Income inequality in tonight’s SOTU

No doubt our President will go all out and demand more class warfare. He will be doing so without any regard for the facts. Word is he will announce that all future federal contracts pay workers a minimum wage of $10.10 per hour. (Duh. Just how many federal employees, even those under contract, are making less than that?) The topic is a wedge issue to attempt to divide America even further in advance of next November’s midterm elections. After all, a recent Gallup poll shows only 4% of those surveyed call the “Gap between rich and poor” as the most important issue of the day. The same poll shows that Americans are worried about the economy in general, including unemployment and federal spending.

Income inequality, for the purpose of Obama’s argument, is the difference in household incomes as reported to the Internal Revenue Service. Single living alone? You are a household. Single with a roommate? You are two households for the statistics. Single parent rooming with another single parent? Still two reporting households, even though you are wisely creating economic efficiency by sharing a home. And here’s the big one: married with two incomes? You are those awful rich people. You see, two individuals filing jointly with two incomes report as one household.

Instant disparity.

Efficiencies in joining households are considered in the poverty guidelines. (These numbers are from 2013 charts, but are sufficient for the argument.) A household of one is considered to be in poverty with an income less than $11,490 a year. A household of two is at $15,510. The government assumes an efficiency of $7,470. ($11,490 x 2 and then less $15,510) for sharing a household.

Sharing the cost of living between two wage earners matters. And if those two are married? It matters even more when contributing to the chances of upward mobility for the children in the household.

Former George W. Bush press secretary Ari Fleischer wrote about income inequality for the Wall Street Journal recently. Too conservative for you? The New York Times penned the article Two Classes, Divided by “I Do” in July of 2012.

From Fleischer:

…the number of children raised in female-headed families is growing throughout America. A 2012 study by the Heritage Foundation found that 28.6% of children born to a white mother were out of wedlock. For Hispanics, the figure was 52.5% and for African-Americans 72.3%. In 1964, when the war on poverty began, almost everyone was born in a family with two married parents: only 7% were not.

From the New York Times:

Estimates vary widely, but scholars have said that changes in marriage patterns — as opposed to changes in individual earnings — may account for as much as 40 percent of the growth in certain measures of inequality.

Most recently a January 2014 study out of Harvard on economic mobility concludes:

Across all the specifications, the strongest and most robust predictor [of upward economic mobility] is the fraction of children with single parents.

The fi ve factors included in the study: (1) residential segregation, (2) income inequality, (3) school quality, (4) social capital, and (5) family structure.

Consider for a moment that economic mobility has not changed in 50 years. (Then recognize that article is discussing the same Harvard study linked above, but never once articulates the study’s findings with regard to single parents and mobility.)

Single parent families are less efficient in their living arrangements, so they are costing themselves more than dual parent families.

The wiki on income inequality lists numerous reasons why inequality exists. From CEO pay to the decline of unions, it’s in there. All except the rise in single-parent households since 1980. From 1980 to 2007 single-parent households increased from about 6 million to 10 million. That this increase correlates to what is called an increase in income inequality over the same time is no surprise. The correlation, however, is usually ignored. It must be more fun to blame union busting.

Tonight when the President tries to further divide this nation, remember he’s only giving you part of the story. He would be much better preaching to teens that babies come after marriage than that they should be earning $10 an hour salting fries.

Comments

  1. Randy in Richmond says:

    The man that told us he was going to bring change and hope to Washington D.C. was half right. He has wrought change that most would agree has been the wrong kind. He is a proven liar and his approval rating is around 44%. At the time of the same SOTU address President George W. Bush was around 43% because of Katrina’s aftermath and the Iraq War. Clinton was at 59% and Reagan was at 64%.

    This was Obama when he promised to “slow the rise in the oceans” and “restore America’s image”. I wonder if this same Obama will be speaking tonight.

  2. “Consider for a moment that economic mobility has not changed in 50 years.”

    And that’s not a good thing. The U.S. has ranked near dead last in economic mobility for five decades. But while mobility remains flat, income inequality has exploded. The Chetty/Berkley study openly acknowledges this. If you don’t have time to read it, here’s Chetty in a short interview with PBS recently:
    http://www.pbs.org/newshour/bb/business/jan-june14/mobility_01-24.html

    “The wiki on income inequality lists numerous reasons why inequality exists. From CEO pay to the decline of unions, it’s in there. All accept the rise in single-parent households since 1980.”

    Because while the rise in single-parent households has an effect on economic mobility, it’s effect on income inequality is less so (mobility and inequality are not the same). As your link states, single parent households have increased significantly in most OECD nations over the past three decades (with the U.S. actually less so than others), yet the U.S. still ranks among the top OECD countries in the Gini index.
    http://www.pewresearch.org/fact-tank/2013/12/19/global-inequality-how-the-u-s-compares/

    See the correlation between single family household increases and income inequality among the nations in your link? Me neither. Because these social deterioration arguments don’t hold up well in terms of income inequality.

    The bottom line is this: It should be no surprise to anyone that the people who have benefitted disproportionately from the financialization, deregulation and deunionization of the American economy would have us spinning our wheels on the social fabric issues of the “have nots” and carrying on about economic opportunity. That includes the President. Upward mobility has been, and continues to be, a problem in this country but mobility has nothing to do with the fact that American productivity gains have gone almost exclusively to the top 1% for over 30 years.

  3. Strupp, I never know if you really don’t understand something or if you are too bull headed to see it any way other than how you’ve decided.

    I think you missed my point, so I’ll make it again. The increase in what is measured as income disparity (gini is a conventional measurement) is a function of 1) using household income to calculate the measurement, and 2) our changing society.

    If it makes you feel any better, if two rich white kids meet in grad school, get great jobs, and then marry, they are contributing to the measurement of income disparity just as much as the increase in single-parent households. BOTH of the changes in our society since the mid-seventies are doing it.

    I’ll give you another article that hit today from Bloomberg, and the Tweet I stole that example from:

    Again, based on the way it is calculated using HOUSEHOLD income, this change IS the change in disparity. I said it above as, “Instant disparity.”

    We are using crummy ways to measure it and crafting vicious a arguments over bad data.

    Let’s find a good way to measure it, then.

  4. J. Strupp says:

    ….what James Goodman said just below your comment on Bloomberg.

    Your point was clear in the original post but I am bull headed. I just think you’re trying to make your instant disparity argument because it fits your conservative dogma. If we talk middle class real wages or capital’s share of economic growth or income concentration, then we have to talk about the fall of collective bargaining, financial deregulation, effective tax rat cuts and other supply-side bright ideas. But here we are talking about the women’s lib movement and single parent/married households from similar economic backgrounds like we’re trapped in a David Brooks column.

  5. Can we at least agree that using household income is a poor way to measure income disparity?

  6. J. Strupp says:

    Yes, for the reasons you state in your original post. And again, I do agree that assortative mating and women entering the workforce are/were contributing factors. But income inequality is almost entirely a phenomenon of the top 1% (and I know how much you love when I talk about the 1%). Neither of these factors has anything to do with what’s going there.

    You know, maybe we should stick to talking about craft beer. I have a feeling that we can come to some sort of agreement on that subject.

  7. Thanks for the pingback Cindy. I enjoyed reqding your blog post here.