Dear Editor,
In your editorial of July 21 captioned `Age of Extremes’, you made reference to an AEPI study that shows US income inequality (between the top few percent and the rest) approaching levels of the late 1920s crash. The essay supported the caption. However, there was one incorrect conclusion from the statistics you quoted.
You stated that “in 1928, the top 1% of US households took in 23.9% of all income and in 2015 it was 22%”. That is a decline (of 1.9%), not an increase, in income inequality.
You also stated that “in 30 metropolitan areas, these 1% households (in 2015) took in more wealth than they did in 1928. That in itself does not support the argument of rising income inequality. Readers would need to know if the other 99% received rising, declining or same income as in 1928. Also, a comparison or contrast with rural (or non-metropolitan) income would also help to better understand income inequality.
Various comparisons (not just the top 1% and the rest) bottom measurements are used by economists to show inequality; economists use the top 10% and the rest; top 20% and the rest, top 20 or 25% and the rest; to 50% and the bottom 50%, etc. There is no fixed method or percentage of comparing income distribution. But income inequality is best measured by the Gini Coefficient or Ratio of Index.
The Gini Index is a measure of income distribution in a country. It was developed by the Italian sociologist Corrado Gini in 1912. Several factors are used to calculate the Gini index which has a variation of 0 to 1. It is measured annually for every country. A zero means a country has perfect equality while 1 represents maximum inequality. Measurements are taken using personal income and with income transfers (social welfare benefits added to it). For the US, income GINI is not handily available for around 1928. But for mid and 2000s and 2010s, it was around .37 with transfer income, and slightly higher without transfer income. The 2018 World Inequality Report shows income inequality widening (doubled between 1980 and 2018) for the top and bottom 50% of the US. Data also shows growing income inequality going way back in 1928. In the mid 1900s, the income gap between the top 50 and bottom 50 gap narrowed only to widen by the end of the century and worsened in the new century.
Aside from the flaws noted above, it is a very informed editorial.
Yours faithfully,
Vishnu Bisram