http://www.discoverthenetworks.org/viewSubCategory.asp?id=775Anyone who follows the media has probably heard many times that the rich are getting richer, the poor are getting poorer, and incomes of the population in general are stagnating. Moreover, those who say such things can produce many statistics, including data from the Census Bureau, which seem to indicate that.
On the other hand, income tax data recently released by the Internal Revenue Service seem to show the exact opposite: People in the bottom fifth of income-tax filers in 1996 had their incomes increase by 91 percent by 2005.
The top one percent — "the rich" who are supposed to be monopolizing the money, according to the left — saw their incomes decline by a whopping 26 percent.
Meanwhile, the average taxpayers' real income increased by 24 percent between 1996 and 2005....
[M]ost Americans do not stay in the same income brackets throughout their lives. Millions of people move from one bracket to another in just a few years.
What that means statistically is that comparing the top income bracket with the bottom income bracket over a period of years tells you nothing about what is happening to the actual flesh-and-blood human beings who are moving between brackets during those years.
That is why the IRS data, which are for people 25 years old and older, and which follow the same individuals over time, find those in the bottom 20 percent of income-tax filers almost doubling their income in a decade. That is why they are no longer in the same bracket.
That is also why the share of income going to the bottom 20 percent bracket can be going down, as the Census Bureau data show, while the income going to the people who began the decade in that bracket is going up by large amounts. Unfortunately, most income statistics, including those from the Census Bureau, do not follow individuals over time. The Internal Revenue Service does that and so does a study at the University of Michigan, but they are the exceptions rather than the rule....
Another wild card in income statistics is that many such statistics are about households or families — whose sizes vary over time, vary between one racial or ethnic group and another, and vary between one income bracket and another.
That is why household or family income can remain virtually unchanged for decades while per capita income is going up by very large amounts. The number of people per household and per family is declining.
Differences in the number of people per household from one ethnic group to another is why Hispanics have higher household incomes than blacks, while blacks have higher individual incomes than Hispanics....
[Y]ou 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....
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....
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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