Some on the left worry about income inequality as though that matters. It is, though, equality of opportunity that provides everyone the path to increasing prosperity. Even though we begin life with an equal endowment of inalienable rights—including the right to seek our own happiness as John Adams described it—it is the implementation of those rights, equality of opportunity, that lets us capitalize on and so to maximize, our unequal endowments of ability, temperament, luck.
One way to assess the increasing prosperity of all is to look at consumption. Hassett and Mathur do this in their paper, “A New Measure of Consumption Inequality,” a copy of which can be found here.
Some numbers will illustrate. First, a snapshot of the general situation:
|
Per cent of Total US Consumption |
||
|
|
Year 2000 |
Year 2010 |
|
Bottom Fifth of Households by Pretax Income |
8.9% |
8.3% |
|
Middle Fifth |
17.3% |
17.1% |
|
Top Fifth |
37.3% |
38.6% |
That’s remarkably stable.
Now, the trend in consumption:
|
Increase in US Consumption from 2000 to 2010 |
|
|
Bottom Fifth |
14% |
|
Middle Fifth |
6% |
|
Top Fifth |
14.3% |
Despite the recessions of the early 2000s and since 2008, household consumption actually has increased, and the bottom fifth by pretax income increased their consumption by quite a bit, despite the claimed unfairness of income inequality.
Now, some illustrative items of consumption, focusing on the bottom fifth of American households:
|
Per cent of Households with the Indicated Item |
||
|
|
Year 2001 |
Year 2009 |
|
Computer |
19.8% |
47.7% |
|
Dishwasher |
17.6% |
30.8% |
|
Microwave |
74.9% |
92.4% |
|
Washing Machine |
57.2% |
62.4% |
|
Air-Conditioning Equipment |
65.8% |
83.5% |
|
6 Rooms (Other than bath) in the House |
21.9% |
30.0% |
Odd, that—overall relative share, by those unequal income groups, of consumption of items like these has remained quite stable across over time. Moreover, despite that income inequality (which has grown, as it typically does, during recessions, does not act as a limiting factor in consumption capacity. Apparently unequal incomes don’t matter that much to well-being. Household quality of life for is improving for all groups.
Of course, this does not mean that the lower income groups don’t need help—they often do, especially during economic dislocations; their resource margins are much thinner. But that help is most effective as temporary hands up, not in the form of permanent wealth redistribution programs. The latter simply address a non-existent problem.