Posted on 11/21/2007 8:34:17 AM PST by jazusamo
November 21, 2007
When most of us look at income statistics, we are not just being numbers junkies. We want to find out something about actual flesh-and-blood human beings -- specifically what their standard of living is like.
But you cannot always just take statistics at face value -- or, worse yet, with the spin that politicians and the media put on them.
Income, for example, is not the same as earnings, and neither is the same as the economic resources on which people's standard of living is based.
Since most of us get our income by earning it, it might seem that any difference between income and earnings would just be some technicality that only economists or accountants would bother with.
In reality, the difference can be huge, depending on the income bracket and the age of the individual.
Most of the income received by people 65 years old and up is not counted statistically as earnings. Only 24 percent of their incomes are earnings. Most of their incomes are from pensions or other sources known as "unearned income," such as returns on investments.
It should hardly be surprising that people who have been around a long time would have accumulated more money in the bank and maybe have a little nest egg in a mutual fund, each of which provides a stream of income during their retirement years, even if that income does not get counted as earnings.
Despite a drumbeat of political rhetoric depicting the elderly as being in dire economic conditions, the actual incomes of the elderly are more than four times what their earnings statistics might suggest -- or what politicians can claim, citing those statistics.
When it comes to wealth, the average net worth of people 65 years old and up is several times that of people under the age of 45. The highest average net worth in any age bracket belongs to households headed by people aged 70 to 74.
Although income is often confused with wealth, as when people currently in high income brackets are referred to as "rich," the elderly average lower income than middle-aged people, but more wealth.
Since 80 percent of the people who are 65 and up are either homeowners or home buyers, their housing costs tend to be lower. Among those 80 percent, their median monthly housing costs in 2001 averaged just $339 a month.
That includes property taxes, utilities, maintenance costs, condominium and association costs for people with such living arrangements, and mortgage payments for those who do not own their homes outright.
There are of course some elderly people who are poor, just as there are some poor people in every age bracket. But statistics cited by politicians, journalists and others who inflate the number of the poor need both scrutiny and skepticism.
The elderly are not the only people whose standard of living is grossly understated by those who cite statistics on earnings or income.
Those statistics do not include income received by low-income people as transfer payments from the government, such as welfare checks, much less various in-kind transfers, such as subsidized housing and subsidized medical care.
As of 2001, about 78 percent of the economic resources used by people in the bottom 20 percent of income recipients were in the form of either cash transfers or in-kind transfers.
To judge the standard of living of low-income people by income statistics is to leave out more than three-quarters of the economic resources used by them.
It is understandable that those who have either a political or an ideological vested interest in exaggerating the numbers of "the poor" would use statistics that greatly understate the standard of living of low-income people, as well as that of the elderly.
But that is all the more reason for the rest of us to be aware of what statistics do and do not mean -- and beware of those who want us to believe the worst, whether for their own political advantage or because that fits their ideological vision.
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Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His Web site is www.tsowell.com.
I like Sowell, even if he never has responded to an e-mail from me.
Good article, but stating the obvious. We have the richest poor in the world. Our poor are not poor by world standards. Could a poor family in Mogadishu roll up in an escalade and buy food with food stamps. Or go home from the same store and watch Yo MTV Raps on their 52” plamsa HD Tv. Iv’e witnessed here more than I care to recount. So, are there truly AMericans in need. There sure are, and they should be taken care of. The poor with the cars and TV’s are just playing the system. Because the system is too big to manage, they get away with it.
He’s right. If you torture the data enough, it will tell you whatever you want to hear.
I have a couple of good friends who are naturalized Americeans. Both think that the only poor people in America are those who choose to be poor. Also that most Americans, identified as “poor”, live with upper middle class luxuries, compared to most other parts of the world.
I think most of the really poor have made exceedingly bad decisions or or mentally ill...
Neither of those groups are poor because of outside influences. They are poor because of choices made by their very own brains.
We may regard those choices as so consistently bad, that we label people as "mentally ill", or even insane, but it remains true that these people do have brains (albeit defective ones). Nobody can be responsible for the decisions made by someone else's brain.
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