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Home Publications Blogs Beat the Press The Right's Inventive Approach to Income Inequality

The Right's Inventive Approach to Income Inequality

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Sunday, 22 April 2012 23:58

Just as it refuses to accept global warming or evolution, much of the right is busy trying to deny the evidence on income inequality. As Thomas Edsall notes in his column today, they don't have much of a case.

The big point that they are hitting on these days is that most middle income and poor people get health insurance, either from their employer or the government, which costs lots of money. If we add in this expense to their cash income, then the rise in inequality does not seem as large.

There are two important points to consider on this issue. The cost of health insurance is money being paid to highly paid medical specialists, insurers, and drug companies. It seems a bit perverse to argue that the poor are actually doing better than we thought because we are paying lots of money to cardiologists.

The other point is to keep in mind is that if we look at health outcomes like life expectancy, then it adds to the view that inequality is increasing. While all income groups shared more or less equally in the gains in life expectancy in the three decades immediately following World War II, a hugely disproportionate share of the gains have gone to the top in last three decades.

This suggests that if we measure what low and middle income people get by way of health care, instead of what the government and employers pay, the growth of inequality might be even worse than the commonly used data indicate.

Comments (10)Add Comment
...
written by skeptonomist, April 23, 2012 9:50
Everyone is hiding important aspects of income inequality trends when they give results in terms of household income, rather than income per person employed outside the home. Since WW II, the fraction of women employed outside the home, and the number of earners per household, has increased considerably. Actually, the participation rate of women peaked around 2000 and has declined since:

http://research.stlouisfed.org...NS11300002)

The entry of women in the work force was partly by choice but especially at lower income levels it has been a matter of necessity - the income of one worker is often not enough to support a family. Looking at actual real wages of those at median and lower income gives a much worse picture than looking at household income.
1968
written by pete, April 23, 2012 10:03
So what changed after 1968, the year with apparently the flattest distribution? Johnson delcared a a "War on Poverty" and ushered in Medicaid and Medicare. Nixon got the U.S. off the gold standard, allowing for a doubling of the inflation rate from 2% to 4% over the next 40 years, a disaster for the poor. We had 2 housing bubbles and a dot com bubble. And of course, as Shiller points out, growth periods (think Apple Oracle MS Google) correspond to increasing inequality, almost by definition.

Most likely, as in the 1920s, we are at an inequality peak, and as happened then with Rockefeller and Carnegie monies, in a couple of generations the huge dotcom wealth will be dispersed.
...
written by dilbert dogbert, April 23, 2012 12:16
"Nixon got the U.S. off the gold standard, allowing for a doubling of the inflation rate from 2% to 4% over the next 40 years, a disaster for the poor"

I have a different take on inflation. Wages usually follow inflation with winners and losers but on the whole that is what happens. The real disaster was the loss of well paying jobs for low skilled and low educated workers. That moved a lot of people from OK to poor.
dilbert....
written by pete, April 23, 2012 2:05
Kind of confusing...if the jobs have gone to less skilled and uneducated then shouldn't they be making less. So I guess you are saying that a big problem is a lack of skill? I kind of agree there, and that is directly due to policy. We have effectively outlawed apprenticeships, so that for the most part its college or lack of skill. Plus, recently, the minimum wage went up 20% in the midst of the greatest recession ever. Urban teen unemployment is way high. And no matter what anybody says, that is structural.

Economists View clears up the inflation/wage thing, kind of a smackdown on Dean and Krugman. Inflation has been bad for workers.

http://economistsview.typepad.com/economistsview/2012/04/fed-watch-distributional-impacts-of-monetary-policy.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+EconomistsView+(Economist's+View)
Many low- and moderate-wage workers in the health sector
written by A Greek Bearing Facts, April 23, 2012 2:28
According to Dean Baker: "The cost of health insurance is money being paid to highly paid medical specialists, insurers, and drug companies. It seems a bit perverse to argue that the poor are actually doing better than we thought because we are paying lots of money to cardiologists."

Surprising as it may seem, many low- and moderate-income people also work in hospitals, doctors' offices, drug companies, nursing homes, rehabilitation centers, pharmacies, and medical supply companies. Tabulations of the Census annual income statistics suggest the household income distribution of workers with most of their income derived from the health care industries is only very slightly higher and only slightly less equal than that of households with workers in the balance of industries. Hence, Baker's argument for disregarding reimbursement of consumers' health care spending in the calculation of household income in nonsensical on the face of it: It presumes a fact that is largely untrue (and mostly irrelvant, even if true).

His argument that the correlation of expected lifespans and average lifetime earnings has increased is, however, true. The fact remains, however, that a sizeable share of U.S. income gains (as measured in the National Income and Product Statistics) has taken the form of "personal income" in the form of insurance reimbursement of health care consumption. And proportionately, this is more the case for low- and moderate-income Americans than it is for the well-to-do.
...
written by Kat, April 23, 2012 3:17
Surprising as it may seem, many low- and moderate-income people also work in hospitals, doctors' offices, drug companies, nursing homes, rehabilitation centers, pharmacies, and medical supply companies. Tabulations of the Census annual income statistics suggest the household income distribution of workers with most of their income derived from the health care industries is only very slightly higher and only slightly less equal than that of households with workers in the balance of industries. Hence, Baker's argument for disregarding reimbursement of consumers' health care spending in the calculation of household income in nonsensical on the face of it: It presumes a fact that is largely untrue (and mostly irrelvant, even if true).
I'm sorry, but this makes no sense to me. It appears that you are talking about something entirely different.
a greek bearing nonsense
written by mel in oregon, April 23, 2012 4:04
kat has it right, you are missing what dean baker has been pointing out for years. sure orderlies, cnas, food servers & caregivers are low paid & work in the medical field. but when you have an organ tranplant that costs 25 times as much in the united states as just as good of care in thailand or india, it isn't the orderly that's robbing you to the point of bankruptcy, it's the medical bureaucracy & a bunch of overpaid surgeons that don't want any foreign competition. same thing with the overpriced prescriptions pushed by medical physicians by the giant drug corporations. if patents were used in a responsible way instead of used by the wealthy drug companies to block generic less costly medicines, americans would save close to $300 billion a year, almost 1000 dollars for every man, woman, & child living here. again dean has pointed this out for years.
CBO already includes employer paid health insurance anyhow
written by AndrewDover, April 23, 2012 4:38
The non-partisan Congressional Budget Office report, “Trends in the Distribution of Household Income Between 1979 and 2007.” includes "the value of income received in-kind from sources such as employer-paid health insurance premiums". See Appendix A.

http://www.cbo.gov/sites/default/files/cbofiles/attachments/10-25-HouseholdIncome.pdf

CBO's excellent analysis includes only PART of health benefits
written by A Greek Bearing Facts, April 24, 2012 11:48
Mr. Andrew Dover - - If you read that CBO report carefully you will see that the CBO includes only PART of health benefits. It includes all the health benefits paid by employers, and it counts those benefits as income available to the wage earner covered by the insurance policy. Also, it includes all the estimated insurance value of Medicare and Medicaid for Americans with middle and high incomes, so long as they identify themselves as insured under Medicare or Medicaid.

However, it EXCLUDES all or most of the value of Medicare and Medicaid if the insured person has a low cash income. And it excludes all the value of Medicare and Medicaid if the person does not report coverage under those programs. This is not a big problem for Medicare, but it is a major problem for Medicaid, which is very under-reported in the household survey that CBO uses.

In sum, the CBO's analysis method and data source lead to a huge understatement in the value of Medicare and especially Medicaid benefits paid to low-income Americans.

Anyone with the slightest acquaintance with federal and state budget statistics -- or with Dean Baker's commentary -- realizes that increases in Medicare and Medicaid spending account for a huge share of the nation's budget problems. The benefits provided by these two programs, especially Medicaid, are hugely skewed toward Americans with low incomes. The CBO purposefully excludes the Medicare and Medicaid benefits received by the lowest income Americans from its distributional statistics, and it misses a sizeable slice of the benefits received by Americans who are not poor but who have cash income below the median cash income level.
facts, schmacts
written by David, April 24, 2012 8:24
Mr. A. Greek fails to point out the reason Medicare/Medicaid costs are spiraling out of control is because medical care in the private sector has costs spiraling out of control. Drug patents and Doctor/nurse salaries. Does my doc need to drive 3 beemers to get the job done? Really?

Mr. Greek also fails to point out that the lowest income Americans have gotten the slightest part of the increase in GDP from the 1970's onward. Work 'em to the bone and then deny them health care for the their end years. Compassionate conservatives, my asterisk.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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