Are we better off today?

Recently on another blog I had a somewhat heated debate about the well-being of people in America today. He wanted to argue that since the Reagan revolution, the poor have become worse off and the well to do have become better off. One arguement I used was that wealth is a better judgement than yearly income for a number of reason. Lets look at some facts that were reached by economists Michael Cox and Richard Alm at the Federal Reserve Bank in Dallas.

They did a study on income and spending differences of different income brackets. When taking statistics based on income only, retirement payments, investment pay outs, savings withdraws, capital sells such as homes and cares, and many other variables are not taken into consideration. These economist show that since 1975 the percentage of national income of the top 20 percent of income earners income rose from 43.6 to 49.6 percent while that of the lowest 20 percent, at $10,000, fell from 4.3 to 3.3 percent. Thus it appears that the rich are getting richer and the poor are getting poorer. But lets take a closer look. Income is not a determinate of wealth. In fact Cox and Alm found that While the lowest fifth averages $10,000 in income, they spend almost twice that amount. The highest fifth averages $150,000 and spends about $70,000, the rest goes to taxes and savings. The middle fifth averages $45,000 and spends about $35,000. While there's a large income gap of 15 to 1 between the top fifth and lowest fifth, the spending gap pales in comparison. (Walter Williams article 04/02/08). Due to other areas of income, not just wages, statistics can be deceiving when not considering thos other areas of income.

These statistics are also for household. Keep this in mind as well... high-income households have more people living in those households due to averaging 3.1 people in the top fifth income brackett. This compared to 2.5 people in the middle fifth and 1.7 in the bottom fifth. This means that the income gap per person in the house hold closes between those in the higher brackett and those in the lower brackets.

So let me conclude with looking at the wealth of these people which will allow us to look at the effects of the other areas of income and the drop in "real prices". Walter Williams states that "years ago, a worker earning the average wage had to work 365 hours to purchase a VCR; today it's two hours. A cell phone dropped from 456 hours of work in 1984 to four hours today. A personal computer, with thousands of times the computing power of the 1984 I.B.M., declined from 435 hours of work to 25 hours." He continues "Nearly all American families now have refrigerators, stoves, color TVs, telephones and radios. Air conditioners, cars, VCRs or DVD players, microwave ovens, washing machines, clothes dryers and cell phones have reached more than 80 percent of households."

The fact is wealth has increased due to our capitalistic ways while some politicians and economist with an agenda might hide some variables out of their statistics and thus a true reading or description of our well-doing is mis-leading. Keep this in mind the next time someone wants to tell you that life is getting worse not better for those who are not the so called "rich" in America.