Explaining Income Inequality With Demographics.

This is an updated chart from the Census Bureau's report Income and Poverty in the United States: 2015. What it shows is that differences in household income are primarily related to differences in the households themselves.

1. High income households earn more because they have more people in them who are actually working at something.
2. High income households have a much higher rate of marriage.
3. High income households are composed of better educated people, who have higher earning capabilities.
4. High income households have more people in their peak earning years (35-64).

In other words, contrary to popular political rhetoric, household income inequality is not something that is "done to you", it is mostly a product of decisions that you have made and where you are in life stage. The good news is that these are factors that you can influence. You can choose more education. You can choose to work. You can choose to marry and have more earners in your household. And if you're 25 you will eventually be 35 or 40 (sorry, but if you're 65, your earning power won't increase with age).  

Also, keep in mind that "income" here is only earned cash income. It does not include transfer payments (e.g. welfare, Medicaid, social security, housing subsidies, etc.)

Worldwide Prosperity Explained in One Chart

It's hard to give any other explanation to this chart than "capitalism" or, if you prefer, "classic liberalism" --- the idea that if government protects property rights and otherwise leaves people to employ their own energies and ambitions, great wealth will result. The US, having more aggressively adopted this posture, obviously benefited the most.

Using Household Data for Income Analysis is Misleading

Democrats constantly make the "income inequality" argument by citing household data from the census bureau. But they don't cite a number of important facts about the household data itself. One being that the number of people in households varies considerably (and directly) with income. Another is the composition of the households with respect to age. Higher income quintiles have more people of working age in them. This shouldn't be terribly surprising, but apparently nobody in the media is smart enough to research and report on it.

Imagine you read a report that asserted that fans in Boston spend more more on ballpark concessions than fans in Oakland do, but that report didn't mention the fact that Fenway Park is always full of people while Oakland-Alameda is not. Would you think the reporter incolved was a) stupid or b) purposely misleading?



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