Do we have criteria to estimate the income one deserves?

In the course of the equality and equity discussion, there are a few questions that make me feel uncomfortable.  One of these questions the role of government in economic and social life it has to govern. The gender and race inequality in income are commonplace and the demand for equality seems to be absolutely justified. 

To understand the income inequality problem, let's first take a look at real income inequality estimates and start with white (alone) males as published by the US Census Bureau. Figure 1 presents the age dependence of the Gini ratio in 2019. One can see that there is no equality in income distribution for the white males in any age group. The equality implies that the Gini ratio is equal to 0, but it is rather 0.5, i.e. income inequality is extremely high. The highest inequality (Gini=0.539) is observed in the youngest age group from 15 to 24 years of age. This group also has the lowerest mean income, as Figure 2 shows.  Interestingly, the lowermost income inequality (Gini =0.405) is observed in the next to the youngest group - from 25 to 29 years of age. Then the income inequality grows with age to the age of the peak mean income - 57.5 years of age in 2019. The level and the age evolution of income inequality in the white-alone-male population does not ignite any visible discussion. It seems to be a fair one, i.e. the income distribution is considered as proportional to some widely accepted criteria (which I do not know except the one used in our income distribution model). In our previous post, we discussed the secular impoverishment in the youngest age group but it was not connected to the unfairness of income distribution as such. Therefore, the observed income inequality is not considered unfair when we talk about white males. 

For the white females in Figure 3, the overall evolution of the Gini ratio is very similar, except it grows much faster in the mid-ages between 30 and 50. This reflects the fact that the white females have larger income inequality in the age interval when the mean income grows fast. Black males and females demonstrate similar Gini ratios with some small deviations. Therefore, within each of these four groups, we observe similar income inequality levels and evolution with age. It is highly likely that the same economic forces drive the distribution of income and these forces do not raise any questions about their unfairness. At least at the level of the unfairness of income differences observed between the groups - a major topic of discussion in the USA. 

I wonder that the government servants have to be merciless robots to resolve the conflict between different gender/race (and age) groups. On one hand, any mechanical leveling of income will demolish the fair criteria of the current distribution of income in any of the groups. Essentially, the relatively fair income distribution mechanism has to be replaced with something artificial. One needs to defend such a new set of mechanisms to be accepted by all participants. On the other hand, income disparity between genders and races is obvious, has a clear historical background, and definitely needs urgent action. The real fight is ahead. However, the income distribution in and between the groups is a result of similar fights in the past when the capabilities and power distribution were different. 

As a researcher, I would like to see the new criteria of the income distribution, i.e. who deserves what? 

 

Figure 1. Gini ratio (published by the US Census Bureau. Table pinc01_1_2_3) in 2019. Dependence on age for white alone males.

Figure 2. Mean income of white (alone) males and females in 2019 as a function of age

Figure 3. Gini ratio in 2019. Dependence on age for white males and females, black males and females.

Why liberals do not join the police 2

I wrote in the previous post: 

The current police discussion in the USA reminds me of the excellent book by J.Haidt "The righteous mind" discussing the inherent difference between liberal and conservative moral foundations. This difference is well experimentally described in the book but what strikes my (conservative) mind is how liberal minds can serve the army and police. The liberal mind does not like authority and loyalty - the basis of hierarchy, order, honor, and duty. The police reformation (defund) discussion does not have a significant point - liberals have to reform the police from the inside, i.e. join the police and replace the rude policemen. However, they want the dirty part of the justice work to be done by somebody else and thus denying their own conviction that nobody has to be forced to do such a job. I do understand why liberals do not have overwhelming representation in the police force, but I do not understand how they are going to resolve actual social and criminal conflicts.

Now I have something to add. With the police crisis unfolding and the real depopulation of precincts, it seems that the idea behind the police defunding is much deeper than just to make the police weaker. I guess that the liberal mind sees the future force enforcement of the political power as applied to the society as driven by rules not be the law. As we observe now, the rules are adaptive and out of the legal field. The rules are developed ad hoc by the "derin devlet"   and introduced through media (old Soviet joke - newspaper cannot tell lies). This procedure is now under successful testing in the "cancel culture" process. We will see actual force enforcement actions very soon. 

On secular relative impoverishment of young people

The problem with young people's income deficiency attracts more and more attention from media and politicians. Almost every day one can find a publication in non-negligible (e.g. FT) media resources comparing the current young people generation with historical records. We have explained in this blog and many academic papers that this problem cannot be resolved in the situation with growing real GDP per capita. 

Figure 1 describes the growth in average income in the USA for work experience between 4 and 10 years, i.e. for 19 to 25 years of age according to the CPS ASEC conducted by the Census Bureau every March for the BLS. (All data were retrieved from  IPUMS USA, University of Minnesota, www.ipums.org.) Because of the growing nominal and real GDP, the curves in Figure 1 are normalized to the peak value for a given year and we observed how fast people can reach the peak income on average.  In 1950, the mean income grew from 0.26 for 4 years of work experience to 0.70 for 10 years. The linear regression shows that extremely good fit (Rsq=0.991) and a linear growth rate of 0.073 relative units per year. In 2019, the rate was only 0.054 per year, and the change from 0.082 for 4 years of work experience to 0.40 for 10 years (Rsq.= 0.995). This observation indicates the progressive decay in the relative mean income for a given work experience. Figure 2 presents an example of such decay for 10 years of work experience from 1950 to 2019, i.e. during the last 70 years. The linear decay over decades implies that extremely strong natural economic forces drive this process.  These forces are fully related to real GDP per capita linear growth.  

We have developed an income distribution and evolution model describing also these effects of the relative decrease in the young people incomes - the mean income obviously means that all young people of a given age have lower relative incomes. We also well documented the process of full similarity of the personal income distribution in various countries when compared according to real GDP per capita. The linear fall in the mean income relative with time is explained by the effect of the increasing age of the peak income, as Figure 3 shows. The peak age has been increasing as a square root of the real GDP per capita since the beginning of the 20^th century, where we have income measurements. According to our model, the initial mean income growth is approximately a linear function of time.

Real income measurements reveal the process which underlies the relative impoverishment of the youngest cohorts. This is not an economic problem in sense of natural forces driving this effect. One cannot make younger people richer by economic measures. This is a social problem, however. This social problem will deepen and expand with time if to ignore the real economic forces behind it. These forces are fully related to real economic growth.  

Figure 1. Relative growth of the mean income depending on work experience between 4 and 10 years in 1950, 1980, and 2019.   

Figure 2. The fall of the relative mean income of people with 10 years of work experience between 1950 and 2019.

 

Figure 3. Relative growth of the mean income depending on work experience in 1950, 1980, and 2019.  

 

Will Green ruin Berlin?

I am waiting for the Greens victory and green Chancellor in Germany this fall. This would be a great social experiment when amateurs will run the biggest economy in Europe. The secret of German success was always in excellent engineering (industry)  and order (social agreement). Both cornerstones will be deposed and the decay of the German economy will be dramatic with negative social consequences. I hope that Germany will compete in this race with the US - recognized leader of self-destruction.  

МОК запретил вставать на колено во время Олимпийских Игр

Надеюсь чернокожие американцы откажутся от участия в этих ксенофобских и расистских соревнованиях, а остальные развитые страны их поддержат. Недопустимо ограничивать права угнетенных.

Why liberals do not join the police

The current police discussion in the USA reminds me of the excellent book by J.Haidt "The righteous mind" discussing the inherent difference between liberal and conservative moral foundations. This difference is well experimentally described in the book but what strikes my (conservative) mind is how liberal mids can serve the army and police. The liberal mind does not like authority and loyalty - the basis of hierarchy, order, honor, and duty. The police reformation (defund) discussion does not have a significant point - liberals have to reform the police from the inside, i.e. join the police and replace the rude policemen. However, they want the dirty part of the justice work to be done by somebody else and thus denying their own conviction that nobody has to be forced to do such a job. I do understand why liberals do not have overwhelming representation in the police force, but I do not understand how they are going to resolve actual social and criminal conflicts.

Why the whites pretend they do not understand the meaning of George Floyd's death

The (western European) whites and their descendants have many excuses for their cruel global expansion accompanied by extermination - genocide is a new term - of the native population (literally everywhere) and slavery. There are many considerations why they pretend that they do not understand their crimes and the feelings related to Floyd's death. 

1. they say that slavery was prohibited more than 150 years ago and none of the living humans participated in that. To understand the feelings the whites have to get through 300 years of slavery themselves and then judge what does it mean.

2. many white (and not only white) say that they are not guilty because joined later. Since the whites is a gang humiliating everyone who is not in the gang and protecting their own bandits one can say that the members joining the gang at the later stage are also guilty in all criminal actions, including the genocide of the native population. They knew whom they joined and were ready to use all preferences obtained from all the crimes.