just seems that way, because as more things become available to the general population, they can’t afford them.

For example, when I was a girl in high school, all you could have was a TV, bike and maybe a phone and car, if you had rich parents or a job. Now kids can have that and a ton of other things. We never even had the option of designer clothes, which were just coming in as I was leaving high school.

Since teens have much more to buy now, if they don’t have it all they feel poor. But they still better off then I was, as a whole.

And again, this is as a whole, there are things that are worse off now. For instance, dental is far worse now than in the 60s and 70s. Insurance simply hasn’t kept up with that.

As others have said, it very much depends on what you mean by the term “poor”. By the relative standard, the poor have been getting poorer ever since we stopped being hunter gatherers.

The poor are holding their own, the rich are getting an ever increasing share of the wealth, and the middle class is an endangered species. The classes are becoming much more defined and upward migration, short of becoming a star athlete, is nigh impossible.

Side note:

The video links to an economist, not The Economist magazine.

From the pespective of a Norwegian, I am pretty shocked at the conditions of the poor in the US. Your country is so rich, but if you get sick, lose your job or make some mistakes, you often end up with no realistic chance of getting back on track. And when there are 100 people applying for 10 jobs, the 90 people get blamed for not working hard enough.

From my perspective, compared to other first-world countries, many Americans are really poor. Even though they can afford some of the cheap electronic toys we have nowadays.

Well put.
I’d add that, in Norway, you do pay high taxes-but you actually get something for them (government paid healthcare, clean streets, etc.).
Here in the USA, we get:
-endless foreign wars

  • a huge military
    -and enormous government bureacracy, which delivers nothing
    -a congress dedicated to lining its own pockets

Statistics often do mislead. Horwitz, the man in the Youtube (and BTW an “Austrian School” economist :dubious: ) doesn’t seek to solve that problem – he just wants to mislead in a different way!

There are poor people today and there were poor people 30 years ago. (Yes, these are in general not the same people – I wonder if deducing that astounding fact was in one of Horwitz’ papers :smiley: ) The poor people today are, in important ways, poorer than the poor people 30 years ago.

Definitions of “poor” are going to devolve into discussions of dollars and, today, a poor person can afford an electronic gadget that would have cost millions a few years ago. If quality of life is all about having electronic gadgets, then today’s people, even the poor, are fabulously wealthy. On the other hand, health care costs have risen; some of us would rather be healthy than to get Horwitz’ or Gingrich’s latest twitter 2 seconds before another guy.

Personal assessment may be a good way to get a handle on life quality. My impression is that many young Americans, including many “middle-class” as well as “poor”, feel that their economic future is much bleaker than that of their parents at similar age.

Did anyone actually watch the video? A few points:

  1. This is from LearnLiberty.Org, a libertarian “think tank”, if you want to call it that. I doubt it’s an objective source of information. Probably slanted towards ideas of free market economics.

  2. The video is talking about data between the years 1977 and 1997, so it’s over a decade old.

  3. His thesis is not so much that the lowest class is getting richer, but that there is social mobility out of that class over time. He claims that many people start out poor (say right out of HS or college) and get richer over time, as their salaries increase and they acquire assets. In fact, he claims that (IIRC) 80% of people who are poor at the start of their working lives, end up not poor later in life. I believe he is defining poor as being in the lowest quintile.

At any rate, I’m not going to research this and try to substantiate or refute it, but I just thought that, in the interest of this being in GQ, we should know what the video is about.

Americans as a whole, to their credit, have never bought into the idea that the rich got their wealth by stealing it from the poor. So arguing that income inequality is inherently unjust is not going to gain much traction.

The problem is that most of the very rich can no longer readily explain why they deserve their money. A guy like Henry Ford (or Steve Jobs for that matter) could say: I invented x, or built y factories, that made goods you probably cherish in your home right now, therefore I deserve to be rich. Most people are OK with that, even if they think Ford or Jobs were personally obnoxious. Even pro athletes or entertainers can claim they gave a lot of people a good time.

But how does a bond trader, or a banker, or a celebrity CEO or one of those people who sort of floats between high-level positions in the government and the financial sector, explain why he deserves to be a billionaire even if his company went bankrupt? Maybe there’s an acceptable explanation, but if there is, I haven’t heard it. In fact, if wealth requires explanation, no explanation but the very simplest is ever really going to be satisfactory. It’s very easy to start thinking these people must have cheated, gamed the system, or stolen their money. It’s pretty clear to me that many of the very rich did indeed get their money by gaming the system on behalf of themselves and others; in fact, it’s what they do.

This being GQ and all, do you have a cite that this is happening more now than in the past?

Russ Roberts who runs the Econtalk podcast has a similar thesis - essentially that the poor aren’t who you think they are and neither are the rich. People in the lower quintiles of income aren’t neccesarily the indigent, they are mostly just young, single people first starting out in careers. As they get older and married, they move up to higher income quintiles. Someone who makes $30k/year when he first gets out of college might be making $120k/year by the time he’s 45, and thus would have moved from, say, the lowest 20% of people to the top 20%(or whatever). It’s not really even “social mobility” per se, just natural progression in a capitalist society. His secondary point is that some of these changes in income distribution need to be considered in light of long term demographic changes. For example the baby boomer generation was larger than other cohorts, therefore when they were growing up the class of “poor people” might have been larger than in the past, and now, the class of “rich people” might similarly be larger, simply because it was the passing through time of a particularly large cohort. Same thing for things that affected household formation like the widespread social acceptance of divorce in the 1970s and 80s - single women with children as a cohort tended to be poor, and if more people get divorced, there are more single women with children, and thus more poor people even if the rest of the economy hasn’t really changed.

It’s a compelling point(not something that ideological “conservatives” come up with often) that I think deserved to be seriously considered when discussing these things, although I haven’t myself done much more research to validate whether all the things he talks about are all borne out by the data.

Poor can be given a number - earns $15,000 a year, say. That is a fact. But as I am given to repeating OCD-like, facts have no meaning without context. Because this statement has been discussed many times recently that poor shivering fact has been draped in blankets of subjective comparisons without getting any warmer.

Start with the basic statement. It has the word “earns” in it. But the U.S., while not a socialistic society like those in Europe, has several layers of government aid for the poor; you know, that famed “welfare state” that is turning us communistic. The poor do get things like food stamps, Medicare health benefits, school breakfasts and lunches, unemployment, social security, and the rest of the range of programs. Few people claim that this brings the poor into parity, but the argument recently has been that the collective effect has been to raise the poor out of poverty. Others counter that it may alleviate the worst effects of poverty, but they remain poor relative to the rest. I don’t know of an objective way to rate this so both sides are free to make their case, using the same base numbers.

“Relative to the rest” seems like an obvious measure but that soon dissolves into meaninglessness. Who is that rest? Is it middle class people in the same communities in the U.S. today? Is it those who have lost jobs and houses and health benefits in the recession? Is it the entire population of the country whether they live in areas that are of higher or lower daily costs? Is it to socialist countries in Europe and their benefit programs? Is is to booming countries where jobs are moving to? Is it to third world countries where the average wage is a dollar a day?

Or is the question “when” is the rest? People have a tendency to compare today to the past, which is another indeterminate. The past can be 1997 before the recession, or 1955 when the U.S. was the only healthy economy in the world, or 1944 during the war boom, or 1933 during the Depression, each of which also comes with different expectations of what poor and comfortable were, different levels of government assistance, different ratios of the pay of CEOs to the average worker, and different levels of artificially repressing segments of the population. Foreign observers in the 1930s, during the worst of Depression, during the Dust Bowl, kept marveling that the poor Okies could get in cars - cars! - and drive freely to the golden state of California, who had to take them in. That couldn’t comparably happen in any European country. If American poor were richer than European poor at our lowest, how can anyone argue that 75 years of effort to keep that low from happening again hasn’t had some effect?

If you can’t tell, I hate, hate, hate this argument. You can take the base fact and make it mean absolutely anything you want, including putting the blame for the lowness of that number squarely on the shoulders of the poor, which any number of political actors have done. Me, I blame society. No, seriously. While people are certainly responsible for their lives, I believe there are always overwhelming structural explanations for the way our country and our era and our times are. You personally may be poor because you’re stupid and lazy and a drug addict who broke up your home. But when 50 million people are poor, that individual explanation no longer washes. Something much bigger than any individual is at work. And since the wealthy and the middle class have far more power in shaping society, they bear far more responsibility.

Personally, I’d rather look at the future of the poor than the present. If the fact is that they earn $15,000 a year, my question is “where do they go from here?” What are the pathways out of poverty? How likely is any individual to be able to take that path? How likely are large groups to be able to take that path? How much opposition will they be getting? How many more will join them along the way? If those answers look worse than they have in times past, then the poor are truly poor, no matter what the number happens to be. You are free to answer those questions with any logical projection you want. My projection, though, is that it doesn’t look good. And that’s my definition of poor.

Man,

Posts 11, 12, 13, and 14 are all VERY good. Thanks folks. Dopers can be damn insightful at times.And most of the other posts are pretty good as well. And Merry Whatevermas.

The disparity between the rich and the poor is getting bigger and bigger. That’s the bottom line. The middle class is vanishing. The only debate is who to blame. The only honest debate is how best to debunk the people who claim it’s not entirely the fault of Wall Street and the Republicans. I personally don’t think statistics and honest facts work anymore, I think lies and propaganda work best (just see Fox News). Liberals need to learn how to lie the way conservatives do. Thinking you’ll win because “the truth is on my side” is so ignorant and last-century. The truth is what makes people feel the best… religion only exists because of that unfortunate flaw of the human mind.

The other “debate” is whether the disparity is a problem. Just the fact of the disparity isn’t. If I am comfortable financially, it really doesn’t matter to me that that guy over there has become fabulously wealthy.

No, it’s not. The OP is asking if it’s true that the poor are getting poorer. The rich could be 1,000x richer than they are now, and that would not necessarily mean that the poor were poorer. Your gripe is another matter, unrelated to the question asked by the OP since economics is not a zero sum game.

Not addressing the rest of your editorial, since this is GQ.

Let’s move this over to Great Debates.

Colibri
General Questions Moderator

Now that we are in GD, you may commence the debunking process. I’m all ears (eyes, actually).