Poverty and Income Inequality are Separate Issues
By David Henderson
“One reason that action to limit growing income inequality in the United States is difficult is that the growth in inequality is not a simple picture. Old-line leftists, if there are any left, would like to make it a single story–the rich becoming richer by exploiting the poor. But that’s just not a reasonable picture of America in the 1980s. For one thing, most of our very poor don’t work, which makes it hard to exploit them. For another, the poor had so little to start with that the dollar value of the gains of the rich dwarfs that of the losses of the poor. (In constant dollars, the increase in per family income among the top tenth of the population in the 1980s was about a dozen times as large as the decline among the bottom tenth.)”
The above is a quote from a book published in 1990. The author is a well-known economist. Question: What is that economist’s name? Hint: he won the Nobel Prize in economics in 2008 and writes a regular column and blog for the New York Times.
That’s right. Those words were written by none other than Paul Krugman.
I quote this paragraph, not to embarrass him, pleasurable as that is, but to make a more serious point. It is this: the income inequality in the United States today cannot be explained by rich people exploiting poor people.
What matters is not whether inequality increases but whether people of all income levels are doing better.
These are the opening paragraphs of my piece, “If Obama’s worried about poverty, he should focus on it, not income inequality,” FoxNews, January 24, 2014.
Read the whole thing, which is short.