This is the third of a three-part posting. I posed two questions in the previous parts.
Two days ago, I noted that someone at the 90th percentile in terms of income obviously earns a multiple of the income of someone at the 10th percentile. I asked, ‘what level of multiple would make you uncomfortable?
Yesterday, I asked a second question: I invited you to guess what is the actual multiple in the United States? I specified that I was referring to earned income for full-time work.
When Robert Lerman, of the Urban Institute in Washington, asks his students these questions, he says that -with some exceptions – most of them say they would be uncomfortable with a multiple of 10 to 15 times.
When he then asks them what they think the actual multiple is, they tend to answer “at least 20 times”.
And what is the actual figure? The actual figure, gleaned from Bureau of Labor Statistics in the USA on this link, http://bls.gov/ncs/ocs/sp/nctb1490.txt, is 4.28.
The question that perhaps arises next is this: why do people have such an exaggerated idea of the inequality of incomes in America and elsewhere? My guess is because their perceptions of the world are substantially guided by the media and the media goes to the extremes to get a powerful story. I have been a journalist for most of my life so I know well how it works. So people in the USA hear about the huge pay received by the chief executives of the top 300 companies which, by definition are vast concerns. That is 300 out of 300 million people. We are told in newspapers about extremes, not about norms.
Of course there is inequality. But it is not as extreme as people think.
Here is a link to research and commentary by Robert Lerman.