I'm having a hard time making sense of Oxfam's claim

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quantropy
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Joined: Sat Jan 28, 2017 10:38 am

I'm having a hard time making sense of Oxfam's claim

Postby quantropy » Thu Jan 25, 2018 3:09 pm

World's Richest 1% Took 82% Of Wealth Generated In 2017 is the claim. But what does that mean? In The People's Economics I discuss the difference between wealth inequality and income inequality and conclude that wealth inequality is less meaningful. But wealth inequality has greater shock value, so it's what tends to be mentioned. The trouble with Oxfam's claim is that it makes wealth inequality look like income inequality, especially when it is repeated by news sources. This is highly misleading.


The 1% and where to find them
Another problem with the claim is that it compares the wealth of the richest 1% at the start of 2017 with the richest 1% at the end of 2017. But these aren't necessarily the same people. Some people will drop out of the 1% by losing money, others will die. Some people will enter the 1%. Since the 1% is based on individual adult wealth, death of a spouse may be the reason some people enter the 1%. I doubt that they're celebrating.

To get into the top 1% by wealth you need to own $770000, or about £550000. In Oxford that represents a 3 bedroomed house plus a reasonable pension fund. If that's the wealth of a couple they won't be in the 1%, but if it's just one person then they will. When you hear of the 1% you may well think of a yuppie. I think of a widowed pensioner - who won't think of themselves as particularly rich, but might well volunteer in one of Oxfam's shops.

What about the top 1% by income To get there you need about $35000 or £25000 a year. Coincidentally that is what Oxfam are offering for a Superstore Shop Manager. They certainly won't think they're rich - they'd find it hard to get a mortgage in Oxford on just that income.

So where might you find the 1%. Maybe working in Oxfam's shops.

Asset valuations
One trouble with looking an inequality by wealth is that it depends on asset valuations. Suppose your house is worth twice what you paid for it. You're a lot richer aren't you? But then again it's the same house that you bought - how can you claim to have gained anything? What seemed to have happened recently is that the price of property has stagnated, and people have moved their money to stocks and shares,pushing up the value relative to property. Since the top 1% own proportionately more shares than the rest, this has increase the value of their assets. But it all seems like numbers in a computer to me, only loosely connected to the necessities of everyday life.

We probably do need much more redistribution of wealth, but we need to move away from a scarcity mentality. To obsess over some sort of revenge on the rich, rather than on how to make the world a better place is just going to make the rich want to hold on to their money. Muddled thinking and dodgy statistics aren't going to do any good at all.

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quantropy
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Re: I'm having a hard time making sense of Oxfam's claim

Postby quantropy » Mon Jan 29, 2018 6:50 am

Another of Oxfam's claims is that the poorest 50% got nothing of the increase in wealth from 2016 to 2017. To make this comparison you need to know what the wealth of the poorest 50% was in 2016. Well Oxfam told us, the same as the wealth of the richest 8 billionaires (billionaire-equivalents seems to be Oxfam's favoured measure for the wealth of the poor). Except that, as was quickly pointed out, this includes those with substantial debts, such as highly paid graduates with large student loans. Hardly poor by most people's definition. If you exclude these debts then the number changes to 98 billionaires.

But then there was a massive revision of the estimate for the wealth of the poorest 50%. I don't know whether we should have said 'Hurray, the poorest 50% are at least 60% richer than we thought they were', but there was very little publicity for this revision, and I haven't been able to find a link to the revised data. This means that the 8 changes to 61, and the 98 to 181. So after making a big fuss about 8 billionaires, it turns out that the most realistic number was 181. Quite a difference.

My point is that Oxfam has a pretty loose grasp on what the wealth of the poorest 50% actually is, but they are willing to make a big fuss claiming that is hasn't increased at all.

But even with Oxfam's dubious statistics that the wealth of the poorest 50% has gone from 61 billionaires in 2016 to 42 billionaires in 2017 (they still love to include those highly paid graduates in the poorest 50%) this represents an increase in the wealth of the poorest 50% from $1486 billion to $1581 billion. So 'nothing' is an increase of nearly $100 billion, while elsewhere Oxfam claim that just over $100 billion would be enough to end extreme poverty. Interesting.


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