There Isn’t Really a 1%

Writing for the American Enterprise Institute, Mark Perry quotes from a New York Times piece by social welfare professor Mark Rank as follows:

It turns out that 12 percent of the population will find themselves in the top 1 percent of the income distribution for at least one year. What’s more, 39 percent of Americans will spend a year in the top 5 percent of the income distribution, 56 percent will find themselves in the top 10 percent, and a whopping 73 percent will spend a year in the top 20 percent of the income distribution (see those statistics displayed in the chart above).

Correspondingly, according to Rank, “54 percent of Americans will experience poverty or near poverty at least once between the ages of 25 and 60.”  For some perspective, stir these numbers up a bit:

  • Fully 46% of Americans will never have experience with “poverty or near poverty.”
  • Only 27% of Americans will never have a year of income in the top 20%.
  • At least half (27%) of those who experience “poverty or near poverty” will also experience a year in the top 20%.

John Hawkins picks up this thread for a fanciful rumination on whether the Purge movies have a valid economic philosophy.  For example, would it help the economy for the government to go out and massacre a bunch of poor people one night a year?  No, says Hawkins, because…

… if government mercenaries kill a poor part-time fast-food worker in a Purge today, there’s a decent chance they’re robbing themselves of a restaurant manager a decade down the road and a not insignificant chance that they may even be killing a highly paid restaurant owner two or three decades from now.

As reasonable as this point is, Hawkins doesn’t quite get to the key point.  For an inkling as to why, turn to Kevin Williamson’s pop-culture use of Negan in The Walking Dead to make a point about China’s economy:  the show’s latest villain insists that “people are a resource,” and so they have proven in Asia.

More than that, people are the economy.  The poor worker has value as a part-time fast-food worker and might have more economic value down the road as a manager, but what grows the economy is his or her transition from the former to the latter, and as more than one low-end worker strives to improve his or her lot, they’ll create new ways to employ other people… and to serve them.

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When we use blunt government policy on behalf of people who are currently poor, we short-circuit this creativity and the related incentives to develop it.  We make poorer people rely on other people to move them along.  People who are good at doing that will remain in the top 1%, leaving less opportunity for anybody to move up.

So, when people attempt to sell you on the promise that they’ll use government to “even the playing field” or “spread the wealth,” you’d be justified in suspecting that what they’re really trying to do is to ensure their own time in the top 20%.

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