Unemployment Rate Drops as the Workforce Drops Out

Periodically you hear President Obama pat himself on the back because the unemployment rate has fallen from nearly 10 in 2009 to 7.6 today. Huzzah!

Except that what's really going on is that more and more people are leaving the workforce.



Which is a bit like the high school principle congratulating himself for having a higher grade point average as more kids are dropping out of school!

Income Inequality -- It Ain't necessarily So

Mark Twain said, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."

Of course we "all know" that income equality in the United States has been getting worse. Except that's not quite true. The chart below shows the Gini Coefficient for individuals, households and families since 1994. The Gini Coefficient is a measure of inequality where a value of 0 indicates perfect equality (everyone has the same income) and a value of 1 indicates perfect inequality (one person has all the income, while everyone else has none). 



As you can see, that measure for individuals (the people who actually get a paycheck) has not changed.  But that seldom gets reported because it contradicts the narrative of The Rich getting richer. What's reported is the coefficient for households.

If income equality for individuals hasn't changed, how can inequality for households go up? Simple. People with very high income earning potential are increasingly likely to form and maintain families. At the opposite end of the scale people with low earning potential are increasingly likely to be in single earner households.

So rising inequality has nothing to do with economics and everything to do with how people choose to form families or households. If you want to reduce inequality get married to someone with high earning potential and don't split up.