Income Inequality Argument Takes A(nother) Hit

Another chink in the income disparity arguments.  Mark Perry takes an article written by Thomas Sowell about how statistics can be misleading (you think?) and adds to it.

From Mr.Sowell:

When we hear about how much more income the top 20% of households make, compared to the bottom 20% of households, one key fact is usually left out. There are millions more people in the top 20% of households than in the bottom 20% of households.

The number of households is the same but the number of people in those households is very different. In 2002, there were 40 million people in the bottom 20% of households and 69 million people in the top 20%. A little over half of the households in the bottom 20% have nobody working. You don’t usually get a lot of income for doing nothing. In 2010, there were more people working full-time in the top 5% of households than in the bottom 20%.

Mr. Perry’s expanded take on this idea:

Income inequality between the highest and lowest quintiles shrinks considerably when it’s calculated on a per-earner basis. For example, in 2014, there was more than a 16X difference between the average income of households in the top 20% (about $194,000) and the average income of the bottom quintile households ($11,676), see table. But that difference shrinks to only a 3.5X difference between the average income per earner in the top 20% (about $97,000) and the average income per earner in the bottom 20% ($27,800). Therefore, when measured this way, about 80% of the income inequality between the top and bottom 20% of US households that generates so much attention and hand-wringing disappears just by adjusting for the number of earners per household.

Here is the graph to which they refer:

incomea2014

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