The Fallacy of the Rich/Poor Gap

For some time now it has been fashionable to speak of the increasing gap between rich and poor and that this is a serious problem for our economy. It is no doubt that adherents to this theory that have come out to support Mr. Obama's plans for redistribution. However I would caution that this theory of a widening gap between rich and poor be more closely examined before canonize its merit and conduct economic policy based on it. I, like many others, am concerned with the economic progress of my fellow Americans, especially as we are being hit with hard economic times. I have always emphasized by belief that businessmen should give liberally in terms of wages and that employees should always earn fair wages for their production. However, I also believe it is the right of the entrepreneur or businessman to enjoy the fruits of his garden. The company is his and has been built with his capital. Give the unreliability of business ventures he has taken great risks to found his company. Or, if he is a CEO, his skills have demanded that his pay be a certain level. Whatever his salary the board clearly thought it was worth what skills and knowledge he brings to the corporation. But I do condemn this vain consumerism and the accumulation of wealth for the sake of pride, those who have been entrusted with great wealth out to use it for the benefit of their fellow men in addition to their personal pleasures. However, such is between him and God and not him and the government.

That being said, let us explore a major flaw in the rich/poor gap theory. Let us say that the average person in the lower 80% of society (in terms of wealth) makes $50,000 a year. Let us also say that the average person in the remaining upper 20% makes $200,000 a year. Then let us look twenty five years in the future (no inflation is assumed). The average person in the bottom 80% is earning $100,000 annually and the average person in the top 20% is earning $300,000 annually. The average middle class person has seen his wage double
over that twenty-five year period while the average rich person has seen his wage increase only by 50%. The growth of the middle class income is far greater than that of the rich income. However, the rich/poor gap has increased. Where there was previously only a difference
of $150,000 between the two, there is now a $200,000 difference. The gap has increased by 25%. Yet, who's income has experienced more dynamic growth in the period of 25 years? Is it not the middle class person's income? This is why the gap between rich and poor is an inadequate measurement of economic progress. What ought to be considered is the increase in income per individual over the time period being assessed as a marker of economic growth. This you will find has increased over the last twenty-five years despite all the cries of an increasing gap between rich and poor.