andrew_gelman_stats andrew_gelman_stats-2010 andrew_gelman_stats-2010-495 knowledge-graph by maker-knowledge-mining
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Introduction: Reihan Salam discusses a theory of Tyler Cowen regarding “threshold earners,” a sort of upscale version of a slacker. Here’s Cowen : A threshold earner is someone who seeks to earn a certain amount of money and no more. If wages go up, that person will respond by seeking less work or by working less hard or less often. That person simply wants to “get by” in terms of absolute earning power in order to experience other gains in the form of leisure. Salam continues: This clearly reflects the pattern of wage dispersion among my friends, particularly those who attended elite secondary schools and colleges and universities. I [Salam] know many “threshold earners,” including both high and low earners who could earn much more if they chose to make the necessary sacrifices. But they are satisficers. OK, fine so far. But then the claim is made that “threshold earning” behavior increases income inequality. In Cowen’s words: The funny thing is this: For years, many cultural c
sentIndex sentText sentNum sentScore
1 Here’s Cowen : A threshold earner is someone who seeks to earn a certain amount of money and no more. [sent-2, score-0.728]
2 If wages go up, that person will respond by seeking less work or by working less hard or less often. [sent-3, score-0.442]
3 In Cowen’s words: The funny thing is this: For years, many cultural critics in and of the United States have been telling us that Americans should behave more like threshold earners. [sent-10, score-0.475]
4 What isn’t so widely advertised is that those same critics have basically been telling us, without realizing it, that we should be acting in such a manner as to increase measured income inequality [emphasis added]. [sent-14, score-0.783]
5 Not only is high inequality an inevitable concomitant of human diversity, but growing income inequality may be, too, if lots of us take the kind of advice that will make us happier. [sent-15, score-0.948]
6 No, I don’t think “threshold earning” increases income inequality I don’t see how you can get from threshold earners to increased income inequality. [sent-18, score-1.545]
7 It seems to me that threshold earning would decrease inequality, in both the examples that Salam gives. [sent-19, score-0.729]
8 First, you have a well-educated middle class person who could be a high earner but instead gets a more moderate income (perhaps by writing for a political magazine, for example). [sent-20, score-0.675]
9 The only way I see threshold earning as increasing income inequality is someone who could earn $20,000 a year instead slacks off and earns $5,000 a year instead. [sent-25, score-1.56]
10 Cowen in particular was focusing on inequality in the top 1 percent of the income distribution. [sent-28, score-0.7]
11 In the context of the general population, though, I see this threshold earning as a source of decreased inequality (as discussed above) in that it brings some potential incomes high in the tail down toward the median. [sent-31, score-1.163]
12 Start with a scenario on which these people work normal hours and have some distribution of income, with some millionaires, some people making less $50,000 per year, and many people in between. [sent-34, score-0.609]
13 Now imagine that some people in this quintile are “workaholics,” people who work long hours and might become really rich. [sent-35, score-0.476]
14 Taking a normal person in the top quintile and turning him into a workaholic will increase the inequality in the income distribution. [sent-36, score-1.066]
15 Taking a normal person in the top quintile and turning him into a slacker will decrease the inequality in the income distribution. [sent-38, score-1.161]
16 To the extent that variation in work habits and money goals is causing income inequality to increase, this is coming from the workaholics, not the slackers. [sent-39, score-0.786]
17 Contrary to Cowen’s claim (see the long quoted paragraph above), if more people in the top quintile are taking the advice to chill out, enjoy their gains, and relax, this should be causing a decrease in measured inequality, not an increase. [sent-40, score-0.593]
18 Summary (a) I didn’t see the evidence that threshold earning behavior is a bigger deal now than it used to be. [sent-41, score-0.657]
19 (From an economic perspective, threshold earning made a lot more sense in the era when top tax rates were 70% or higher than now when they’re typically below 50%. [sent-42, score-0.808]
20 ); (b) I’d guess that threshold earning is compressing the income distribution (it’s people who could be making a lot who are instead closer to the median) and thus reducing the level of measured income inequality. [sent-43, score-1.575]
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