The purest nonsense about American wealth inequality

The latest bemoaning of wealth inequality in the US:

The shocking racial wealth gap between families, and its impact on Black and Hispanic kids, is revealed in groundbreaking new research by scholars on US inequality. It shows that the basic wealth levels of families from different racial and ethnic backgrounds have diverged to such a stark degree in the past three decades that the future prospects of children from lower-wealth groups are likely to be grossly compromised.

In 2019, the median wealth level for a white family with children in the US was $63,838. The same statistic for a Black family with children was $808.

It’s the purest nonsense. The full papers are here. The crucial error is here.

National levels of income inequality have long been shown to be shaped by labor-market institutions and welfare states

In their measurements of wealth inequality they, determinedly and in common with other wealth studies, refuse to incorporate the effects of welfare states. Just to remind, yes, the United States does have one of those even if it’s a little different.

As an example, and not one that specifically applies to families with children, the capital value of Social Security as a retirement income can be put in the $300,000 to $600,000 range - depends upon full or minimal benefits, expected lifespan, assumed discount rates and all that. Being naughty and extreme with those numbers, a racial wealth gap of $363,838 to $300,808 looks a great deal less alarming.

Now add in Medicare (of more interest to those in retirement of course), Medicaid, free schooling, unemployment insurance, the EITC and Section 8 (both of a great deal more interest to families with children, as with the schooling) the child tax credit and on and on up to and including free cellphones.

Their measurement of wealth inequality is before all of those things done which reduce wealth inequality. As a decision making tool it is therefore valueless for what is desired before deciding whether to do more, less or nothing is what is the situation after what is already done?

Further, don’t forget one rather important point. If everything government does which reduces wealth inequality is to be disregarded then it’s not a problem that can be solved by government, is it? For we’ll have to disregard the effects upon wealth inequality of what government does.