Sunday, July 28, 2013

Lies, Damned Lies, and Statistics.

Okay, so here goes.

It’s all over the news. Income disparity. Bad and getting worse. So I’m thinking “really?”. We all have so much. We have multiple cell phones per family costing hundreds of dollars per month. We have flat screen TVs, and home theatres with sub woofers. Not just woofers mind you, we have subwoofers. We have cable and high speed internet and WiFi for our computers. Our cars last longer than they ever did before, our school districts spend twice as much money (in constant dollars) per student than they did just 40 years ago. Now you can take this or leave it, but from my point of view: not ever having anything that I didn’t really have to have just to get by, not having anything now, and not really figuring on having anything in the future, I don’t see that things are really much different than they ever were. Sure, sure, times are tough right now and I have proof, but that was the making of 50 years of “do good” government spending money it didn’t have, wasn’t going to have and making economic decisions that couldn’t be safely implemented by the private sector economy that is our heart and soul.

And the line is that the rich are getting richer and the poor are getting poorer. If the phrase didn’t appear in popular song lyrics decades old one might be tempted to think it was a new concept, and it actually traces it’s origins to a speech made by William Henry Harrison in 1840. You’d think the tread would have worn off that old tire some time ago.

In any event, the case is being made again, and there are “NEW” “SOBERING” statistics to back it up. After 170 years. Finally. Something new. But while I’m not an economist I CAN read and I’ve noticed a few things that might make it seem to some degree as if wealth were concentrating in the hands of fewer and fewer hands. Referring of course to the evil 1%.

Let’s begin.

First we have to agree on some things as a basis for discussion. We must agree that younger workers have fewer skills, and less experience in the job market and that because of this they will have less wealth than their parents and grandparents. So. If you break the population into two age groups: 18-44 and 45-74 what you see is that from 1980 to 2010 the younger part of the work force declined from 41% to 36% while the older fraction increased from 27% to 33%. Now. How significant are those percentages? I don’t know. I’m not an economist. However, it’s pretty plain that the shift in age breakdown alone is going to make it appear that wealth is moving away from younger less skilled workers.

Next. In 1980 (according to Census data) 20% of all households were of the single parent persuasion. Three decades later in 2008 the number was 30%. Now, you might say “so what”, “there’s less money in the house”, and that would be true, but this is something that people decide to do. They choose to get divorced, or they don’t get married in the first place. No one cares anymore about stuff like that. It only means that your kids grow up poorer, but you’ll be eligible for food stamps and free lunches so what’s the diff? AND, this simple thing makes it look as if families are becoming poorer when at least a significant fraction choose this for themselves. They don’t actually choose to have less, but they make the decisions that lead to it.

This next sort of goes hand in hand with the last: In 1980 60% of all households were occupied by a married couple. In 2010 the figure was 48%. What this means is that because people are choosing not to form traditional families household income and thus accrued wealth will be lower. Doesn’t necessarily mean that it is, but it will look like it. The statistics will show it, but another saying that traces it’s roots to the mid 1800s is that “there are three kinds of lies: lies, damned lies, and statistics”. People know this, but frequently forget that two analysts can look at the same statistic and draw completely opposite conclusions. So the next time you hear someone saying how bad things are indicated by such and such a number take a few minutes and have some fun trying to think up what else that number could mean.

But that’s just what an average guy thinks.

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