The Corner

American Income Inequality in Perspective

My colleague Matt Michell sends me this remarkable chart  posted by Catherine Rampell of Economix. It is from a new book, The Haves and the Have Nots, by the World Bank’s Branko Milanovic. It takes a moment to wrap your head around it, but it’s worth the time.

On the horizontal axis  we have 20 equally-sized income groups, country ventiles, what Rampell describes as “a cluster of five percentiles.” On the vertical axis are percentiles of world income distribution. So, for instance, in the chart above you can see that Brazil has both spectacularly rich and spectacularly poor people.

As Rampell explains, the chart makes some adjustments for variables like cost of living:

The household income numbers are all converted into international dollars adjusted for equal purchasing power, since the cost of goods varies from country to country. In other words, the chart adjusts for the cost of living in different countries, so we are looking at consistent living standards worldwide.

Debate over the data aside, the most striking point on this chart is that even the poorest 5 percent of Americans are among the richest people in the world — richer than nearly 70 percent of the world’s population.

How can there be so many people in the world who make less than America’s poorest, many of whom make nothing each year? Remember that were looking at the entire bottom chunk of Americans, some of whom make as much as $6,700; that may be extremely poor by American standards, but that amounts to a relatively good standard of living in India, where about a quarter of the population lives on $1 a day.

I doubt this is comforting to the poorest Americans, but it does show that America is doing something right.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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