Max Borders‘ latest Ideas Matter update includes an item focusing on the use (and flagrant misuse) of statistics regarding the rich and poor:

This great little video makes three points we shouldn’t forget:


* It may not matter what share of total income the poor have today — even if it’s less — because the income pie may be much bigger than in the past (and so the poor’s income still bigger). Over time, the pie usually does get bigger (absent government doing dumb things like stimulus packages). So the income of the poor today is probably better today than in the past despite an increased share of total income for the rich.


* It is also not appropriate to take statistical snapshots of populations because individuals experience income mobility. Most individuals get richer over time. When we track them, we can see that much of the rich/poor mythology is based on statistical artifacts.


* New poor people – the young, immigrants, etc. — are constantly coming online to replace those who have become upwardly mobile — which tracks the “American Dream”‘ story, i.e. starting out poor, but working hard and getting richer with experience and effort.


I’d add a fourth bullet to this list: income is not necessarily wealth. A minute of work today buys you a whole lot more than a minute of work did 20-, 50-, 100 years ago. Poor people enjoy cellphones, TVs, inexpensive food, and a far higher standard of living because their purchasing power is so much better. By historical standards, our poorest quartile today are much better off than any time in history.