I don’t grasp the point of any part of your argument about the comparison, so obviously I don’t get it, so I will bow out.
I don’t think you are wrong in the overall point (the US is not a poor society by any measure), but when discussing inequality you need to use medians, not averages. The median net disposable income is about 23.000$ in the OCED and about 41.000$ in the US.
What I dislike about disposable income as a measure is that it does not take into account public services and associated expenses where they are not available. If you take into account average/median expenses in retirement plans/social security/healthcare and education (what I would term non-optional expenses), a LOT of that difference suddenly evaporates since the average expense in other countries is close to 0. The US reads as a country where most people (middle class) live pretty much with the same spending power as the OCED average (a little higher, but not by much).
Timex
4402
In most calculations of disposable income, things like healthcare, transportation, etc. are not included.
Exactly, that’s why I don’t think it’s a good measure to compare between countries with widely different social services offerings.
A lot of that “disposable” income gets tied into paying for healthcare, etc in the US versus other developed countries. And when it’s not spent is many times not by choice.
I would use either income after “paying for essentials” or gross income, adding social contributions in kind to the amount (but these are very hard to quantify due to wildly different costs for the same service/results).
Timex
4404
No, you misunderstand.
Disposable income is calculated AFTER you pay for things like healthcare.
Don’t know where you read that, but the OCED statistics we are discussing say:
Only taxes and SS is deducted. Even housing is considered something you pay with disposable income.
It’s just income - taxes/SS + direct tax transfers
Median OCED is 23k, median US 41k. USians spend at least 15k on average more on “essentials” (couldn’t find median numbers), so the difference is way less stark. And I’m not even counting housing as essential, just stuff that is elsewhere provided as social services (health/education/pension contributions). Note that it also skews towards systems that do direct cash help (which is counted) versus provide services (which is not).
To get a meaningful comparison you need to properly include services (and again, assigning adjusted value to those is a mess), or discount median expenses in the areas where services are generally provided within in the OCED.
Timex
4406
My mistake then, I thought disposable income did not include healthcare expenditures.
CraigM
4407
The other thing is that raw dollars is a terrible measure to use. It really only applies to certain categories of spending, namely consumer goods. If we are talking about things like electronics, games, or media? It has relevance. If you have $1000 to spend in the US for a phone, that is largely the same $1000 it would be in Thailand. Consumer goods sold on a global export market can more or less directly compare.
But it completely fails when considering things like housing, food, services, etc. If you compare the US and India, someone working in IT in the US making $80k a year and someone in India making $8k. That disposable income metric would lead you to believe that the Indian person is living in poverty, and the US person is much better off.
But the flat reality is that those incomes are largely comparable standards of living. Granted there are some differences, how and what you spend on shifts, but that person making $8k can have a very good middle class life in one of Indias major cities. The areas where it falls short are areas where the differences are inherent to living in India.
But just saying in the US they have more disposable income means nothing. Because the costs of many things, like housing and healthcare, are much more proportionally higher and more than offset the raw dollars. You are still living in a very difficult condition with poverty and financial ruin always around the corner, but you may just have a PS5 while in constant stress over losing your housing, while in that other country you may not have the consumer goods, but have less direct fear of losing your house or healthcare.
I think that’s why the FT article doing the comparison used PPP.
The OCED data uses PPP. Still, PPP does not account for all differences in cost of life.
Since PPP adjusts to American dollars, at least reducing expenses sort of works.
CraigM
4410
Yeah, I was just responding to the discussion here about median income, as that does not have any inherent value on its own. The median and disposable income figures some here cited are irrelevant on their own.
Strollen
4411
PPP is the right measure, it is just that calculations in arriving at parity are very complicated.
Take the median house in the US of just under 2,400 that’s is significantly larger than all other OECD countries and nearly twice as large as Japan. But by all accounts, the Japanese use the space in their house much more efficiently with many space saving features, so square feet may not be a valid comparison. Plus Japanese households are smaller 2.3 vs 2.6 people on average, so maybe the right comparison should be square ft or (meters :-)) per person?
I think the FT tweet thread has an agenda, but maybe that’s because I find that author to have been chasing glory too often the past few years.
There are a few good replies in the same thread. One cites data that income by decile is higher in the US vs G7 in all but the bottom 10%. So, it’s worse to the absolute poorest in the US, but better to be in the bottom 10-20% in the US than elsewhere.
Another highlights that when adjusting for government services, the US is even further ahead of other developed countries.
There’s also this delightfully snarky response that flags that using Slovenia as a “poor” country is really just a form of gaslighting readers who don’t know any better. Slovenia is not a standard of poverty!
And another point along those lines - apparently Slovenia exceeds Spain in the measure used.
Lots of things wrong with the US, but this FT analysis is making the argument the wrong way, with the wrong data, in what I think is Murdoch’s own pursuit of glory. He did right early in the pandemic with some COVID charts, but enough of what he’s done since cuts corners that I inherently assume he is cutting corners for a good tweet.
Matt_W
4413
Truth to all of that. I think there’s a tendency on the part of American liberals, myself included, to overcorrect the nationalism and American exceptionalism used as a badge by the right with kind of an American fatalism. Clearly America has many issues. And we absolutely need to do better by our poorest citizens. But we’re also, in actual fact, one of the wealthiest countries in the world and most Americans share in that wealth (not equally, but enough that standards of living are generally very high here.) We’re not really the best at anything. And there are many areas we can do better. But clear-eyed criticism also requires we acknowledge our strengths and advantages.
Sharpe
4414
Although I do generally agree with what Matt_W said, I do think there is one significant area where a lot of Americans are not actually that well off: instability/volatility/vulnerability to bankruptcy or other forms of ruin if hit with a bad health crisis, nasty divorce, unexpected career disruption, etc. We just don’t have the stability, especially in regard to health care, that a lot of the developed nations have.
We do have strengths, and wealth, and many advantages. But I also believe there is a fundamental lack of stability, most notable in regard to health care, that plagues America at a very deep level.
I think that fundamental lack of stability has many negative effects. In addition to actually having a negative impact in terms of people’s long term mental outlook and social/economic stability, it also has a nasty political impact: it makes people vulnerable to demagoguery and propaganda on a number of issues including health care, the economy, and social change.
It’s become a standard outlook for many liberals to use the idea of “economic insecurity” ironically and yet there is in fact real economic insecurity in America (not in the way it was meant by Trump apologists in 2016 but in real terms.) That economic insecurity lives alongside our actual wealth and other strengths, undercutting our society in many ways.
We are a strong but flawed society, rusted iron, chipped granite, bone with hairline fractures, whatever metaphor you chose to use. And if pushed too hard, the weaknesses can sap the strengths in a hurry. Just look at how hard hit so many US families have been by a bout of inflation that, although intense, has been of relatively short duration thus far. Just look at how a single pandemic, with death tolls relatively lower than many prior pandemics, fucked up our supply chains and had years of ripple effects. (Not to minimize COVID in any way but the economic ripple effects have been way out of proportion.) Our economy is brittle and despite much wealth and productivity, there are problems.
I think that is a very fair criticism, and indeed have seen good statistics, charts etc that show how some parts of US society have high levels of economic “precariousness” or vulnerability. (I personally find the former term less ambiguous and open to debate.)
And, that point is better made with those data and studies, rather than a flawed FT tweet highlighting how Slovenian destitution is what poor Americans are at risk of slipping below.
Sharpe
4416
Economic precariousness is probably the best term in regard to meaning, but it’s a bit awkward in phrasing and pronunciation.
A much simpler statistic:
It’s even more complex than that. What about quality of construction (dismal in the US, specially when comparing costs) and renovating/maintenance costs -which “disposable” income does not capture-? Cultural differences and spread of costs make it very difficult and it remains an useful but not perfect measure.
But yeah, PPP is likely the best we can do, but I maintain you need to adjust for household expenses or it makes little sense. Adjusting for government services will need to be done using US -the PPP standard- cost of services, not local ones (those “when you adjust for government services” numbers do not do that). And still the quality of the service is hard to evaluate. How much people spend until they are “ok” with an essential service is a more nuanced way of making the adjustment, imho.
Otherwise it’s impossible to square stuff like median disposable income with median wealth per adult (where the US is pretty average -Spaniards and French are significantly wealthier than Americans, for example- despise almost doubling in “disposable” income).
Aceris
4419
The wealth / income relationship is very very different in different countries because of cultural and demographic factors. I don’t think you can read too much into a mismatch in that relationship.
