More or less equal?

This from the conservative periodical "The Economist"

http://www.economist.com/specialreports/displaystory.cfm?story_id=13356650

Apr 2nd 2009
From The Economist print edition
The gap between rich and poor has been widening for 30 years. It has started narrowing again

THE past 30 years have been a great time for the wealthy. Their businesses became more profitable; their equities and properties increased in value; for those who worked in investment banking or hedge funds, bonuses rose steeply. And the further up the income scale you went, the better the rich did. Just as the bottom 90% of the population have lagged far behind the top 10%, most of those in the top 10% have trailed the elite 1%. And that select 1% has looked in envy at the Croesus-like 0.1% at the very top of the tree.

Any explanation for this rise in inequality needs to account for several different trends. In the 1980s the poor fell further behind the middle classes, but since the 1990s those middle classes have been squeezed. Both groups have lost ground to the elite. Between 1947 and 1979 the top 0.1% of American earners were, on average, paid 20 times as much as the bottom 90%, according to the Economic Policy Institute, a think-tank in Washington, DC; by 2006 the ratio had grown to 77. In 1979, 34.2% of all capital gains went to the top 1% of recipients; by 2005 the figure was 65.3%.

All this happened during a period when American workers’ median real incomes stagnated (though the notional value of any health insurance would have risen steeply). In 2007, according to the Census Bureau, the median income of American male workers was $45,113, less than the $45,879 (in 2007 money) that they earned back in 1978 (see chart 4). At no point over that 29-year period did median incomes pass the $46,000 mark. Families made ends meet because more women worked (and their real incomes did rise) and because they were able to borrow money to maintain their spending.

[The median is the point where half are less than or equal to it, half are greater than or equal to it]

The classic tool for measuring inequality is the Gini coefficient. The higher it is, the less equal the society. In America the coefficient climbed steadily from 0.395 in 1974 to 0.47 in 2006 before dipping slightly to 0.463 in 2007. In Britain, according to the Institute for Fiscal Studies, the Gini has risen from 0.25 in 1979 to 0.35 in 2006. Figures from the United Nations suggest that America’s Gini coefficient is lower than that of many developing countries but well above the levels recorded by egalitarian Denmark, Finland and Sweden, where it does not seem to have risen much.
...
There might also be an argument in favour of wealth disparities if social mobility was high and the sons and daughters of office cleaners could fairly easily rise to become chief executives. But America and Britain, which follow the Anglo-Saxon model, have the highest intergenerational correlations between the social status of fathers and sons; the lowest are found in egalitarian Norway and Denmark. Things are even worse for ethnic minorities; a black American born in the bottom quintile of the population (by income) has a 42% chance of staying there as an adult, compared with 17% for a white person.

As a result, talent is being neglected. Of American children with the highest test scores in eighth grade, only 29% of those from low-income families ended up going to college, compared with 74% of those from high-income families. Since the better-off can afford to keep their children in higher education and the poor cannot, breaking out of the cycle is hard.

Perhaps Americans put up with this system because they have unrealistic expectations of their chances of success. One study found that 2% of Americans described themselves as currently rich but 31% thought that they would become rich at some stage. In fact only 2-3% of those in the bottom half of the income distribution have a chance of becoming very well off (defined as having an annual income of more than $340,000). Just over half of those earning $75,000 a year think they will become very well off, but experience suggests that only 12-17% will make it.

Health outcomes too are decidedly unequal; the gap between the life expectancy of the top and bottom 10% respectively rose from 2.8 years to 4.5 between 1980 and 2000. That does not meet the definition of a fair society by John Rawls, a 20th-century philosopher, who described it as one in which a new entrant would be happy to be born even though he did not know his social position ahead of time.

http://www.economist.com/specialreports/displaystory.cfm?story_id=13356686

Apr 2nd 2009
From The Economist print edition

The extremes of wealth in “Anglo-Saxon” America and Britain had reached levels not seen since the 1920s. The gains from recent economic growth flowed disproportionately to the wealthy. According to one study by Robert Gordon of Northwestern University and Ian Dew-Becker of Harvard, the top 10% of earners received the vast majority of the benefits of the “productivity miracle” of 1996-2005. Another international study found that only Mexico and Russia had more unequal income distributions than America.

http://www.economist.com/books/displaystory.cfm?story_id=13176890

Feb 26th 2009
From The Economist print edition

The findings of those statisticians’ successors—that poor children are more likely to fail at school, poor adults to commit crimes and die young, and so on—are nowadays uncontroversial. And policymakers mostly eschew metaphysics. Instead, they try to break such links by spending to “end child poverty” and by targeting health and education initiatives on the neediest. Yet such attempts are doomed to disappoint, say British social scientists, Richard Wilkinson and Kate Pickett, because they conceive of each social ill in isolation, rather than treating their shared root cause. Moreover, they misidentify that cause: it is not poverty as such, but inequality.

It is a sweeping claim, yet the evidence, here painstakingly marshalled, is hard to dispute. Within the rich world, where destitution is rare, countries where incomes are more evenly distributed have longer-lived citizens and lower rates of obesity, delinquency, depression and teenage pregnancy than richer countries where wealth is more concentrated. Studies of British civil servants find that senior ones enjoy better health than their immediate subordinates, who in turn do better than those further down the ladder.

And the evidence is that the differences in status cause these “gradients”. Low-caste Indian children do worse on cognitive tests if they must state their identities beforehand. High-status baboons bred in captivity show elevated levels of stress hormones and become ill more often when they are moved to groups where they no longer dominate.