The Rich Are Getting Richer, and the Poor Getting…Richer?

Income inequality is Bernie Sanders’s favorite issue. He is running a populist campaign based on combatting the insidious “billionaire class.” Before Sanders discusses the evils of the wealthy, he always points to stagnant incomes for middle-income earners; indeed, the rich getting richer is only a bad thing if they are causing stagnation (or contraction) elsewhere.

As he proclaimed in the October 13th debate, “Millions of Americans are working longer hours for lower wages, and yet almost all of the new income and wealth being created is going to the top one percent.”

Fortunately for the country, the sky is not falling. The poor are not earning “lower wages,” and all new income isn’t going to the top one percent. The rich are getting richer—this is true. However, the other part of the story undermines the progressive agenda: the poor are getting wealthier, too.

When liberals argue wages have plateaued, they point to real median income. Between 1979 and 2007, real median income only grew by 3.2%, which is essentially no growth for such a long time period. Taken at face value, it would seem that liberals are correct in proclaiming doom for the middle class. But real median income doesn’t tell the whole story.

One of the largest factors missing in real median income measurements is health insurance benefits. Now, under the Affordable Care Act, employers are required to provide health insurance to their employees. When a company provides health benefits, they pay the worker less as insuring employees cost money, but as the worker no longer needs to purchase health insurance on his or her own (or pay for medical expenses out of pocket), the wage is effectively increased because the employer is providing for this essential service.

Accounting for the insurance problem among other issues, a study by economists Richard Burkhauser, Jeff Larrimore and Kosali Simon has determined that middle class incomes have increased 36.7% since 1979—I wouldn’t call that stagnation!

Not only have middle class incomes grown, but the term “billionaire class” is misleading. It creates a false dichotomy of “us versus them.” Sanders assumes the rich have always been rich, and the poor have always been poor. Calling the wealthy the “billionaire class” presents the picture of a static group of individuals who will forever be at the top and never come down—and, more importantly, indicates that those at the bottom have no chance of rising up.

But income groups are not static. People climb up the ladder and fall down the latter all the time. According to the Heritage Foundation, 84% of people have a higher income than their parents. This number is even higher for poor people—93% of those in the bottom quintile are wealthier than their parents. They also found that 8% of those in the bottom quintile would rise to the top quintile in their lifetime.

According to Mark Rank, a professor of social welfare at Washington University, 12% of the population will be part of the top one-percent of income earners for at least one year of their lives; concurrently, 39% of the population will be part of the top 5% of income earners at some point in their lives, and a majority (56%) will be part of the top 10% in their lifetime. A supermajority (73%) will be in the top 20% at some point in their lives. When Sanders attacks what he envisions as a wealthy minority, he is actually railing against a majority of the population. The “billionaire class” isn’t a static group of individuals—the rich are constantly being replaced by poorer, more productive, individuals.

The wealthy are not succeeding on the coattails of the middle class’s hard work; the rich may be richer, but the poor are richer, too. To claim the middle class is stagnating while, at the same time, more productive is simply false. To rail against a static “billionaire class” is laughable, as income mobility is alive and well in this country. It is time we stop spreading misrepresentations about income inequality and start honestly looking at policies that would make everybody better off. We should work on bringing the poor even higher up, not the rich down.

More from The Liberty Standard

Leave a Reply

Your email address will not be published. Required fields are marked *