Dear Americans: You Are All Rich

I have made the point a number of times that the bottom 20th percentile (in term of income) of US families would actually be in the 80th percentile in many nations.  In fact, it turns out that the 20th percentile person in the US would not just be relatively rich in many other countries, but on a global scale sits around the 85th percentile of world income.  Virtually no one in the US would even be in the bottom half of world income. This chart from a recent study was shared by David Henderson:

fig2_0

 

The axes are not well labelled here.  How to read this is the X axis is the income percentile of a person in their home country.  Then one reads up, and the Y axis is the income percentile that person would be at for the whole world.  So a person who is at the 20th percentile in the USA is around the 85th percentile worldwide.  It is interesting that by hugging the 45 degree line, China mirrors the world average.  If you want to envision the distribution of absolute incomes around the world, think of China.

This raises a certain question for American redistributionists.  Ayn Rand used to point out that redistributionists always love the idea because they feel like they got to pick the pocket of the guy wealthier than them, forgetting that someone poorer gets to pick their pocket.  Essentially, in a truly global redistribution scheme, everyone in the US would be paying rather than receiving.

A better way to achieve global income equality would be to have more countries emulate the American rule of law, property rights regime, and relatively free markets.  Ironically, most American redistributionists support the opposite, arguing that in many was the USA should emulate the authoritarianism of these poorer countries.  Which I suppose will achieve global income equality as well, though in a much less attractive way.

  • Jason Brunson

    Is the chart adjusted at all for purchasing power? This is a great point that needs made more but that would be one potential hole

  • Arrian

    I'm curious what the chart looks like for US verses several of the countries that the Bernie Sanders crew like to admire: France, Sweden, Germany, Switzerland?

  • Arrian

    Oh, also, this is for income not wealth. A lot of the sturm und drang is over wealth distribution, not income: How much you _own_ not how much you _make._

    Not sure why that was picked. The cynical me says that it's because wealth is far more unevenly distributed since a lot of people, even well to do people, have zero or even negative wealth. Own a house? No? Then most likely your net wealth is close to zero. The economist me says that consumption is probably a much better measure of well being than either income or wealth for multiple reasons. But it's also probably much, much harder to measure on an individual level.

  • slocum

    Yes, but. I have a relative currently living in South America. Where she lives, $25K year is a solid, middle-class salary. And it really is -- you can afford to live in a nice place in a good neighborhood, eat out frequently, go on nice vacations locally, etc. And now that TVs, smart-phones, and computers and all that have gotten cheap, you don't suffer there either. About the only place where the lower income really pinches is with international travel. Being in the bottom of the income distribution anywhere kind of sucks -- you tend to end up living around other people with problems. Conversely being in the upper brackets in a middle-income country has at the least the real advantage of being able to afford to live among people who generally have their shit together.

  • JEH

    I've seen this sort of thing before. But echoing slocum's comment more or less, I'd like to see this adjusted for purchasing power parity.

  • slocum

    But it's not so easy to calculate. Groceries, for example, aren't cheaper down there than here. But real-estate and restaurant meals (really anything that includes local services) are much cheaper. As goods make up a smaller and smaller part of budgets around the world, the cost of services matters much more and so economic well-being converges even when incomes remain far apart.

  • morganovich

    arrian-

    wonder no longer:

    http://www.forbes.com/sites/warrenmeyer/2013/12/10/do-we-care-about-income-inequality-or-absolute-well-being/

    warren has already done that one.

    note that these are at purchasing power parity, so things like single payer healthcare are already included.

    as these charts make painfully clear, you can level incomes, but it does not make the poor better off. it just punishes the middle and upper classes.

    the poor in the EU are mostly a great deal poorer than the poor of the US and by the time you hit the middle class, the europeans are MUCH poorer. (on average about 40%)

    the sort of redistribution bernie loves hurts almost everyone and helps no one.

  • xtmar

    This is a good point, but it only goes so far. I lived in S. America for a few years, and have traveled fairly extensively, and I would add that while services are cheap in poorer countries, goods are more variable than I think you make them out to be. For instance, cars in Brazil are about twice what they are in the US on a nominal basis (though perhaps that's improved recently with the drop of the BRL), and the housing stock is also notably inferior to what you can get in the US, though that also depends on where you are and what your price point is. Finally, a lot of the consumer goods are either very expensive imports, or second rate domestic production with quality similar to what you would find in a dollar store (i.e. worse than Walmart). On the other hand, eating out or having a maid is really cheap, which makes things much more manageable.

    (Also, Brazil is very expensive by international standards, and other places in S. America are probably more reasonable. For whatever reason, the Lusophone countries have very high costs of living for a decent standard of living, be it in Rio or Luanda)

  • kidmugsy

    "the American rule of law ...." might be better phrased as "the American tradition of rule of law ...", alas.

  • roystgnr

    The article claims to be using "2008 international dollars"; i.e. already adjusted for purchasing power parity.

  • ano333

    "Ironically, most American redistributionists support the opposite, arguing that in many was the USA should emulate the authoritarianism of these poorer countries. "

    While I agree with the thrust of this article, the quote above is a bit premature. The "redistributionists" you mention tend to argue that we should emulate Europe (not including European Russia), not these BRICs. In order for your readers to assess your argument here, you really need to put the western European nations on that chart to compare them to the US. By not doing this, your argument about what "redistributionists" support is without any support of its own.

    edit: corrected spelling error

  • obloodyhell

    As the saying goes -- The capitalist sees the rich man, and says, "ALL men should have so much!". The communist sees the rich man and says, "NO man should have so much."

  • obloodyhell

    Sooner or later, your Euros will be as poor as the BRICs. THAT is what you "redistributionists" don't get. THAT is the point. Either your STATE owns and controls everything, or the individual does.

  • obloodyhell

    Even today, America's primary strength is relative rule of law compared to many other nations. More even than liberty and individual freedom, you can assert IT as the primary reason for America's continued success.

    P.J. O'Rourke made exactly that case in Eat The Rich

  • obloodyhell

    Read above. Yes.

  • morganovich

    i suspect the real reason is that wealth is impossible to accurately measure.

    there are simply no stats on it that actually mean anything. wealth is tied up in homes (hard to value), cars (likewise), private companies (all but impossible to value and there are no central records of who owns what, much less what it's worth), equity holdings, options, stocks, warrants, etc.

    there is simply no way to aggregate this, especially in the EU where people routinely shunt investments offshore to Switzerland etc in anonymous, numbered accounts.

    imagine the guy who owns the corner store near you. what's that business worth? do we know how much of it he owns? what about the real estate? the inventory? does anyone have those figures? no. nothing even like them.

    so how do you calculate his wealth and that of every other small business owner?

    there is simply no data that is even remotely accurate or complete.

  • ano333

    "Either your STATE owns and controls everything, or the individual does."

    But that is a false choice, as evidenced by the fact that there is no country in the world where either of those things is true.

  • Mercury

    "Essentially, in a truly global redistribution scheme, everyone in the US would be paying rather than receiving.

    A better way to achieve global income equality would be to have more countries emulate the American rule of law, property rights regime, and relatively free markets."

    ----------------------------------------------------------------------------------------------------
    Bingo. Now substitute "unrestricted immigration" for "redistribution" and this wisdom is just as sound (and applicable to Western Europe and the US).
    Not sure why Coyote can't connect these dots.

  • morganovich

    probably because the choice you offer is a false one.

    immigration helps the receiving country. it supplies labor and expands the local market for goods and services.

    immigrants do not make me poorer, nor make the nation as a whole poorer.

    your stance is inherently hypocritical. you want wealth to be separated by lines drawn on a map for political reasons. you want rights you deny to others.

    it also ignores the economic reality: if the US lacks cheap labor, it will import goods instead of people. there is no "have your cake and eat it too" choice here.

    your "dots" do not connect the way you think they do.

    the issue with immigration is the welfare state. THAT is what needs to be fixed, not the movement of people.

  • Incunabulum

    Another thing that chart illustrates - how *little* 'income inequality' there is in the United States compared to other countries.

    There's a steep rise on the poor end, and then the curve flattens out pretty quickly. Compare that to Brazil's or especially India's and you see a very steep rise on the rich side paired with very shallow rises from the poor side.

  • Incunabulum

    North Korea.

    Anything that isn't directly owned by the state is subject to confiscation at any time, along with state veto on any potential use.

  • Mercury

    The US has the lowest labor participation rate in many decades. There is no shortage, just bad incentives.

    The political lines on the map came first and wealth was subsequently generated at a greater rate within some of them than others, not the other way around. I do agree with Coyote that "A better way to achieve global income equality would be to have more
    countries emulate the American rule of law, property rights regime, and
    relatively free markets." Similarly, I'm sure you'd prefer to show others how to help themselves instead of adopting them into your family to give them all the benefits of a Morganovich.

    Point to one, great success story where third world indigents flooded into a modernized, Western nation/city and prosperity blossomed. England? Sweden? Detroit? Lewiston, Maine? - where?

  • CapitalHawk

    They can't. They just endlessly chirp about how immigrants are going to grow GDP.

    What is also interesting is that, like communists, libertarians see the entire world through the lens of money. Their sole measuring stick is "will this make us more money or less"? Just like the communists. But, that's just not how people are built and not how they relate to each other. And, just as with communism, full on libertarianism will never work. Unless you somehow manage to change human DNA.

  • Matthew Slyfield

    No one said it was easy. However, they did make adjustments for purchasing power parity. If you have any actual evidence that they did it wrong, post it.

  • Matthew Slyfield

    "imagine the guy who owns the corner store near you. what's that business worth? do we know how much of it he owns? what about the real estate? the inventory? does anyone have those figures? no. nothing even like them.

    If the guy who owns the corner store near you doesn't have those figures he will probably go out of business soon, if he isn't shut down by the IRS for tax evasion first. The only think you mention that isn't required to be reported on his tax returns is the value of the business, but if he doesn't know that, he can't make proper business decisions.

    The problem is not that no one knows those things, it's that they aren't aggregated where they can be easily looked up by third parties.

  • Rondo

    I truly like this video regarding income inequality
    Margaret Thatcher Debunks the Leftist Agenda on Income Equality

    https://danieljmitchell.wordpress.com/2011/12/28/margaret-thatcher-debunks-the-leftist-agenda-on-income-equality/

  • Rondo

    "The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of misery."

    Churchill

  • bigmaq1980

    To add to your point...

    There was (at least not so long ago) a huge price difference in Apple products such that Brazilian travelers would buy them in the US (they could claim them as personal use property upon return) and resell in Brazil at a good profit. Same with some other portable electronics and other high value goods (e.g. luxury branded clothing and accessories). I've heard that their customs have taken a harder line on this recently.

    Even in comparison with other "western" countries, prices for many things are significantly cheaper in the US, and that is without waiting and shopping for bargains (e.g. Black Friday).

  • texasjimbo

    immigration helps the receiving country. it supplies labor and expands the local market for goods and services. BS. Sometimes it does, sometimes it doesn't. Ask the descendants of the Native Americans of 250 years ago about that. We have an over supply of labor in the country and there is no scenario where adding to the labor force with large numbers of immigrants is going to be a net benefit for the native population of he country as a whole. Never mind the fact that a non trivial number of the immigrants are highly resistant to assimilation and some are even willing to engage in violence to express their disapproval of our culture.
    you want rights you deny to others. BS. I bet he is perfectly willing to stipulate that other countries should have the right to determine who gets to immigrate to their country; that that countries citizens should have more say about who gets to immigrate to their country than people from other countries; that immigration rules should be set to benefit the citizens of the country more than the people who wish to immigrate to that country. He wants people in other countries to have exactly the same rights he believes he should have.

  • bigmaq1980

    Where the cost of providing something (e.g. service) is largely labor, then, yes, it will likely be cheaper than here.

    Ever visit Mount Vernon? George Washington's plantation. Labor was "very cheap", so he had all kinds of services available to him. But, I doubt anyone would like to live his lifestyle then vs being poor in America today, given the choice.

    Real Estate? Have to disagree. It is always a local market. The favelas in Brazil are rather cheap. The Leblon neighborhood, in Rio, is rather pricey. Some areas of Detroit are dirt cheap. Manhattan, amongst the priciest in the world.

  • bigmaq1980

    True they are not aggregated. You'd be surprised how much guess work, er...estimates, actually goes into the GDP number.

  • Matthew Slyfield

    "You'd be surprised how much guess work, er...estimates, actually goes into the GDP number."

    Sorry, it wouldn't surprise me if the GDP number was produced by pulling numbers from the asses of Donald Trump, Warren Buffet, and Steve Forbes then averaged those three numbers together.

    1 blog comment: $0.00
    Image you can't get out of your head: Priceless.

  • xtmar

    Indeed, for some things you could basically go pay for a ticket from Rio to Miami, take a cab to Best Buy, and fly back to Rio, and still come out ahead versus buying in Brazil.

  • SineWaveII

    This chart makes the mistake that so many analysis like this make. It only looks at income and forgets all about the cost of living. Yes wages are higher here than many places in the world but this is also an expensive country to live in. Consequently most middle class Americans are living paycheck to paycheck and barely able to get by. You have to have a higher income just to be able to have a comfortable life here. If you take away American's money to give to the rest of the world because you think Americans are too rich you end up hurting Americans more because the cost of living doesn't go down. America is not the richest country in the world. And Americans are NOT richer than everyone in the world. Inflation just makes it look that way.

  • Scott

    Ayn Rand is one of my favorite authors, Ernest Hemingway is my favorite. This is a quick bit from Hemingway's short story, "The Denunciation," set in Spain:

    I don't think if people gambled for what they could afford it would be very interesting, Do you, Enrique?"

    "I don't know, I've never been able to afford it."

    "Don't be silly. You have lots of money."

    "No, I haven't." I said. "Really."

    "Oh, everyone has money," he said. "It's just a question of selling something or other to get hold of it."

    "I don't have much. Really."

    "Oh, don't be silly. I've never known an American who wasn't rich."

    I've had similar conversations while traveling abroad, and for me these signify the enormity of America wealth more than any graph ever could. Warren Buffet likes to say he won the genetic lottery - well, we all did, in a sense, simply by being born in America - a greater advantage than any European aristocracy could ever offer.

  • jandr0

    [libertarians see the entire world through the lens of money.]

    Nonsense.

    [And, just as with communism, full on libertarianism will never work. Unless you somehow manage to change human DNA.]

    And, just as with , full on ANYTHING will never "work" in the sense of delivering a utopia. Unless you somehow manage to change human DNA.

    FTFY.

  • Sean Leal

    Not to state the obvious, but how could cost of living not go down if everyone in the US suddenly had less money? Prices would fall to equilibrium.

    Second, how does inflation bear any effect on wealth compared to a global percentile? Zimbabweans have trillions of dollars in their pockets, but they don't show up on the graph.

  • markm

    When "eating out or having a maid is really cheap", the restaurant workers and maids are really poor. Also, in the USA, the majority of the population is middle class, at least by income; in Brazil, I expect that not only are the income brackets for middle class lower, but they are much less than 50% of the population, while the poor are well over half of the population.

  • markm

    "Point to one, great success story where third world indigents flooded into a modernized, Western nation/city and prosperity blossomed. England? Sweden? Detroit? Lewiston, Maine? - where?"

    Detroit, until the socialists and crooks (but I repeat myself) took over in the 1970's. The whites from Appalachia and black sharecroppers from the deep south may have been American citizens by birth, but economically and culturally they were third-worlders. Detroit boomed for 30 years - until the majority of the voters were immigrants who still thought like third-worlders.