Friday, February 21, 2014

Income Inequality: Jared Taylor and Bad Analyses

American Renaissance is a publication of race realist information, founded by Jared Taylor, an
American journalist. Recently I happened upon a YouTube video uploaded by American Renaissance entitled "Income Inequality: The Debate Ignores Race," with Mr. Taylor as the speaker. The title
immediately struck me as being odd since I'm familiar with the debate over income inequality in America, and race has always been a considered factor. After beginning to watch the video, however, I immediately noticed what Mr. Taylor was attempting to do and, unfortunately for him, nearly all of his assertions were either wrong or misleading. In this post I will be examining some of the arguments he makes, although I will only address maybe the first half of the video. I don't consider this to be something that is completely worth my time, and the video itself is disgusting in nature, but I think it's important to point out where people should be skeptical. My posts serve purposes, and his definitely fits in that motif. So, let us begin.

Jared Taylor
The video begins by giving the warrant for its making: a speech by Obama stating that fighting income inequality and promoting upward mobility is the defining challenge of our time. To begin his argument, Mr. Taylor starts off with this:

"But this talk about fighting income inequality is mostly nonsense. First, inequality is natural; inevitable. People are unequal in every possible way. Not even the most ruthlessly egalitarian regimes run by Stalin, or Mao, or Pol Pot, could enforce across-the-board equality."

First of all, the argument that the fight against income inequality is for "across-the-board equality" is a strawman. It's actually a perfect example of a false dilemma, where Mr. Taylor seems to believe that one must either be supportive of complete and total equality (egalitarianism), or supportive of the natural tenets of inequality (them). Secondly, I don't even think I need to explain, at this point in time, why saying "inequality is natural" is a pointless statement. Of course people are unequal, although not in "every possible way." This is still thinking along the same lines of "you're either one of us, or you're an egalitarian." Let's continue, though.

"And how much equality do we want, anyway? Presumably we don't want everyone in America to get the same grade on the SAT. We want them to get the highest grades they can."

Well we can guess when someone suggests that income inequality is too high, the ultimate goal is to just decrease it by some statistically significant amount. Again, Mr. Taylor reinforces the false dilemma.

"The second obvious blind spot about income inequality is that practically no one points out that for the last twenty or thirty years we have been importing millions of poor people. They then go on to have millions of poor children. This, along with a large native population of blacks, guarantees increasing income inequality. It's scandalous that no one mentions something so obvious."

Actually, the reason nobody brings it up in the manner Mr. Taylor brings it up is because it is obvious, and the answer is almost just as obvious. Importing "millions of poor people" does not necessarily mean that income inequality is going to increase because the Gini coefficient, the statistic we use to measure income inequality, is intended not to scale with a growing population. At the same time, the coefficient also doesn't base inequality strictly off of negotiable funds, but instead also bases it off of any form of capital income -- for example, if a farmer grows his own food, then those crops are considered part of his income. Presumably, the "millions of poor people" coming in who are by and large seeking jobs in agriculture will not so drastically change the coefficient. Also, on the fact of having "millions of poor children," the calculation of income inequality is adjusted for household size. I will admit that adding "millions of poor people" would increase income inequality somewhat, but the coefficient is designed to not allow this type of demographic change to so drastically effect it.

This is upheld when we consider that the influx in immigration was only responsible for 5% of the increase in income inequality from 1980 - 2000. As far as the "large native population of blacks," Mr. Taylor seems only to have confirmed that there is also racial implications in terms of domestic income inequality -- unless, he's suggesting that blacks are somehow predisposed to have lower incomes. Kind of a ridiculous and even more detached assertion than his previous one, but otherwise, it simply upholds that income inequality is an issue. Let's continue.

The chart Mr. Taylor refers to.
For his next claim, Mr. Taylor highlights that the rich are, indeed, getting richer, and cites Figure 2 of the Congressional Budget Office (CBO) report on income inequality in America showing the income gains from 1980 to 2010. He makes note that while income has risen for the top 1% by 201%, nobody has seen a decrease in income, thus "the poor are not getting any poorer."

This is, once again, misleading because of what the CBO accounts for when calculating income inequality. The report makes note of the fact that the statistics also include things such as employer-sponsored health benefits; in other words, as I said, income inequality accounts for any type of capital gain. However, while leaving out such benefits would understate middle- and low-income gains, it gives a different perspective. Intuitively, one could guess that such benefits would make up a smaller percentage of income for the top 1%, but a much larger portion for middle- and low-income households.

In addition, a report from The Pew Charitable Trusts suggests that while the conclusions found by most economists are in concordance with the CBO, that the rich are getting much richer while the poor are still getting somewhat higher incomes (as a result of accounting for all capital), in terms of wealth, it is true that the rich are getting richer, and the poor are getting poorer.

So what does Mr. Taylor say next?

"Remember, however, that these numbers are for households. The rise in income inequality for individuals is considerably less. Well how can that be? It's because so many more people are living in separate households, and a lot of those new households are single mothers with very low incomes. In 1960 the average American household had 3.35 people in it. 10% of those households were headed by a single parent. By 2009 the average household had lost almost a whole person and was down to 2.63 people, and the percentage of single-parent households had tripled to 30%. A huge increase in poor single mothers certainly added a lot to income inequality by household."

Keep in mind that I fully acknowledge that Mr. Taylor doesn't even bother to cite where he's getting these statistics from. For the purposes of this refutation, we're just going to assume that his numbers and assertions are correct. Mr. Taylor still neglects to mention that the CBO in their report of income inequality adjusts for the size of a person's household, such that, for example, a single individual making $20,000 would be scored similarly to a household of four making $40,000.

"People may be envious of sports stars and CEOs with gigantic salaries, but those salaries don't make us poor. Bill Gates didn't get rich by making you poor. He got rich by making software you wanted to buy. Robinson Cano just signed a $240 million contract with the Seattle Mariners because a lot of people want to watch him play baseball. Should there be a law to cut his pay?"

Nobody has anything against Bill Gates. Well, some people do.
It seems Mr. Taylor doesn't understand that when people speak of income inequality, it is largely not concerned with the outliers that are Fortune 500 CEOs and sports stars, since that is a very small portion of what categories we tend to refer to. Literally, if we take the number of athletes and sports competitors and add 500, that accounts for 0.00005% of the United States population -- not even close to addressing the "top 1%" category. Mr. Taylor is very good at noting extremes, but this does not address the large variation that there is between income classes.

"Something that seriously skews incomes in America is the poverty of blacks and Hispanics. [...] The mere presence of blacks and Hispanics, therefore, increases America's income inequality. And this partly explains why the states with the greatest income inequality in 2009 were California and Texas, with their very mixed populations, and the ones with the least income inequality were overwhelmingly white states, such as Maine, Vermont, Montana and Wyoming. The next time someone complains about income inequality, point that out."

Once again, Mr. Taylor makes the same assumption that many others do in saying that because blacks and Hispanics are disproportionately represented in income inequality, that the presence of blacks and Hispanics increases income inequality. This serves only to divide racial lines as opposed to actually explaining the issue. But what of his claims that the more heterogeneous states have higher income inequality?

Let's consult a list of the United States by their Gini coefficients and match them with demographics of US states in the same year, 2010, and calculate a correlation coefficient. Including data from District of Columbia, the correlation is -0.5; in other words, there is a moderate negative correlation between income inequality and the number of white people -- the more white people, the less inequality. The correlation without the District of Columbia was -0.42. Does this hold as strongly if compared to other variables? I decided to do the same test using population density instead of percentage of non-Hispanic whites. Including the District of Columbia, the correlation between high population density per square mile and high income inequality was 0.59. If you remove the District of Columbia, you get -0.43. In both instances, a state's population density is more closely correlated to income inequality than is that state's racial demographics.

Of course, this shouldn't come as much of a surprise -- in a population dense state, job competition is more likely to occur; however, it's obvious that Mr. Taylor would like to neglect stronger correlations in favor of making a racial claim. Even still, I'm probably also ignoring other factors that may have an even stronger correlation.

Income inequality by country.
There is something to say about America's income inequality. If we look at data provided by the United Nations, the World Bank, the CIA and the Organisation for Economic Co-operation and Development, we see that the United States's income inequality is on par with countries we typically deem to be less-than-developed, such as Mexico, and is actually even higher than that of India. This is not an issue of population size, either, as income inequality metrics are independent of population increases, as stated earlier. Later on in the video, Mr. Taylor expresses his disapproval of welfare programs, yet we can see that countries in Scandinavia (known for their strong welfare states) and even Canada (with a public health care system) have lower income inequalities than the US. This is not to say, however, that strong welfare states correlate to lower income inequality, because we can see that China is pretty much in the same range as the United States.

What can we learn from this? It's fairly easy to tell that there are multiple factors that have just as strong, if not a stronger explanation for income inequality in individual states than those mentioned. Mr. Taylor, however, neglects this in the video. Recall what his opening statement was about his views on the debate, in saying: "But this talk about fighting income inequality is mostly nonsense."

Such a dismissive statement of one of something that has been in debate for centuries shows the thinking of a closed-minded, biased individual with no interest in solving problems, but merely pushing his own agenda. I hope that my readers take this as an example that simple solutions to complex problems are almost always biased and crude in nature.

Thank you for reading.

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