Just how unequal modern societies are becoming is a big political question these days. My native UK has much the same arguments going on as we see in the US at present. Society has become more unequal, this is a bad thing and we need to do something about it.
This could even be true: my own view is that globalisation necessarily leads to greater in country inequality while reducing global such. And I tend to think that a little more inequality among people who all already are clothed, housed and fed while the work goes on of providing those three to the destitute who have none of them is just fine. But that is an opinion that you’re entirely at liberty to disagree with.
However, what’s caught my eye is that people seem to be measuring inequality in very different ways. Such different ways as to be terribly misleading. I looked at this here. The recent figures for the US reported by Census are the inequality of market incomes. Just about every other country reports inequality after the influence of the tax and benefit systems. Both are interesting numbers: but by market incomes the US is less unequal than France, Italy or Germany. While by post tax and benefit numbers it is indeed more unequal. So it’s not necessarily the structure of the US economy that is “wrong” and producing such inequality. It is that less is done about it: assuming that inequality is something you believe must be reduced.
I also suggested that it would be interesting to know whether the US was more unequal than the European Union. Both are near continents and it seem reasonable enough to compare 300 million Americans with 500 million Europeans rather than just, say, the 9 million Swedes. The EU’s own figuresare not much help here. For they just give us an average of the various within country inequalities: not inequality among Europeans as a whole. They’re also post tax and post benefit numbers, not market income ones.
Then we get this from Branco Milanovic, one of the leading researchers in the area:
Thus, in 2007, after Bulgaria and Romania (and previously eight other post-Communist countries) became members of the European Union, the EU-wide Gini coefficient (across all individuals in the area) reached 41 points which is about the same as the Gini calculated across all individuals in the United States. The difference however is that in the former case, most of inequality is driven by mean income differences between the member-states. If we take EU15 the Gini coefficient is only 33, about the same as the median Gini of the fifteen countries and significantly less than US inequality.
The US market income Gini is as reported by Census. 48 or so in that latest report. The post tax post benefits Gini for the US is more like 38 (calculations of this do vary and it is arguable where it is in the range 38 to 41 as Milanovic has it).
It’s therefore fair to say that the US is less unequal than the European Union. Certainly the Gini for market incomes alone is lower in the US than it is across the 27 nations of the EU. Arguably the post tax and post benefits one is as well. Finally, the post tax post benefits Gini for the US is certainly higher than that of the EU 15, that is the generally richer nations which made up the earlier version of the EU.
Whether you want to say this makes the US more equal or more unequal that Europe is really up to you. For it really depends upon exactly what you mean by Europe and what you mean by inequality.
This article is available online at:
http://www.forbes.com/sites/timworstall/2012/09/25/the-united-states-is-more-equal-than-the-european-union/
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