Wednesday, February 26, 2014

There are five times as many workers in the top 20 percent than there are in the bottom 20 percent

Well that explains a lot.

From Jared Bernstein’s “Tax Reform” Assault on Pensions, IRAs and 401(k)s by Alan Reynolds. Basically a fairly technical refutation dealing with the arcana of tax and accounting codes. However, in that process, Reynolds points out something I had noticed in Census and BLS data.
There are five times as many workers in the top 20 percent than there are in the bottom 20 percent. To exclude young singles and old retirees, Gerald Mayer examined the work experience of households headed by someone between the working ages of 22 and 62. Average work hours among the poorest 20 percent still amounted to just 1,415 hours a year in 2010, while those in the middle fifth worked 2,771 hours, and the top 20 percent worked 4060 hours.
For all the faux outrage about inequality and social justice, there are hard facts that stand in the way of easy answers. It is numbers like these that in part lead me to believe that our focus should nearly singularly be on helping people to become productive.

Even if the top quintile and bottom quintile were paid exactly the same per hour, the top quintile homes would be three time better off. But you have to factor in the premiums that go with specialized work (much more prevalent in top quintile households), intensity of effort (the person who works 60 hours a week at a job will earn significantly more than three times what the person who works 20 hours a week earns), the premium from duration of work (the person who has ten years of experience earns much more per hour than the person with a year's experience), and the churn premium (the person whose economic and familial circumstances are stable will earn and save much more than the person constantly subject to exogenous shocks). You take those factors into account and all of sudden you are probably looking at a top to bottom quintile ratio of probably 10-15:1. All from individual choices, decision-making, values, and behaviors and nothing to do with structural discrimination, class bias, etc.

It is a complex issue about which we need to know much more and it appears to me that virtually all the outrage appears to be politically manufactured with a significant probability of causing more harm than good.

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