Forbes just released its 400 list of the richest people in the world. Not surprisingly, there were 27 billionaires who dropped off the Forbes 400 list.
I say “not surprisingly” because nothing is guaranteed in capitalism. There is high risk and high reward.
Some of the high-profile billionaires to drop off the list included the following: Nick Caporella, Lorenzo and Frank Fertitta, Leslie Alexander, and Philip Frost.
If you listen to those on the political Left, you would think that the top 1% are always in the top 1% and that those that make up the wealthiest income tier are the same people every single year.
However, that is not the truth.
If you were to look at the top 400 list from 30 years ago, the list would look very different.
Income is not static and is not frozen in place, but rather fluctuates from year to year. There is not a fixed pie of wealth that is controlled by the wealthiest individuals; the pie changes composition every year.
One of the hallmarks of American capitalism is income mobility.
In America, starting in the bottom 20% of income earners doesn’t damn you to a life in the lowest income bracket. In fact, it is quite the opposite.
The great economist Thomas Sowell has highlighted the fact that those who start in the bottom 20% of income earners rise and more of them end up in the top 20% than remain at the bottom. People who started in the top 20% of incomes had the lowest rate of increase in their incomes.
That is a fact that I have never heard Berne Sanders or Alexandria Ocasio-Cortez cite before. How convenient for them and their socialist agendas.
Another factor that is overlooked is how income statistics are calculated. In one year, a person’s salary might be calculated but no capital gains are included in the income total.
For example, if the income earner in question was holding a piece of property in California and then sold it, his income would be higher that year than it was the year before. However, the next year, he would be back to a lower income level because he didn’t sell any assets.
The income earner would move in and out of a number of income tiers from one year to the next.
This is yet another demonstration of how simplistic liberals make their argument with regards to income inequality.
Another way to measure income statistics is by counting household income. That can be a misleading statistic as well.
Thomas Sowell described the discrepancies in counting household income when he wrote, “When we hear about how much more income the top 20% of households make, compared to the bottom 20% of households, one key fact is usually left out. There are millions more people in the top 20% of households than in the bottom 20% of households.
The number of households is the same, but the number of people in those households is very different. In 2002, there were 40 million people in the bottom 20% of households and 69 million people in the top 20%.
A little over half of the households in the bottom 20% have nobody working. You don’t usually get a lot of income for doing nothing. In 2010, there were more people working full-time in the top 5% of households than in the bottom 20%.”
Income mobility and inequality are two issues that are too often misunderstood these days.
This ignorance has big implications for the future economic policies of the nation.