The data presented in the article is correct. But it leaves out critical information for understanding what this means overall, or even if it means what it purports to mean.
Almost 20 years ago in a graduate economics course we learned that the “static” view of income at an instant in time is not a full picture. Not surprisingly, incomes change over time, often by a lot. Consider when someone starts a career, but over time, advances in their career or grows their own business – their income rises over time.
20 years ago we learned that most people start their earnings in the bottom #1 or #2 quintiles and then most rise to the top #4 or #5 quintiles. Upon retirement, the typical person then falls backwards by 1 or 2 quintiles.
Other research captures this effect in a different way. 73% of Americans end up in the top 20% of income for 1 year or more (details are not provided as to whether this is due to unique, once in a life event, or spans many years, or occurs many times over several disconnected years).
A professor of social welfare wrote about this in the NY Times in 2014.
The “income inequality” subject is a popular one in the news media and among political activists. By definition, political activists are engaged in propaganda – they are trying to convince you to adopt their agenda versus adopting someone else’s agenda. In this specific instance, the propaganda message supports a Seattle City local income tax.
The propaganda message is simple to understand – the top 20% (in the first chart) make more than half of all the area income. This message is very effective – the bottom 80% make less than half. This message is easily interpreted by the bottom 80% and may become the basis for policy.
Many in the bottom 80% are likely unaware that most will see considerably higher incomes in the future. Consequently, this propaganda message is highly effective, preying on lack of knowledge to push someone’s agenda.
The methods used include (usually) “appeal to authority”, “cherry picking” and sometimes “Get on the bandwagon” (some other city is doing x, y and z). The discrepancy in income stratas may also invoke an “emotional” response in the target.
This post is not about whether the income inequality in Seattle is good or bad, right or wrong or whether the solution is a redistribution income tax or not. This post illustrates how presenting one part of a complex topic leaves the public thinking they have learned something when by learning only a partial view they may be dumber than before they read the article. This post does not examine if a very small number of extremely successful entrepreneurs in the Seattle area (think who lives there!) bias the sample with outliers.
This story illustrates the power of propaganda methods – after reading only the above Seattle Times article, would you be more or less likely to support a city income tax? After reading the source for the second chart and learning about how incomes are dynamic, over time, would you be more or less likely to support a city income tax?