Where Do You Want to Be Born?

By James Kwak

That seems like a nonsensical question. Of course, each of us born where he or she was born, and we didn’t have much choice in the matter. But, philosopher John Rawls asked, if you lived behind a veil of ignorance, not knowing what position you would occupy in the socio-economic hierarchy, what rules would you choose to govern society?

Rawls was reasoning from a situation in which people could decide on any set of rules.* In the real world, the set of existing countries gives us a limited set of options to choose from; among those, if you didn’t know if you were going to be rich or poor, where would you choose to be born? On Friday, I was discussing this question with a scholar who is in the United States for a year, and one thing we noted was the instinctive tendency of many Americans to assume that we must be the best at everything and have the best of everything in the world (best health care, best Constitution, best hockey team, etc.).

The data-driven answer is probably the Netherlands or Canada. Here are the changes in median after-tax per capita income in the Netherlands (black) and the United States (red) over the past three decades, courtesy of The New York Times (you can ignore the text that I included in the screenshot).

Screen Shot 2014-04-22 at 1.57.43 PM

In words, poor people do a lot better in the Netherlands, middle income people do almost as well, and rich people do less well. Since the thing you want to hedge against is being born poor (and let’s not get into the question of social mobility, which makes the United States even worse), you should be willing to trade off extra income in the 95th percentile for extra income in the 5th percentile.

Screen Shot 2014-04-22 at 1.54.50 PMCanada also looks pretty good, and probably has a higher median income than we do today. (Norway looks even better, but that data series doesn’t go as far as the other ones.)

When you look at the red lines, this is just another way of looking at rising inequality. Note in particular the negative slopes for people in the 5th and 10th percentiles. But in comparative terms, it’s increasingly clear that while we like to think of ourselves as the richest country in the world (leaving aside a few anomalies like oil states and tax havens), that’s only true for practical purposes if you’re in the top  half of the income distribution. Remember that rising tide floating all boats thing? Not so much.

Current trends are not in our favor, either:

Screen Shot 2014-04-22 at 2.05.53 PM

There are lots of reasons for these outcomes, but one is a tax system that, by comparison with other advanced economies, takes less from the rich and redistributes less to the poor. And, of course, the current trend in tax policy is getting worse, not better, with the extension of most of the Bush tax cuts and the freezing of taxes on investment income at 20 percent.

How is any of this making ours a better country?

* This is the subject of a very brief and undoubtedly simplistic discussion in White House Burning, in the context of social insurance programs.

23 responses to “Where Do You Want to Be Born?

  1. dumb question, but are the figures used to generate those graphs inflation-corrected?

  2. Yes, I smell a rat too, foppenjan2. Just what data is this based on, and how do we compare on consumption rather than income?

  3. Here’s another way of looking at the question;

    http://www.nytimes.com/2014/04/20/opinion/sunday/from-rags-to-riches-to-rags.html?smid=pl-share&_r=0

    ———quote——
    It turns out that 12 percent of the population will find themselves in the top 1 percent of the income distribution for at least one year. What’s more, 39 percent of Americans will spend a year in the top 5 percent of the income distribution, 56 percent will find themselves in the top 10 percent, and a whopping 73 percent will spend a year in the top 20 percent of the income distribution.

    Yet while many Americans will experience some level of affluence during their lives, a much smaller percentage of them will do so for an extended period of time. Although 12 percent of the population will experience a year in which they find themselves in the top 1 percent of the income distribution, a mere 0.6 percent will do so in 10 consecutive years.

    It is clear that the image of a static 1 and 99 percent is largely incorrect. The majority of Americans will experience at least one year of affluence at some point during their working careers. (This is just as true at the bottom of the income distribution scale, where 54 percent of Americans will experience poverty or near poverty at least once between the ages of 25 and 60).
    ———–endquote——–

  4. Daniel Barkalow

    If I’m hedging against being born poor, I don’t think I care so much about making $9k instead of $6k. I care much more about what my life will be like if my parents have practically no money through my childhood, so I’m thinking about nutrition, health care, and education provided at no cost to the recipient and guardians. Not that I think the US does any of these things particularly well, but it does them better than $3k/year on the open market, so I’d have to look at more than that NYT graph to get a sensible answer.

  5. Just saw a book entitled When Public Housing was Paradise. Reagan cut public housing by 75 percent . Also little is said about Japan and how they sell so many cars in the U.S. from an economy where the CEO to worker ratio is 11 to 1 and ours is over 300 to 1 . Where they have 20 times as much job security and where the economy pays much less attention to the stock market than the U.S.

  6. The NYT article is a very interesting read, and does provide the useful information that historically income over one’s lifetime describes a crudely bell shaped curve, or if one participates in the right industry at the right time may include sharp spikes. But I would have liked to see more information on what fraction of the peaks of those earning curves were high enough and the spread of the curves broad enough for the earners to actually accumulate wealth over the 44 years that the researchers studied. Although the 1%/99% rubric is overly simplistic, it does get to the heart of the complaint it voices: that once some wealth is acquired, it tends to concentrate and thus the rather changeable income-vs-time curve broadens into a multigenerational spread that is essentially static or increasing. The study does not look at the right metric when considering power and money. It needs to consider accumulated wealth.

  7. Moses Herzog

    Without trivializing the above post (which is well written and correctly stated) I would like to be born near the stadium of an awesome NBA basketball team:

    http://www.insidethunder.com/renners-revelations/

    Either that, or the next door neighbor of this girl’s teenage years home:

    Hmmmm….. Let me think about it some more and I’ll get back to you…..

  8. @Moses, and yet, you trivilized it anyway – guess the idea of one good year of “wealth” for women means the first year she operates in the global economy as a sex slave….?

    @Paddy – when the female half of the population can’t participate in the technology boom in business development positions – ie. drones/robots that take over femal dominated “jobs” like cleaning up hotels after “March Madness” sports – then what are you talking about….?

    Three kinds of LIES:

    1. Lies
    2. Damn lies
    3. Statistics

    Now go pinch your nose shut and let me know which stat formula or derivative explains that “process”….

    More misery for others = More $$$$ for ME ME ME

  9. Note that the graph takes account of taxes, but not of government benefits like free or subsidized healthcare and education.

  10. Moses Herzog

    Annie, it’s called “a sense of humor”. Which, as I have just learned reading your comment, schizophrenics don’t have

    Annie, it’s a “marketable skill”. Now if YOU don’t have a “marketable skill”, that’s not necessarily other people’s problem. Last time I checked, women in many schools constituted over half of the enrollment. Part of the reason this fine looking young woman (yes, my mouth is foaming as if I have rabies as I type that) works in the film industry is she is CHOOSING to do work so she can attend one of the finer American (and arguably in the world) universities in the higher education arena. She could get a loan and work a low wage job if she chose and attend a lesser respected institution. She has chosen this route (presumably) so she isn’t stuck with tens of thousands of loans on her back as she ventures out into a tough job market. That is her choice. It is a tough situation for her to be in.

    But I don’t think that makes things unfair in an androcentric way. Unless you’re still living in 1975, and you’re not wearing a bra because Gloria Steinem (or such similar) told you that was your one-way ticket to freedom. Or 1990s feminists told you being the lone female half dressed at a party drunk with 12 men is your constitutional right. In which case Annie, you have a right to that opinion.

  11. The above graphs show changes in income, but from what absolute base? The following throws that question into the discussion.

    http://www.newgeography.com/content/001543-is-sweden-a-false-utopia

    === ===
    The Swedish seem to be an admirable people, hard working and cooperative. “The 4.4 million Americans with Swedish origins are considerably richer than the average American. If Americans with Swedish ancestry would form their own country their per capita GDP would be $56,900, more than $10,000 above the earnings of the average American.”

    The old Sweden, in contrast, has not done as well in economic terms. In 1960, taxation was 30% of GDP, roughly where the US is today. As taxes rose, economic growth decreased, with Sweden dropping from being the 4th richest country in 1970 to being the 12th richest in 2008. Swedish GDP per capita is now $36,600, far below the $45,500 of the US, and even further behind the $56,900 of Swedes in America.
    === ===

    EasyOpinions.blogspot.com

  12. Though I must admit that Moses’ pragmatic suggestion has a lot of appeal (at least if my wife is not listening in to this) I would like to have been born in a country where my countrymen wished, dared and were certain they could become the best in the world… now where that is, in this world of increasing risk aversion, beats me.

    Also a place where, if I make it… I can leave it to my kids… which means in a country far away from Thomas Piketty

    http://teawithft.blogspot.com/2014/01/professor-thomas-piketty-dont-be-so.html

  13. WORSE than McCarthyism, “Moses”…that’s your psychobbable legacy.

    Hollowood is a cosmic joke – lipstick on the pig that is your gizmo oriented off the shelf “culture” in USA….can’t even chime in with JOBS everyone would like to eliminate through technology (cleaning puke off toilets) without being called a schizoid feminist by your ilk…a disgusting and vicious attack your “free speech” FIAT money buys….

    World population in 1960? 3,026,002,942
    Today? 7,243,784,124

    The Swedish focus is a good example. Seems they’ve held on to their QUALITY of life, all things considered.

  14. There really IS a “secret” Department for the Disembowelment of the Living tucked away somewhere in FIAT $$$$ land….endless ways to make the one math formula that rules them all work for you with the fine print of pharisaism – More misery for others = More $$$$ for ME ME ME:

    http://hotair.com/archives/2013/12/16/fine-print-state-can-seize-your-assets-to-pay-for-care-after-youre-forced-into-medicaid-by-obamacare/

    There you go – details to weigh in where to be “born again”….

  15. The low end of the totem barks at the high end of the totem, one problem you have Annie, with anyone who wishes to exert their dominance, is that you are not a linear thinker. Not able to interpret the many ways in which people communicate. 70 % of communication is done this way, and I know it’s too late to teach an old dog new tricks, but too many people, including politicians and businesspersons, use this to control and manipulate the system. It could be your some of your own kids, who ask themselves why wasn’t my parent a linear thinker, and how did they get so much money while I have none and am a superior and seasoned linear thinker. The mental health field believes it’s job is to check and see if you are a linear thinker, if not, it’s now their job to take your money and control your life. Now I can’t believe you havn’t seen a shrink once in your life for at some reason. It wasn’t their job to check and control, it was their job to make others understand why mo money for u means mo misery 4 me. They failed miserably and are in complete denial about it all. Next time you see c your shrink, please behave with him or her as you do with us here for me because when I talk to him about his failures, he simply puts his hand over his ears and starts to bang his head against the wall and refuses to talk or admit his failures. This country is going to hell in a hand basket and he thinks he is the miracle worker from oz, here to draw the line on our life decisions and to set us straight. Please Annie, do it 4 me, just one time, get your courage up to talk face to face with the real problem, because we are not it.

  16. You are certifiably nuts, Anonymouse.

    On one hand you admit to some bs self-appointed PREDATORY AUTHORITY being exerted over people who are NOT linear thinkers (wha’ever that is, you have NOT properly communicated to anyone, since you pulled it out of your arse it’s so ugly no one wants to understand it),

    and then you tell me to face the “real” problem which is NOT, supposedly, a PREDATORY AUTHORITY.

    Like I said, so ugly of a rationalization for SAVAGERY, no one can look at it.

    All WE know is that we have a duty to contain the infection your crap continues to create. Call it “irreconcilable differences” and no one backs down from injustice. Funny how your psychobabble has selectively chosen not to hear the cry for “fairness” embedded in human DNA….guess that is what the mind numbing dope and Viagra are for….keeping linear thinkers happy?

  17. I live in the Netherlands and it’s all true. Life is better tfor the poor in these parts. Our getto’s are definately not like your getto’s. In fact, we have people trying to be like the thugs in america and they are a laughing stock. They rap aobut a hard knock life. But if you take a stroll through the getto’s thats obviously nonsense. It’s impossible not to have a relatively easy life in the Netherlands, even if you are poor.

  18. But those are the same ones Annie who will go to war over their beliefs, they are controlled by cocaine dealers who are the subjects of the human denial story. Doing business in the usa is becoming ever more difficult and taxing for them because of the forces of resistance such as me, and yourself, frankly. But they will be overcome by the poisoning of their own body’s and the lack of cures to revive them, go back to a deep sleep Annie, one day the denial will be over, and for good reason too.

  19. PREDATORY AUTHORITY – who can sleep through that?

    Internet the equivalent of Crabs in the Pubis, who can sleep through that?

    If I know who the people are and what they are doing with “derivatives”, then why doesn’t the HUGE “security” apparatus know?

    WORSE than McCarthyism – the psychobabble legacy…

    Never bending my knee to the War, Drug and Slave Lords. Scum bags. So far, only one world leader had the cojones to send in an army and level their billion $$ opium operations encroaching in his back yard….and the “media” in USA spun that out to call him an aggressor against an ethnic “minority” in the country So what’s the plan there, when enough people are bold faced congolese savages to qualify as a “majority” is when “political correctness” finally addresses THEIR criminal “psychology”?

    Where has the FREEDOM from iniquity gone that “capitalism” cured? Into a derivative dark pool? Did that “freedom” from INIQUITY also crash with the global economy?

    Meanwhile, on the PUBLIC Broadcast System’s News Hour, the lead “news” story was that Israel and Palestine broke off peace talks. That’s “news”?! Did they ever NOT break off peace talks?!! And then the next important news story was about smokeless cigarrettes. Who gets to feed the absurd pablum called “news” down our throats (along with Frankenfood’s delivery boys, the mercs from the former Blackwater that Monsanto just hired).

    http://www.rense.com/general37/char.htm

    Psychoanalyze THAT – what’s the “fascist” personality all about, eh?

    DRUG Lords in on the fascist schtick (“corporations are people, my friend”)….hard to sleep through those billion $$ “capitalists”….machine gunning down MDs in Afghanistan – why was TRILLIONS spent on that “culture”??!!

    Reminded today by a self-appointed Las Vegas moral maven that “you don’t need a degree to make money”. No kiddin’, Lady. It’s simple math:

    More misery for others = More $$$$ for ME ME ME.

    Let’s call health care what it IS in the USA – for-profit health insurance that does not provide health care (More $$$$ for ME ME ME), yet another tax, and now a way to upend all private property laws – Medicaid babushkas grab your house once you sign up on her website (designed and run by the Department for the Disembowelment of the Living).

    Just the facts, Ma’am, so that people boinking for fun can decide on which PLANET they can raise their wunderkinder….hey Mom, I landed me a man with a good job – he’s a merc!

  20. It’s official: America’s middle class now earns less money for more hours of work

    One crucial factor left out of the NY Times story “The American Middle Class Is No Longer the World’s Richest” — that means that American income inequality is even worse (if you can believe it) — is that more Americans work longer hours for more years than Europeans or Canadians.

    Now, if the per capita income of our middle class (defined as median income) is barely equal to or lower than that of other modern middle classes — and — we work more hours to get less …
    … Holy Cow; it’s time for some very big changes!

    From the book “The State of Working America 2006/2007″, Chart 8.7 on page 334:
    Average hours worked in OECD countries

    United States…………..1824
    Japan……………………..1789
    Germany…………………1426
    France…………………….1441
    Italy………………………..1585
    United Kingdom……….1669
    Canada…………………….1751
    Australia………………….1816
    Austria…………………….1550
    Belgium…………………..1522
    Denmark………………….1454
    Finland…………………….1736
    Ireland……………………..1642
    Netherlands………………1357
    New Zealand…………….1826
    Norway…………………….1363
    Portugal……………………1694
    Spain………………………..1799
    Sweden…………………….1585
    Switzerland……………….1556

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