Posts tagged ‘Christian Boda’

A Statistic I Hadn't Seen Before

Christian Boda, via Q&O, discusses inflation rates in the context of income (in)equality issues.  He offers this bit of information:

Inflation differentials between the rich and poor dramatically change
our view of the evolution of inequality in America. Inflation of the
richest 10 percent of American households has been 6 percentage points
higher than that of the poorest 10 percent over the period 1994 "“ 2005.
This means that real inequality in America, if you measure it
correctly, has been roughly unchanged.

This actually makes a ton of sense - Walmart helps hold down food and clothing costs for average folks while the rich pay ever increasing rates to stay at the Ritz at Laguna Niguel.  He argues that as a result, globalization and the growth of low-cost manufacturing in China tends to help rather than hurt the poor.

It also helps to answer a question I had yesterday -- why do metrics of median wage growth adjusted for inflation tend to look unexciting, while at the same time other metrics show the poor doing so much better materially.  This notion of a graduated inflation rate by income class would go a long way to explaining these paradoxes.  In short, we may be applying the wrong inflation rate to metrics of wage growth of various income groups in assessing their well-being (not to mention the usual failing of missing individual migration between income groups).