Wednesday, October 26, 2011

Wealth Distribution - How "Poor" is "Poor?"

Occupy Wall Street!  Re-distribute wealth!  OK, it's clear that inequality in wealth exists in America (as it does in all "developed" countries.)  If we genuinely want to create more equality in wealth-distribution in the United States, how do we do this?  Not by taxation.  Lets assume Billionaire Bill, with accumulated wealth of $30 billion earns (with outstanding advice and insight) 20% on his investments.  That calculates to $6 billion.  Even if we tax him at 80%, it still leaves Bill with $1.2 billion to add to his $30 billion.  One can't create equality by taxation initiatives.  We can try to narrow the gap by putting a ceiling on income and wealth.  Laws can be instituted to limit wages to some multiple of a calculated "poverty wage" in the country.  Assuming a base poverty-level income of $20,000, maximum income could be restricted to a multiple of 20 x $20,000, or $400,000, a difference of $160,000.  Needless to say this is a generalized illustration; there would be modifying factors.

But consider the implications.  If this formula were in place, one would anticipate that the lowest income level would rise by re-distribution.  But as it rises, of course, the upper level would continue to rise by a factor of 20.  A new base of $40,000 would result in a ceiling of $800,000, or inequality that has now reached $760,000.  As the level rises, so does the difference between the extremes of income.  Now, since money begets money, the richer will get richer.  Yes, the "poor"will also get richer, but the difference in the extremes will continue.

Are today's "underprivileged" "99%" so much worse off than the "privileged" "1%?"

Let's examine the "poor households" in the United States:  43% own a home, 73% own a car or truck, 31% own two or more cars, 80% have air-conditioning, 37% have a dishwasher, 97% have a color TV, 55% have two or more color TVs, 63% have cable or satellite TV,  etc. (1) Not too shoddy.  The poor American (as defined by the government) reports that his family is not hungry and has the funds to meet essential needs and access to quality medical care.  While life is not opulent, dire poverty, as we often imagine it, exists only rarely in the United States.

Another interesting statistic:  Housing space per capita (in square feet): US - 721,  US poor - 439, High income countries (UK, France, Germany, Japan) - 377, Low income countries (Egypt, Philippines, Morocco) - 95, Very low income countries (India, China, Nigeria) - 66.  By the way, this comparison of US poor is to "average," not "poor," populations of the listed countries. (2)

Yes, poverty exists in America, but although some 12% of Americans are classified as "poor" very few actually lack essential resources. Yes, disparity exists....and, I believe, always will.  As long as there is equality of opportunity, there will be inequality of success,  as defined by income or by any other criteria.   Should we somehow place a financial limit on wealth disparity?  Will such a system be better for America?  Could it be worse?  Are the "poor"really "poverty-stricken" in the true sense of this condition?  Inequality is not the same as inequity.

Sources:  1. US Census Bureau, American Housing Survey for the US 2003,2005.  US Dept of Energy 2001. 
               2. UN Center for Human Settlements and World Bank, 1993.  US Dept of Energy, 2007.

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