Income Inequality Is Falling Globally | Hacker News Reader

Income Inequality Is Falling Globally

nytimes.com

42 pointsdean35 comments

To all the doubters, real manufacturing wages in China have actually been soaring over the past decades, this is corroborated across non-correlated sources:

PRC Government numbers: http://www.tradingeconomics.com/china/wages-in-manufacturing http://www.marketwatch.com/story/china-wages-jump-in-2012-de...

WSJ: http://online.wsj.com/news/articles/SB1000142405274870384920...

Journal of Economic Perspectives: http://leedsonfinance.com/2013/02/24/the-end-of-cheap-chines...

No one source is believable but there appears to be wide consensus here. Also note these are real, inflation-corrected wages. You can tell especially by the WSJ's concern over prices, if inflation explained the changes it wouldn't impact export costs which are priced in USD not Yuan.

well china has a huge growth, but after the 2008 crisis I can still raise my eyebrows.

why would americans really care inequality in china ? if american politics want to reduce inequality, they want to do it in their country, not in developing countries.

Some people care about people in general, even if they are far away.

If you live in America and are struggling to make enough to feed and house your family, it's a moot point that the numerical income level puts them in the 1% around the world.(or whatever the percentage is) Local inequality matters.

Local purchasing power is quite different from local inequality

Everybody should care, it has a direct impact on you. If workers in China and India are earning more money and there is less of a gap between what an American gets paid, it makes less sense to outsource.

I could hire workers locally for similar wages and not have a 12 week lead time on manufactured goods.

and how do you want american politics to do something about china ?

Did they also compare/correct not only with "inflation rates" but with raw material (e.g. foods) prices?

To my knowledge, food prices have risen in many countries more than official inflation rates.

Inflation is measured by the cost a a standard basket of goods that includes food items. Well informed people disagree over whether or not that basket is representative or not, but inflation is a least supposed to be a measure of exactly what you are talking about.

The key is "supposed". Inflation rates are always political.

It's remarkable how many people in the NYT comments dismiss this as a distraction from the more important issue of within-country inequality. I guess it's more important to help out someone earning $15,000 a year who looks like us, than someone who earns $400 a year who doesn't. Global poverty is truly horrific, on a level that most people in the first world can't even comprehend, and its continued reduction is one of the really great (incomplete) triumphs of human history.

I suppose I'm being uncharitable here. I'd guess the more likely explanation is mood affiliation--people want a political revolution in response to real problems (inequality, global warming, poverty, war, surveillance) and are resistant to any news that does not fit into this narrative of decline.

> It's remarkable how many people in the NYT comments dismiss this as a distraction from the more important issue of within-country inequality. I guess it's more important to help out someone earning $15,000 a year who looks like us, than someone who earns $400 a year who doesn't. Global poverty is truly horrific, on a level that most people in the first world can't even comprehend, and its continued reduction is one of the really great (incomplete) triumphs of human history.

I'm pretty familiar with the issue of global poverty, but the critics are right: the policies that reduce poverty and inequality at the national level are not mutually exclusive with those that reduce poverty at the global level.

More importantly, nation states CAN reduce poverty/inequality within their own borders (and many policies that do so are simply good economic common sense [1]), while there's a limit to what any particular country can do on a global scale.

In short, decreasing inequality at the global level is no excuse not to combat rising inequality at the national level.

[1] Such as universal healthcare and accessible education.

You think it is remarkable that people prefer to help those who are within their local communities? That's practically in our biological makeup.

As much as utilitarianism looks good on paper, ignoring emotions in understanding human behavior strikes me as equally remarkable.

Seen that thing already on /r/economics a while ago, went in a long discussion with a libertarian sounding guy. Was really disappointed.

I don't like this, because the current argument of inequality talks about developed countries, inside borders. The "global inequality" somewhat argues that inequality per country is irrelevant because what counts is global inequality, which to me is a little fallacious: you don't replace a debate with the same debate at a bigger scope.

If markets are being globalized, nations lose bargaining power, and it's not really a good thing.

It's also a little inadequate/irrelevant to talk about income inequality in developing countries I think. Those countries are developing, so it's not surprising to see their economies improve. If it's done at the expense of other more developed countries, it's natural for those latter countries to complain.

The situation globally and the situation in first world countries, particularly the USA, is quite different. Income inequality is falling in places like Brazil, India, and China but is rising in the developed world.

Inequality actually isn't falling in China or India, though it might be falling slightly in Brazil[1][2][3]. Global income inequality is decreasing because the poor countries are developing, and those countries from a position so far behind the developed world that their growth has a significant effect on global inequality, even if within any particular country inequality has increased.

[1]http://en.wikipedia.org/wiki/Income_inequality_in_China

[2]http://en.wikipedia.org/wiki/Income_inequality_in_Brazil

[3]http://timesofindia.indiatimes.com/business/india-business/I...

I can accept the article's premise that income inequality is falling when you look at incomes globally. However the fact that there are still stratified, separated markets makes his analysis a moot point.

Things may be getting better in Africa, but they aren't in the US. Since I currently live in the US I'm more concerned about how income inequality is rising here, which is something that his article brushes off as a non-concern simply because I live in a developed nation.

He goes on to argue that I shouldn't worry about how my real wages haven't been increasing because globalization has allowed the wealthy to profit from a bidding war between me and the rest of the world. I'm actually okay with other people being brought up to my standard of living. I'm not okay with people using that as an excuse as to why my own standard of living should be stagnant or declining.

He's arguing that I need to "reframe" my point of view. What that really means is that I shouldn't worry about my own problems, but rather be happy that the rest of the world is improving.

It's almost as if the "first world" elites are transferring the wealth of their developed nations and their poor and middle classes to themselves and sending a bit of it overseas to their outsourced interests...

If you disagree, give me some proof otherwise. The situation I've described allows for a "global rise in income equality" while enforcing the status quo. But you won't because you can't.

Anyways...

And even that, I doubt. In China is rising a new class of Billionaires, which in place exploit their own people.

I guess (and there is no real data given in the article), that they just counted for the inequality between countries and found that the lowest incomes in China are doing better against medium or low incomes in other countries.

No wonder, since the medium income for example in Germany has dropped .... and of course the medium incomes in countries like China has risen (but the low incomes in those countries are still "poor" compared to Western standards).

I just posted this to my Facebook wall with the tagline I use for a headline conclusion that states a fact that everyone should know: "But of course." Globalization (increasing international trade on increasingly free terms of trade across more goods and services) would have to act as a worldwide phenomenon to reduce income inequality. Moreover, a country's greater rather than lesser involvement in international trade generally reduces income inequality within the country. Many of the countries in Europe that have especially low Gini coefficients (in other words, have especially equal distributions of income) are long-time members of the European Free Trade Association, and many of the countries in Central and South America that have high Gini coefficients (that is the region on the world to look in for the worst income inequality, among regions of the world) have long had protectionist trade policies and remarkably little involvement in the world economy.[1] Free trade improves income equality.[2] If reducing income inequality is your policy goal, improving provision of primary and secondary education is a good idea,[3] and other policy responses may be useful in one country or another,[4] but the world trend should continue to be toward more and more trade, the better to reduce income inequality and raise real wealth for everyone.

[1] https://en.wikipedia.org/wiki/List_of_countries_by_income_eq...

[2] http://www.efta.int/statistics/news/efta-countries-show-decr...

http://www.imf.org/external/np/seminars/eng/2014/lic/pdf/Lim...

[3] http://www.oecd.org/eco/labour/49421421.pdf

[4] http://www.project-syndicate.org/commentary/laura-tyson-desc...

AFTER EDIT: I would be glad to hear from multiple participants here from all over the world how your income (as a hacker?) compares to the median income in the country you live, and I have opened an Ask HN thread specifically to focus discussion on that topic, which may help me learn a lot about other people's perspectives here.

https://news.ycombinator.com/item?id=8058579

US GINI has steadily risen since 1968. If we're deciding that correlation equals causation, then that means US free trade equals US inequality.

This is just propaganda without any real facts.

He just footnoted 4 sites with real facts.

It is amazing the extent people will go to contradict data when that data disagrees with their personal experience or worldview.

That he posted four links does not mean, that all what he says (as much I see, he draws conclusions, that need not necessarily be proved inside his links) is true.

I also can post several links, some with truth, some with lies or speculations. Who will decide. Numbers mean nothing.

To give a concrete example, confounding variables in the analysis can lead to things like Simpson's paradox. In the famous Berkeley gender bias case, the evidence based on facts was that men were accepted into graduate school at a higher rate than women. People concluded that there was institutional gender bias.

Further analysis shows that most departments had no strong bias against women, and some evidence that it was actually the other way around. The confounding factor is that women tended to apply to more selective programs.

The post by tokenadult, for a more concrete backing of PythonicAlpha's reply, observed 'Central and South America that have high Gini coefficients (that is the region on the world to look in for the worst income inequality, among regions of the world) have long had protectionist trade policies and remarkably little involvement in the world economy'. However, that is only one possible correlation.

Consider that US government and businesses have a long history of political and economic intervention in those countries, with Cuba being a prime example but see also http://en.wikipedia.org/wiki/CIA_activities_in_the_Americas , the private army of the Cuyamel Fruit Company taking over Honduras, and US military support to Colombia in the so-called 'War on Drugs'. The US has a weaker influence in Europe.

Consider that most Central and South American countries are Catholic, while the European countries include more faith traditions. In the same vein, religion tends to be less important in the European countries than the countries in the Americas.

So there are several other differences which might affect the economical differences besides 'protectionist trade policies' and international economy involvement. Yet the provided link [1] is only a list, and does not have any sort of analysis to judge if there are confounding affects other than free trade. It is insufficient justification for the point made.

The provided link [2], as evidence for "Free trade improves income equality" doesn't actually make that statement. It does indeed say that "EFTA countries show decrease in income inequality" but "One explanation for this is income losses in the upper part of the income distribution that happened during the financial and economic crisis." That's quite a different point, don't you think?

Then if you read the actual study it says "Social transfers (excluding pensions) played an important role in reducing inequality in 2012"

There's nothing in that document which mentions free trade as improving income equality.

The provided link [3] looks like a nice document. Tokenadult suggests that it primarily suggests "improving provision of primary and secondary education". To point out though, that same document categorizes "Liberalising product markets" under the section "Growth-enhancing policy reforms that have an ambiguous effect on income inequality"

Finally, link [4]'s biggest suggestion is that "The US needs a more progressive and redistributive tax and transfer system to combat rising inequality in market incomes." I didn't see anything about globalization and free trade.

Hence why PythonicAlpha is fully justified in saying "This is just propaganda without any real facts."

Moreover, you might have noticed that tokenadult's "globalization" is limited to "free trade", and not "free movement of labor" or "freedom of workers to bargain collectively." By focusing only on capital and ignoring labor, this is propaganda favoring those who own capital over those who work. As a classic example, a law which forbids the purchase of goods made by child labor or slave labor is also a law which is anti-free trade.

The question I have for nostrademons and those who down voted PythonicAlpha is: did you actually follow and read those four footnotes, or was their presence enough for you? If you read them, then how did they persuade you that they strengthened tokenadult's comments?

the libertarian POV makes complete abstraction of politics, socio-economics and ground to earth humane sciences. the same blurb of macro economics, like it's the only real relevant thing to measure.

You can't even find an economist who will get out of his academia and try to look at those parameters, it's the elephant in the room.

I don't think I understand your comment. What are "those parameters" you are referring to?

labor participation rates, rampant poverty in some part of the country, economic opportunity, happiness index...

something different than the GDP, U3 unemployment, minimum wage, house prices...

Ho! He is right.

Just the problem of redistribution is like a problem of multiple bath tubs pouring water in a bigger common bathtub (the wealth) and how it is recycled (the water flowing back to the top in no respect of any scientific analogy).

you could globally be happy that for all the bathtubs of the world to observe a ratio of wealth repartition that is less extreme.

but where does this wealth/water comes from?

the rich who are already experiencing a favorable bias toward tax paying or the active workers who are paying relatively more taxs comparing to their income?

Tax does not transform into wealth maybe?

No, but education does: a worker with an easier access to the education worths more for the economy. Health insurance makes a worker available in good conditions for more productive years. (No wonders that health insurance are almost forced for highly paid workers; the company should ensure its working forces are productive).

So if the richer don't pay as much taxes, taxes being more profitable for the richer it is de facto (just by the sheer disappearance of the resources indirectly provided by the states) a logical decrease of the «second order» resources.

Yes in the world globally situation increases positively in terms of repartition, but locally because mostly we have the same incentive all around the world, the situation decreases.

The inequality are globally more balanced, but locally tending towards more non linear repartition. With a nice sigmoid.

this will go on as long as there is no fiscal equity amongst all citizens, whatever the country, whatever the religion, or social/political/economical belief.

It all boils down to how retro action works. And the shape of the curves of taxes. Every single steps, every non linear progression you make, you introduce distinct clusters of citizens which interests will diverge with the rest.

Put a sigmoid in the way people pay taxes/get credit refound, and your society will have a sigmoid in its structure, thus creating the probability of some divergence of opinions on what is equity or egality.

Are the 2 extremum wishable? All persons living at the average, or a cast system with n distincts layers, or can their exists «harmonious» level of wealth in a society that could results in less frictions?

Mathematically I am pretty sure we could agree that when a curve have 2 extremum that are not optimums (casts system or uniform normative systems) we should find the rules for an optimum in the middle.

Now in real life, maybe it is time to see the inequality not as a philosophical problem, but rather as process that can be engineered for the greater good of every one: slackers, billionnaires, hobos, politicians all alike.

The first step at my opinion would be to forbid any rules in the form IF DISCRETE cond A then apply X else apply Y in laws and tax formulation.

yea okaaaay... i was born at night, but not last night.

I don't see any evidence in the article, just links to some dubious papers, partially paid by the world bank.

It might be, that some money goes to third world countries (specially China and India) but I just doubt, that many people are really rising out of poverty. The "wandring labourers" of China are not. They work just to survive. Also those that are sewing our jeans in Malaysia and other countries ... at the verge of living wage. When the big corporations move along, to even cheaper countries, nothing is left to them.

I know by own experience, that with statistics, you can prove just anything, even lies.

I think, reading also the comments posted to the article is helpful. Some insights are also there.

The Chinese poor, don't have to rise out of poverty to be vastly richer than they were a few decades ago. They had to get bigger desks in their school because all the kids are bigger because they can afford to feed them now.

Might be, but they will run in tremendous health problems, given the current rate of environmental pollution.

Also (again): Compared to western standards, the Chinese median earnings are still laughable.

Yet their life expectancy is still rising because they are so much better off than they were before. Chinese median earnings are still laughable compared to western standards but rising from unimaginable poverty to still quite bad poverty is a big improvement.

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