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Tag Archives: income

What is the Great Gatsby curve?

From The 9.9 Percent Is the New American Aristocracy: The class divide is already toxic, and is fast becoming unbridgeable – You’re probably part of the problem by Matthew Stewart (June 2018) in The Atlantic. (Figure 2)

The Great Gatsby curve represents the correlation between income inequality and intergenerational income elasticity. In short, the greater the income inequality in a country the greater the relationship between a child’s income and their parent’s income.

The Atlantic article, The 9.9 Percent Is the New American Aristocracy: The class divide is already toxic, and is fast becoming unbridgeable – You’re probably part of the problem by Matthew Stewart (June 2018)  is an excellent example of weaving important quantitative information (great for a QL course), including the Great Gatsby curve, to tell an important story.

Rising immobility and rising inequality aren’t like two pieces of driftwood that happen to have shown up on the beach at the same time, he noted. They wash up together on every shore. Across countries, the higher the inequality, the higher the IGE (see Figure 2). It’s as if human societies have a natural tendency to separate, and then, once the classes are far enough apart, to crystallize.

The post What is The Great Gatsby Curve? by David Vandivier (6/11/2013) has an animated gif that explains the curve well. To update or recreate the chart, you can get country gini values from the CIA World Factbook.  Intergenerational income elasticity can be found in figure 1 of a the paper Inequality from generation to generation:the United States in Comparison by Miles Corak (2012).  Intergenerational Social Mobility in OECD Countries January 2010 OECD Journal: Economic Studies 2010(1):6-6 Orsetta Causa  and Åsa Johansson is another source.  If you find more recent data let us know.

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What is the CEO to worker pay gap?

U.S. Publicly held companies now have to report CEO and median worker salaries (this was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010) and Bloomberg has an article, Alphabet CEO Page Makes a Tiny Fraction
Compared to Its Median Employee by Alicia Ritcey and Jenn Zhao (5/15/18), with an interactive graph (see image).   Mattel “wins” with a CEO to median worker pay ratio of 4,987-1. Walmart “wins” in the consumer staple category with 1,188-1 ratio.  In the interactive graph there is a button on the top right that hides outliers. This is useful, but be conscious of whether it is on or off.

The Guardian article ‘CEOs don’t want this released’: US study lays bare extreme pay-ratio problem by Edward Helmore (5/16/18)  provides some context and a summary.  The Bloomberg graph is being updated daily.  Rep. Keith Elliston’s staff prepared the report Rewarding or Hoarding? An Examination of Pay Ratios Revealed by Dodd-Frank, which has the data of the first 225 Fortune 500 companies to report and and details on the data collection. The data in the report can be used in statistics courses to test differences by sector.  At some point maybe Bloomberg will post a spreadsheet of the data (one can also ask for it too).

What is an explanation for the racial disparities in student loan debt?

From Parents’ Wealth Helps Explain Racial Disparities in Student Loan Debt by Fenaba R. Addo

Fenaba R. Addo has an explanation in the article Parents’ Wealth Helps Explain Racial Disparities in Student Loan Debt at the Federal Reserve bank of St Louis.

An analysis of data from a youth survey found that 58 percent of black young adults reported that their parents contributed an average of $4,200 over the course of their college career. That compares to an average of $12,000 given by 72 percent of white families.

Finances by race is summarized in table 1, copied here. It is note that “All averages are statistically different at the 5 percent level by race, indicating that the differences are not a result of random chance.”  (This can be used in a statistics course and if you contact the author you might even get the data.) The article goes on to note how this may impact the future of these students:

As early as age 25, racial wealth gaps begin to emerge. In the age 25 asset survey, college-educated white young adults reported having approximately $17,000 more wealth than black young adults who had attended college. We calculated that a $10,000 increase in young adult net wealth is associated with 7.6 percent less student loan debt. Young adults with high net wealth may have benefited from transfers of wealth from their parents and subsequently may be in a better position to pay down their student loans quicker.


Are teachers being paid fairly?

An August 2016 report by EPI, The teacher pay gap is wider than ever (8/9/16 by Allegretto and Mishel), suggests not. For instance, the graph here shows that teachers are paid 23% less than other college graduates in 2015 and the gap has been increasing since 1980.

Average weekly wages (inflation adjusted) of public-sector teachers decreased $30 per week from 1996 to 2015, from $1,122 to $1,092 (in 2015 dollars). In contrast, weekly wages of all college graduates rose from $1,292 to $1,416 over this period.

For all public-sector teachers, the relative wage gap (regression adjusted for education, experience, and other factors) has grown substantially since the mid-1990s: It was ‑1.8 percent in 1994 and grew to a record ‑17.0 percent in 2015.

The report includes 8 graphs with data plus two tales. There are comparisons between females and males, as well as union and non-union.

What is known about world income inequality?

The World Inequality Report 2018 provides a complete summary of world income inequality.  The executive summary contains thirteen charts to explore such as the one here.

The poorest half of the global population has seen its income grow significantly thanks to high growth in Asia (particularly in China and India). However, because of high and rising inequality within countries, the top 1% richest individuals in the world captured twice as much growth as the bottom 50% individuals since 1980 (Figure E4). Income growth has been sluggish or even zero for individuals with incomes between the global bottom 50% and top 1% groups. This includes all North American and European lower- and middle-income groups.

The executive summary also notes:

Research has demonstrated that tax progressivity is an effective tool to combat inequality. Progressive tax rates do not only reduce post-tax inequality, they also diminish pre-tax inequality by giving top earners less incentive to capture higher shares of growth via aggressive bargaining for pay rises and wealth accumulation. Tax progressivity was sharply reduced in rich and some emerging countries from the 1970s to the mid-2000s. Since the global financial crisis of 2008, the downward trend has leveled off and even reversed in certain countries, but future evolutions remain uncertain and will depend on democratic deliberations. It is also worth noting that inheritance taxes are nonexistent or near zero in high-inequality emerging countries, leaving space for important tax reforms in these countries.

The methodology page includes files with all the data.

How do NYC securities employee bonuses compare to U.S. household income?

Statista has your answer with their post Wall Street Bonuses Outpace Household Income  (3/28/18 by Dyfed Loesche) and their chart here.

Compared to the average U.S. household income this is quite some money, keeping in mind these are payments on top of the regular pay. In 2016, the average Wall Street bonus stood at close to $158,000 and thus 2.5 times as high as the median household income of a little more than $59,000. (The U.S. Census Bureau has not yet released official household figures for 2017). The average number of people living in an American household stands at 2.5.

The post has links to the median household data as well as the bonuses. Not only is this useful data for a stats course, but there is also an interesting discussion to be had on the use of mean and median in this post.

How does income inequality differ by country over time?

Our World in Data has an interactive chart that compares income inequality with gini coefficients. For example the chart here has the United States, United Kingdom, France, Germany, Netherlands, and Japan (you can select other countries too). Of these six countries the U.S. has greater income inequality than the other five.  It has also grown considerably since the mid 1970s.  As always with Our World in Data, you can download the data set so it can be used in statistics courses. You can also download graphs, such as the one here.

Is America’s nutritional divide due to food deserts?

In a recent article by Richard Florida, It’s Not the Food Deserts: It’s the Inequality, the case is made that food deserts aren’t the real problem.

Instead of within cities, the biggest geographic differences in the way Americans eat occur across regions. The map above plots the geography of healthy versus unhealthy eating across America’s 3,500-plus counties. Dark red indicates a lower health index based on grocery purchases, while light yellow represents a higher health index. While there is some variation within cities and metro areas, by far the biggest and most obvious differences are across broad regions of the country.

Ultimately, the fundamental difference in America’s food and nutrition has more to do with class than location. More than 90 percent of the difference in Americans’ nutritional inequality is the product of socioeconomic class, according to the study. And it’s not just that higher-income Americans have more money to spend on food. In fact, the cost of healthy food is not as prohibitively high as people tend to think. While healthy food costs a little bit more than unhealthy food, most of that is driven by the cost of fresh produce.

The article has useful graphs and summary statistics and can be used in  QL or statistics based course.

What do you know about the top 1%?

The Chicago Booth post, Never mind the 1 percent Let’s talk about the 0.01 percent, provides an insightful summary of income distribution at the top.

Mankiw noted that the 1 percent’s share of total income, excluding capital gains, rose from about 8 percent in 1973 to 17 percent in 2010, the latest figures available at the time. “Even more striking is the share earned by the top 0.01 percent. . . . This group’s share of total income rose from 0.5 percent in 1973 to 3.3 percent in 2010. These numbers are not easily ignored. Indeed, they in no small part motivated the Occupy movement, and they have led to calls from policymakers on the left to make the tax code more progressive.”

There is detailed exposition on who makes up the top and how they got there. For instance,

Technology, from the internet to media such as ESPN and Bloomberg terminals, has given elite athletes, entertainers, entrepreneurs, and financiers the ability to profit on a much larger, global scale, making the fruits of their labor more valuable than what previous superstars, such as, say, Pelé or Babe Ruth, brought in. Ruth’s peak salary of $80,000 would be worth about $1.1 million in 2016 dollars, around one-thirtieth of the $33 million the highest-paid Major League Baseball player, pitcher Clayton Kershaw of the Los Angeles Dodgers, made in salary alone in 2016.

And hedge-fund managers make multiples more than top athletes and entertainers. James Simons of Renaissance Technologies and Ray Dalio of Bridgewater Associates each made more than $1 billion in 2016, even though, as Institutional Investor’s Alpha reported, the top-25 hedge-fund earners took in the least as a group since 2005, largely because of the industry’s overall poor investment performance.

This is an excellent article about income and how it is distributed, with a number of graphs suitable for QL based courses.

What is the pay gap between Hispanic women vs white non-Hispanic men?

The Economic Policy Institute has the answer with their post Latina workers have to work 10 months into 2017 to be paid the same as white non-Hispanic men in 2016. They compare not only wages by percentile (graph here), but also compare by occupation and education.

Much of these differences are grounded in the presence of occupational segregation. Latina workers are far more likely to be found in certain low-wage professions than white men are (and less common in high-wage professions). But, even in professions with more Latina workers, they still are paid less on average than their white male colleagues.

As Hispanic women increase their educational attainment, their pay gap with white men actually increases. The largest dollar gap (more than $17 an hour), occurs for workers with more than a college degree.

The EPI post includes downloadable graphs (such as the one here) as well as the data.