Thomas Sowell: "Work Pays"

Townhall.com ^ | May 2, 2003 | Thomas Sowell

[UnklGene]

Work pays! Thomas Sowell

May 2, 2003

Those for whom indignation is a way of life often inform us of the fact that families or households in the top 10 or 20 percent in income make far more money than people in the bottom 10 or 20 percent in income. What they almost never inform us of are how much money they are talking about and how many people in these different brackets actually work.

These omissions are neither incidental nor accidental. If the full facts were brought out, those facts would completely undermine the picture presented by the envy zealots or, as they prefer to be called, advocates of "social justice."

Despite the looseness with which the term "rich" is thrown around -- as in "tax cuts for the rich" -- most people to whom that term is sweepingly applied are far from being rich. First of all, whether you are rich or not depends on your wealth, not your income, but the statistics used by the envy zealots are almost always income statistics.

These are also usually statistics about family income or household income, which can be very misleading, because families and households differ substantially in size -- and where there are more people making money, they usually make more money.

While there are more than 19 million people working in households with incomes in the top 20 percent, there are fewer than 8 million people working in households in the bottom 20 percent. How much of an injustice is it that people who work get more money than people who don't work?

If you are talking about working full-time, 50 or more weeks a year, then there are more people doing that in the top 5 percent of households than in the bottom 20 percent. As Casey Stengel used to say, you can look it up. These are Census data, available on-line from the Current Population Survey, Table HINC-06.

It may not be a breakthrough on the frontiers of economics to say that work pays, but it does. Among households in the bottom 20 percent in income, there are more than 13 million people who do not work at all and fewer than 8 million who do work, counting both full time and part time workers.

How do people live without working? Millions in the bottom 20 percent live on the money earned by other people who do work and whose income gets taxed to pay for the non-workers. In addition, more than 4 million families in the bottom fifth in income live on property income and nearly 6 million live on various forms of retirement income, including Social Security. (Table FINC-06, for those who demand proof only from those they disagree with.)

What about those "rich" people we hear so much about? Studies that follow the same individuals over time have found that those in the top 20 percent and those in the bottom 20 percent are mostly the same people at different stages of their lives. Not only does work pay, when you have worked a longer time, it usually pays more.

High-income people are typically people who have reached their peak earning years in middle age. What does it take to reach the top 20 percent in income? In 2001, it took a little less than $85,000 -- for a whole household! (This is a different Census publication: "Current Population Reports," P60-218.)

How many yachts these people are going to buy, even if they get those "tax cuts for the rich" we hear about, is another story.

To reach the top 5 percent, you need an income of about $150,000 -- again, for a whole household. A middle-aged couple who have worked their way up in middle-class jobs, over a period of decades, can reach this peak -- and have much of it taxed away.

These publicly available numbers may be surprising news to some because neither in the media nor in academia do the envy zealots like to talk about actual dollars and cents. Or about work -- one of the few four-letter words that remains taboo.

They prefer to talk about percentage shares going to some people versus others. But people do not live on percentages. They live on money and on the things that money can buy, which is to say, their real income.

Despite all the hand-wringing about the fact that the bottom 20 percent get a smaller share than in times past, the real income of the bottom 20 percent has gone up by thousands of dollars. Moreover, the people who were in that bottom 20 percent in the past have also gone up into higher brackets.

[proxy_user]

Oh, rats! I guess I'll have to get back to work....

[strider44]

I guess it's nice to know I'm in the top 5%. An accurate stat that I would love to see is what percentage of Americans live "beyond their means." I would guess that percentage is about 85-90. How many "poor" people do you see walking around with cell phones? Or new rims on their old vehicle?
I certainly don't consider myself to be rich, but I guess in comparison to the rest of the world I am (combined income of myself and my fiance $200K/year). We live in Boston and have a huge mortgage. But you know what? We both drive used cars. We share one cell phone. My TV and stereo are about 12 years old. We save money. I actually check books out of the library. But according to the Dems, I'm rolling in it like Rockefeller. Please tax me more!

[k2blader]

"Envy zealots." Describes them to a "T."

[Lady Eileen]

bump

[Freedom'sWorthIt]

Truth bump.

[Trust but Verify]

Good for you. I predict a bright future for you and your future bride. That said, you are an aberration.

We are aspiring to the top 5%. We have a ways to go, but we'll get there.

[mabelkitty]

I am outraged!

$85,000 PER FAMILY is in the top 20 percentile? Why am I bothering to go to college? Why am I taking out loans of $30,000 and why am I working 50 hours a week?

Only to get half of what a family in the top 20% are making? This is peanuts!

Can someone give me one good reason on why my husband and I shouldn't quit our jobs and sit home? Just one? I WORK MY ASS OFF TO MAKE IT WITHOUT A HANDOUT - EVER- and George Voinivich tells me I can't have my money back??

[mabelkitty]

I'm right with you, there. No fancy restaurants, no trips, no new clothes, etc.

Ohio is taxing me more, I have no children but I have to be taxed on a school system that adds no value to my home, my insurance went up, and now they are moving another city's water into my street costing me upfront $8,500. Water will no longer be free.

I'm a white woman, but I am tired of being hassled by "the man". And I use that term to symbolize the tax and spend politicians running this country.

[strider44]

My advice is live somewhere cheap! That has helped us. When we met we both lived in Kentucky. Moving to Boston has been a financial shell-shock. You have no choice but to be frugal. Our income will go down when we have kids though. It will be a tough call when the time comes, she makes much more money than I do. Can you say Mr. Mom?

[lilmsdangrus]

Great article- my husband has been making this point to our dummycrat friends, who don't even get that they are in the exact position Sowell is talking about, and they work their asses off to get there, as do my husband and I!!!!

[strider44]

"Can someone give me one good reason on why my husband and I shouldn't quit our jobs and sit home? Just one? I WORK MY ASS OFF TO MAKE IT WITHOUT A HANDOUT - EVER- and George Voinivich tells me I can't have my money back??"

PRIDE.

[lilmsdangrus]

Mabelkitty--
I share your frustration!! There are quite a few days when you wonder what you do it all for---- for instance your next door neighbors, who have claimed bankruptcy, pull up with a new vehicle, or some other new toys day after day, and we are driving used vehicles, living in an older home, because we are HONEST, HARDWORKING AMERICANS!

[goodnesswins]

"what percentage of americans live 'beyond their means.'"

Yeah, and what's it all going to cost us to support them when their little world falls apart? (Medical, retirement, etc.) The poorest people seem to want to look like they HAVE money...by the standards of the TV advertising they see...not by how they REALLY live and run (or ruin) their lives. /Rant.

[strider44]

Hey, I just left Ohio (Procter and Gamble, Cincinnati). I miss the golf and my low mortgage payment. Keep up your frugal ways, you'll find a man that respects and appreciates that!

[lilmsdangrus]

Excellent reply-- and when all is said and done, that IS exactly what keeps us going- that and the fact we had great parents who taught us the right values. There isn't enough money in the world to pay for that education..

[strider44]

Too true. These people will never know how great it feels to be debt-free. The tough argument though is that all the profligate spending by the millions of dopes in this country drive the ecomony. It's a double-edged sword.

[Capitalism2003]

his books are great....I recommend everyone find a few on Amazon

[Trust but Verify]

Can you say Mr. Mom?

Sure! Our kids are almost grown and we now are paying for college for 2. Not fun, but necessary.

[strider44]

I was going to mention my upbringing, but you beat me to it. I owe my parents everything. My dad grew up dirt-poor in Summerville Ma. A big traditional Catholic family - 6 kids. He used to tell me stories about going to the bakery and having to buy the "Stalies" Donuts that were at least a day old. My grandfather wouldn't pay for the fresh ones. He's retired now after becoming a very successful corporate executive working for the same company for 35 years. And you know what? He wore his $10 digital watch and drove a Chevy Cavalier. My mom dragged him kicking and screaming into a Volvo dealership and now they have the sensible wagon.
He saved money his whole life to put me, my brother, and sister through college. My brother and I both went to school on full 4-year ROTC scholarships. We saved my parents about $200K. That was one of the proudest moments in my life, when I knew he wouldn't have to pay for my 4 years in college. But still, I feel I owe them everything.