How to compare the income of different countries
Americans other than private jet users do not know how poor they are compared to the middle class in most other advanced economies. They did not overpay for poor health care. They have a solid social safety net and at least a sufficient level of social services (child care, elderly care, public transportation). And they usually prefer less housing and more vacations. Matt Bruenig explained how the US customary income comparison easily conceals all these problems.
Earlier this month, when I went to see a doctor in New York City, I got a strange reminder about the U.S. situation (I was wearing an N95 with a surgical mask in it, and I kept wearing it during transportation, which was very unpleasant) . New York looks… tacky. It was not as low and dirty as when I first moved there after the financial crisis, but it also lacked the steely determination I felt at the time. There is a manufacturing industry in the garment area. Soho is basically empty, and most artists do not have completely legal rents, and they are far from achieving legal improvements. There are many other aspiring talents, singers, dancers, and dramatists who can live in Manhattan’s Lower East Side, Hell’s Kitchen or Harlem, Spain.
But in the late 1980s and the past decade, the city became gentrified. More high-income parents decide to raise their children in Manhattan instead of leaving when their children reach school age. I saw it in my building; when I arrived there was only one child, and when I left, there were already six children. Bodegas and the “Korean” (24-hour convenience store) lost to Chichi food suppliers and chain pharmacies that provided essentials at 2am: cigarettes, condoms, painkillers and cough syrup, milk, butter, eggs, toilet paper, diapers and Battery. Large shops, coffee shops and bank branches replaced eccentric retailers. Everything gets brighter: prettier storefronts, almost no graffiti, cleaner streets, and even faster snow removal.
Seeing the sunset shining on the buildings and seeing the yellow ginkgo trees make me miss. Although the streets are crowded again, the damage to the city is visible. The bizarre Covid Theater in the fast-built fake outdoor room connected to the restaurant is dazzling and disrupts walking and even car traffic. The bicycle lanes “build it and they will come” are almost unused, and the rental bike racks are almost full. Many storefronts are sealed with wooden boards, and there are graffiti everywhere. Even some Christmas decorations look very crude; the city has installed large packaging props on the sidewalks of Fifth Avenue, but their LED lights look very tacky. Even stubborn male locals told me that the subway was not safe.
I still miss New York very much, so I am sad to see this city in this state. But some of the horses on duty in the Central Park tour wore beautiful feathers and swaggered, as if they were proud of being decorated.
Author Matt Bruenig, lawyer, policy analyst, and founder of the People’s Policy Project.Originally published on His website
There are certain difficulties in comparing the income of different countries: income is paid in different currencies, products have different prices, tax levels are different, and welfare levels are different. Many years ago, economists came up with a decent enough way to solve most of these problems: calculate the local currency price of a given consumer basket, and then compare prices between countries to determine the relative price of a given unit of currency The dollar is worth it.
This is called purchasing power parity.It allows you to say, for example, 1 dollar is equal To 7.985071 Danish kroner. With this knowledge, it is possible to see, for example, the ratio of the Danish GDP to the US GDP or the ratio of the median income in Denmark to the median income in the United States.
Last year, Denmark’s GDP per capita adjusted for purchasing power parity used to be USD 60,551. In the United States, the same figure is slightly higher, at $63,543.
In 2017, the last year of OECD data on this subject, the median PPP-adjusted disposable cash income in Denmark was US$30,739. In the United States, the same figure is $35,600.
This number is the best number we have obtained from the OECD, but it has a very big flaw: it subtracts the taxes paid from people’s income, but does not include any non-cash benefits they receive. Of income. This means that the taxes paid by median Danes for public health insurance, childcare subsidies and free universities will be deducted from their income, but the value of these benefits will not be added back later.
It’s hard to be precise, but based on the LIS micro-data I researched many years ago and these current OECD statistics, it’s clear that the bottom 60% of people in Denmark have a higher total income (including benefits in kind) than the bottom 60%. American. Once you cross this line, the U.S. will be ahead of Denmark, which is mild at first, but as you get closer to the top of the distribution, it will become huge.
This may be a boring solution to this problem, but I assure you that it is better than some other methods.
Here and elsewhere in the adjacent thread, you will see people talking about how Danes or other Europeans often do not use various American appliances or consume certain other consumer items in smaller quantities.
An obvious problem with this method of analysis is that there are many reasons why people may have different sizes of houses, different appliances, and different temperatures on the thermostat, and these reasons have nothing to do with their overall wealth. This is why we do not try to compare different places by focusing on the quantity of one or a few specific consumption items, but focusing on the income compared to the price of the consumer basket.
The Danes obviously have enough income to buy dryers. They only cost a few hundred dollars and can be used for ten years. Remember, the country’s PPP-adjusted GDP per capita is almost the same as ours. If you want to figure out why they may not have them even though they clearly record the affluent, then ask yourself why there are no Japanese-style toilets even though Americans are rich. Why don’t we have a French bidet?
Judging from the toilet situation, we must be a very poor country. Or maybe it’s just that over time, different societies will form different consumption habits. When calculating their overall income level and purchasing power, choosing any of them is not very enlightening. Instead, you should use a more comprehensive Metrics.
McArdle’s second tweet was particularly interesting because it started complaining that Danes own smaller houses on average, but then turned to 421 hours The extra leisure time that Danish workers have each year should be ignored because they have to use it to clean the house instead of hiring a maid. If there is a way to reduce working hours and spend less time cleaning the house, maybe it is to have a smaller house…just like the Danes do?
The house with insufficient heating is new to me.Denmark is known for its extensive District heating systemPerhaps a country farther north than Edmonton is more comfortable with colder indoor temperatures and is not poorer than statistics show.
Don’t get me wrong. If people want to ridicule the consumption patterns of other countries or even other parts of our own country, it will be fun. Europeans seem to like American chocolate, cheese and beer. So be sure to enjoy their light food or the fun of the small refrigerator. But in doing so, it’s best not to convince yourself that a consumption pattern that is different from yours indicates a lack of prosperity.
When talking about the “upper middle class” in the United States, we can define it as those whose overall income distribution is much higher than that of the United States and that of Denmark (for example, around the 75th percentile). The question of comparison will have to focus on Whether other considerations may outweigh the lower income.
The universal welfare state does provide benefits for everyone, even those who are not the net beneficiaries of redistribution. For these people, the main benefit of the welfare state is that it can smooth life-long income and protect you from a sharp decline in income.
Whenever one of the articles “200,000 US dollars is not a lot of money” drops, if you look closely, you can almost always find a detailed budget. The person is currently incurring a lot of expenses or savings, which will be taxed by other countries. The subsidized welfare state is eliminated. Therefore, the budget is usually used to deal with one or two childcare expenses, while also using a large amount of savings for 401k retirement accounts and 529 college savings accounts.
At some point, these costs will level off for this person: children will continue to learn K-12, and 401k and 529 will receive sufficient capital. By then, they will receive a large amount of cash. But at that moment, they seemed opaque to realize that a system with higher taxes, childcare subsidies, more generous pensions, and free universities would give them more money to spend at that time in their lives. It means that they opaquely realize that even for people with higher incomes, the smoothing function of the welfare state is valuable.
More leisure time may also depend on your own personal preferences. To be able to take off in the summer for a whole month, and to have more vacations and holidays, for some people, this is very worthwhile, which is why Denmark and other countries implement these policies. Regardless of what McArdle says, not all of this extra free time is actually spent on cleaning.
In addition, of course there are various indirect quality of life aspects of an equal society. Crime, homelessness, “fusarium wilt” and things of this nature are much less frequent. In a highly unequal society, the upper middle class can usually isolate themselves from these things, but this is not entirely the case, and the time and money spent protecting themselves from the consequences of inequality may also be a bit of a drag. In the end, you might even only care about other people in society living a good life for less selfish reasons.