Guest Saturday withe The Free Market Project #2

This article was originally published by Pat Slattery in The Free Market Project on April 18, 2011.

Fixed  Statistic are Different than Mobile People

I was re-reading Thomas Sowell’s Intellectuals and Society over the weekend and he made a brilliant point that I want to highlight (to the degree I can do Thomas Sowell justice).

It’s a very simple thing he said, really, but it is completely missed by most people when discussing economics.  Mr. Sowell’s point was that there is a huge difference between looking at income as quintiles of income distribution, and looking at people in the real world.  The quintiles (or any other construct looking at some percentage of earners) are static.  There will always be a bottom fifth, always a top fifth.  Politicians seem to think this is an intractable problem.  “The poor, those in the bottom fifth in income, need our help.”

Sowell makes the point that if you look at actual human beings (which the IRS does), what you see is movement of people through the quintiles over time.  The same people in the bottom quintile at one point in their lives are very likely to be found in a higher quintile, including the highest quintile, at another point in their lives.  Through work and experience, perhaps entrepreneurial effort, they rise up.  But the lowest quintile persists, filled by new workers just entering the job market, or with people who’ve lost jobs and temporarily dropped in income.  The number of people who stay forever enmeshed in the bottom quintile is small (and much of it can probably be attributed to the damage done to minority families by “Great Society” programs).

This is one of those great little tidbits than can help change people’s minds.  When they talk about the poor, or parrot the Democrat party line (which sees the bottom quintile of earners not as a statistical category, but falsely believes that it represents people stuck in poverty), bring up Sowell’s point.

One example I’ve seen is my brother-in-law and my sister.  When they graduated from college, my brother-in-law went to medical school and my sister’s first-job-out-of-college was their family’s only income.  They were poor.  Doubtlessly in the bottom quintile.  Now, my brother-in-law is a highly respected and well paid cardiologist.  Doubtlessly in the top quintile of earners.

Ask a Democrat if they’ve driven through the suburbs and seen all of the big new houses and even the McMansions that proliferate there.  They are owned by people who have risen from lower quintiles of earnings to higher ones.  They didn’t always have the money to afford those homes.  They didn’t always have money to drive new cars.  At one point they were just starting out and they probably spent at least a little time in the bottom quintile of earners or the second quintile.  Now they might be in the top quintile or the fourth.

We have to be prepared in the debate.  Using Professor Sowell’s insight (which he attaches actual numbers to from IRS data in his book) can make light bulbs go off in people’s minds.  As a friend of mine says, “You can’t change people’s minds, but you can change their perspective.”

Simply ask people, “Do you make more money now than you did when you began working?”  When they inevitably say yes, remind them that they moved from a lower quintile of earners to a higher one.  The quintiles are fixed, but the real people move up.

(Note: some also move down, due to circumstances in their lives.  Divorce generally moves people down.  Loss of a job.  Retirement.  Selling off a business or holdings can bounce someone up into one quintile and then have them retreat back the next year.  Do you realize that there are people counted in the bottom quintile of earners who are incredibly rich, but they’re so friggin’ rich that they don’t have to take a salary or sell anything to live lavishly in a particular year?  Steve Jobs took a salary of $1 when he came back to Apple… for that year–if he didn’t sell any stock–he would be in the bottom quintile of earners.)

3 thoughts on “Guest Saturday withe The Free Market Project #2

  1. The democrats main aim is to keep those in the bottom quintile there and also to try and get those not in the bottom down to the bottom.

    Off course that’s never the publicly stated aim, that’s just how things work out.

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