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The 7 - Current Events & Politics - Why the US has more than Europe Register and log in to post!
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#21 Posted on 23.8.04 2125.49
Reposted on: 23.8.11 2126.21
Erm, you're refuting a point I never made there buddy.

Re-read my post.

I got your point before. I think that my overdose of sarcasm overrode the subtle hint of substance buried in my post. I apologize.

I'll elaborate (and Rudoublesedoublel touched on it as well):

When you compare poverty rates across nations, the benchmark used to define poverty is any household with income less than 50% of the median national income. Moreover, extreme poverty is defined as income less than 40% of the median national income. In the U.S., median income is around $40,000-$45,000. So, by this definition of 'poverty', the extremely poor in the U.S. live better than 70% of the world (give or take). I'm not saying it's not a problem, I'm just saying we have to take these data with a grain of salt. Also, there is no adjustment for cost of living or other factors in these studies either.

Speaking of taking data with a grain of salt, that brings us to the Gini Coefficient. The problem with using this to judge the distribution of income is that when the Gini is applied to national data, the only households who get included in this calculation are the households who have jobs. So, the higher the rate of unemployment in a country, the 'better' the Gini will look because these households who make little or no income are not included. Obviously, the U.S. has much, much lower unemployment than these other countries. Thus, a higher proportion of the low income households in the U.S. are included, while more of these households are excluded from the Gini in other industrialized nations.

I could get into how tax rates impact the Gini; this makes the U.S. look better because the U.S. pre-tax Gini is far more comparable to other industrialized nations, with the difference being that high earners in the U.S. keep more of their income, thus making the Gini look 'worse' after taxes. Also, the skills/education/experience premium impacts the Gini, and there is some meat to the disparity between high and low wage earners because research indicates that this premium is growing faster than it 'should', but I'm not convinced that is the story you were selling.

Furthermore, by looking at the Gini or any other measure of income distribution, we are looking at a snapshot of how income is distributed at a given moment of time. The more important question is whether or not the people in the lowest quintile of these data stay there or have an opportunity to move up (another point that Rudoublesedoublel brought up). Empirical studies have been mixed on this opportunity for mobility across industrialized nations. Predictably, those authors with a bias towards free market policies find that incomes in the U.S. are very mobile, while authors biased against this find that incomes in the U.S. are not significantly more mobile than incomes in other countries.
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#22 Posted on 23.8.04 2211.06
Reposted on: 23.8.11 2213.24
Well said.

The only part I disagree with you is on the matter of U.S. unemployment being lower than "those other countries" who I took as meaning as being other industrialized countries. In the U.S. unemployment rates are lower than, say, Canada's by 2-3% historically, although that discrepancy is almost entirely due to the differences in methodology used to arrive at an unemployment figure.
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#23 Posted on 24.8.04 0934.45
Reposted on: 24.8.11 0935.03
What methodology does Canada use to calculate unemployment? I'm not trying to argue, I teach economics part-time at a local juco and at a local regional university and I'm simply curious to know how it's calculated in Canada.

FWIW, the US figures are skewed by the exclusion of discouraged workers and the counting of underemployed persons as being fully employed. US figures are skewed in the opposite direction by the exclusion of non-market employment (both unreported employment and home employment). I've always felt it was more relevant to view the labor force participation rate along with the unemployment rate to get a better feel of the economy's ability to create and sustain jobs.
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