William Jennings Bryan's intellectual brethren aren't likely to celebrate a recent University of Chicago Business School study about income inequality. Contrary to a popular belief accepted by many Americans and their representatives in Washington D.C., income inequality is not a sign of the worsening conditions of the poor. As the wealth density of the top quintile has rising to record levels, so have the living conditions of the Americans living below the poverty line.
The Economist cites data showing the poor spend on average 12% more of the income on non-durable goods. The typical inflation rate in this range of goods has been kept at an artificially low level due to the purported bogeyman of the American poor, China. Yes, China, the nation many Americans flippantly blame for the loss of manufacturing jobs, is saving low-end consumers money. “The poor tend to shop in the aisles of the supermarket where the presence of Chinese goods has increased most,” writes of one the study's authors. Moreover, China's exports have cut the expected inflation rate by up to 25%, saving consumers quarter for every dollar they spend on essential goods.
While the poor are benefiting from China's lower production costs, the bourgeois and the wealthy are paying progressively higher prices for luxury goods and services. The study focuses on the example of organic milk prices, which have soared in recent years. This food is out of reach for low-income workers, put their more affluent colleagues who place a premium on healthy foods are willing to pay more, which drives up costs.
This long-term trend has been interrupted by the rising cost of goods classified under the inelastic demand category. Since 2007, food and gas prices across the nation have soared. This has strained the budgets of those who now think of buying discretionary items like movie tickets are a foreign concepts. As consumers search for ways to cut back on their expenditures, they'll become even more dependent on low-cost Chinese imports. To those planning to wave signs outside the White House demanding a return to the "halcyon" days of massive tariffs, remember this: without China, those poster boards could cost the same as a one-way ticket to Beijing.
http://www.economist.com/finance/displaystory.cfm?story_id=11791427
Poll
