New Evidence of Good Inequality in the United States

The United States Census Bureau has just released a new report on income and poverty in the United States in 2015.  An article in The New York Times summarizes the report.

In this report, I see evidence for what I have called "good inequality" in a previous post, which includes links to other posts on the evolution of inequality.

Good inequality has been achieved over the past 150 years in liberal societies that have succeeded in dramatically reducing the level of absolute poverty, although the level of relative poverty is still high.  By contrast, socialist societies have failed in their attempts to reduce relative poverty, while increasing absolute poverty. 

People live in absolute poverty when their income is so low that they cannot live a dignified life, because they live in grinding poverty.  For most of human history prior to 1800, almost all human beings lived that way.  Increasingly, very few people in liberal societies today live in such destitute conditions.  But even when those people with the lowest income in a society are living much better than the poor of the past, they can be living in relative poverty in that their income is much lower than others with higher incomes.

The Census Bureau reports that the median household income increased 5.2% in 2015 over 2014, which is the largest one-year increase since record-keeping began in 1967.  This increase in 2015 is shown at all income levels, including the middle classes and the poor.  From 2014 to 2015, there was a 1.2% decrease in the poverty rate, which is the largest annual percentage drop in poverty since 1999. So, on average, everyone's economic condition is improving.  But still the gap between the very poor and the very rich remains very wide, and therefore the rate of relative poverty remains high. 

In liberal societies, the number of people living in such destitute conditions of poverty that they cannot live dignified lives is approaching zero.  And so absolute poverty has been almost completely abolished. 

And yet the leftist critics of liberalism complain about the economic inequality between those who are very rich and those who are not so rich.  This is the complaint of those like Thomas Piketty, who insist that to satisfy the moral principle of equality we need confiscatory tax rates to redistribute the wealth from the very rich to the very poor, because the very rich don't deserve their wealth, and the very poor cannot rise out of their poverty.

But as I have argued in previous posts, it's not clear that Piketty is right about this.  The very wealthiest people tend to be people who are highly educated, who are married to other highly educated people, who have high IQs, and who work full time in two-income households.  In highly complex and  technologically advanced societies, these tend to the people with the highest incomes.  Is it fair to say they haven't earned their wealth?

It might be unfair if those in the middle or lower classes could never move up, but there is lots of evidence that there is plenty of movement up and down.  Most of those American households in the top 1% of income don't stay there for longer than one year.  And 50% of the American households will reach the top 10% in income for at least one year.  Moreover, poor Americans are living better today than most human beings have ever lived at any time in human history.

To complain that this is all unfair because some people are wealthier than other people, and that fairness demands that no one should have higher income than anyone else, is to affirm the vice of envy.