Perception

 

I read in the New York Times today that the top one percent of earners in the United States increased their earnings in the thirty years beginning 1979 by 275 percent. And this increase exceeded that of the remaining ninety-nine percent.

I heard the same story on the radio, although in that version the income of the favored group had tripled. I won't focus on the difference since it isn't that great. But I'm uncertain of the significance of the information, and that's the case with incomplete statistics in general.ⁱ They sometimes lack the meaning which they seem to convey. In this instance the numbers are believed to prove the case presented by those involved in the Occupy Wall Street movement. They are touted as demonstrating that the Wall Street “fat cats” are stealing from the rest of us – that they're living high while the rest of us suffer.ⁱⁱ It's a typical bad guys versus good guys scenario.

But perception plays a large part in the Occupy Wall Street movement and in the concern over the 275 percent increased income of the top one percent since 1979. First of all, that group is different now from then, and includes sports, movie and TV stars like Oprah Winfrey, and entrepreneurs like Bill Gates. We've made them wealthy, though we focus on stock brokers when we wring our hands over their salaries. The comparison of groups that are different lacks the validity attributed to it. Perhaps the Wall Streeters haven't done so well while the nouveau riche have made out like bandits. If, for example, Oprah Winfrey has become a billionaire, we're still inclined to watch her with awe. No one begrudges his idols as much as they can wheedle out of the public. A well-paid baseball player is admired, even if his salary causes admission prices to go up. It's only the nameless bankers we hate.

And we shouldn't forget that a first class stamp then was 15 cents and the average rent $280. Nor that in 1979 undergraduate tuition at a typical private college, the University of Pennsylvania,ⁱⁱⁱ was $5,195. Times have changed. Many consumer items have more than tripled in the past three decades so that, in regard to some things, we are all falling behind. Does this mean that we should lower the salaries of our teachers? Of course not. We should, however, try to decide what the statistics mean rather than simply accept them as proof of an evil system. They provide some information, not condemnation.

Included in the article was other information. One point made was that “for the poorest fifth of the population, average real after-tax household income^iv rose 18 percent.” Stated differently, their real income has increased by nearly a fifth during this period. The problem is not that they aren't doing better, it's that they're not doing as much better as others.

If everyone is doing better, yet it feels worse, and we're incurring greater debt,^v it would be worthwhile to consider why this is happening. Perhaps it is, in part, because our expectations have been raised and we have been indoctrinated into the idea that we are entitled to whatever we want. If we can't force the rich to give us what they have voluntarily, we may be able to convince the government to redistribute resources. In the meantime we can get most of what we want through credit card debt, balloon mortgages, college loans, and similar tactics. Unfortunately our runaway spending cannot go on forever – notwithstanding all the radio advertisements for companies that will help you avoid foreclosures, bankruptcy, high credit card costs and the like. Sooner or later someone has to pay for it, even if it's our children and grandchildren. There's no “app” that will pay all our debts and give us a spotless credit rating.^vi

My intent is not to defend or accuse. Class warfare is not the solution to our problem. Our incomes may have increased but so have our perceptions, expectations, and prejudices. We envy those better off than ourselves. Statistics mandates that there will always be a top one percent. We created them and we support them. Absent socialism, it's up to us to change our idea of "necessities" if we're going to affect the distribution of wealth.

i     There's a fascinating book entitled How To Lie With Statistics, by Darrell Huff, that discusses some of the conscious and unconscious errors of those presenting statistical information. They're not always lying. Sometimes they are simply making silly mistakes which look factual when they're all gussied up.

ii    I suspect that the percentage of crooks among the top one percent is no greater than for the rest of the population. In fact, it's probably lower, since they can afford lawyers to advise them as to how they can get what they want legally.

iii    I used U of P because its numbers were easily available, but all tuitions were a lot lower then.

iv    All the numbers are adjusted for inflation. They do not represent absolute incomes. The absolute numbers are considerably higher because the dollar has lost value since 1979.

v     Which we attribute to the thieves on Wall Street.

vi    Some of that debt results from the purchase of electronics, communications plans, and “apps,” and from the fact that many of the items we buy are greatly increased in price because of actual, but costly, improvements and with additional governmental regulations. In 1979, for example, according to WikiAnswers, “The average price of a car in 1979 was around $4,000 to $6,000, with some being a little over $3,000 and the high-end models being $10,000 or more.” With on-board computers, improved braking systems, changed fuel usage requirements, air bags, and the like, we're more comfortable and safer, but at a cost.