Saturday, May 12, 2012

Nice Chart showing showing poverty, income inequality and redistribution in developed countries...See how the US stacks up...

Income inequality and poverty is a hot political and economic topic today.  Below is a chart (from The Economist) that compares, within developed countries, levels of poverty and income inequality BEFORE and AFTER "taxes and cash transfers" (fancy way of saying "income redistribution"). 

The light and dark blue sections of the bar TOGETHER represent the percent of each countries population below the median income level for that country (median income--half of the people are above that level of income, half are below).

Just the light blue part of the bar represents the percentage of the population that is below the median income level AFTER people pay taxes and those taxes are redistributed to the relevant stakeholders-- people below the median.

As an example of how countries use policy to "level income" , I isolated the US ("A") and Sweden ("B"). I used these two because the percentage of the population living below the median is roughly the same--each bar (light and dark sections) settle at around 26%-27% and because they have a significantly different outcomes after redistribution.

After taxes and transfers ("C"), the US has roughly 17% of the population under the median income level and Sweden has 8% under the median.  The US reduced the percentage below the median by 37% and Sweden reduced it by 70%.  (If I did my math right!) 

So, while both countries started out with roughly the same percentage of people below the median, after taxes and transfers, Sweden (percentage-wise) did significantly better than the US in getting its population to/above their median income level.

Good thing, Bad thing, Neither? What do you think?  Keep comments kind, please...

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