The Bottom 20

Are the poorest 20% of Americans richer than most of the world?

By Nicholas Ward

It is better to be poor in America than rich anywhere else?

A study by 'justfacts.com' has found that the poorest 20% of Americans are richer than most Europeans. Can this possibly be true?

No.

In fact, not only are the poorest 20% of American’s not richer than most Europeans Americans are the poorest people in any MEDC (More Economically Developed Country), by a wide margin.

Conservative think tanks are using a creative redefinition of poverty through apocryphal comparisons of general wealth to GDP to argue that American poverty is a myth.

But because of America’s high cost of living, low wages, and terrible working conditions; on almost every metric the average American is one of the most overworked, and underpaid worker in the developed world.

How can this be? America’s per capita GPD has quadrupled in the last 20 years. To USD63’000 per person, fifth highest in the world. Its median wage is the fourth highest. The mean wealth per adult is USD432’000.

It is by far the richest country in the world.

The problem lies in inequality and misleading statistics.

America has the highest wealth inequality of any MEDC, around the same level as Turkey. And that inequality is growing at a faster rate than any other MEDC. The average wage for 50% of American’s is USD25’000. And half the country earns less than half the per capita GDP.

By comparison the MEDC average for earning half of your countries per capita GDP is 20%

20% of America’s wealth is controlled by just 1% of the population, a similar rate to Thailand and Kuwait. By comparison the top 1% in the Netherlands controls just 6% of the wealth. Among MEDC’s America tops every list on wealth inequality.

Where does this disparity in data and facts arise?

Averages of wealth usually really on a mean average. However, many statisticians argue that a mean average is meaningless. If 1 person earns $100’000 and 4 earn $0, those five have earned a mean average of $20’000.

A more accurate measure of how the average citizen lives is the median average as this accounts for the top 1% skewing results. Giving a far more accurate estimate of what most people earn.

When using a median average to measure wealth per adult. America falls from the top to the very bottom of the MEDC averages from 3rd most wealth per adult to the 22nd between Denmark and Qatar.

However, that is not the full story.

America is the 22nd most expensive country in the world to live in overall. Well behind its European counter parts. Which should benefit it’s working poor.

However when factoring in wages, and insurance, to cost of living America jumps from the 22nd to the 2nd most expensive country in the world but with the 22nd lowest wealth per household.

By comparison Switzerland the most expensive country in the world but covers these costs by having both the highest mean and median income and wealth per adult in the world on nearly every metric.

American Poverty Real or Imagined.

Nevertheless, all of this doesn’t address whether the poorest 20% of Americans are actually poor.

Research shows, the poorest 20% of Americans consume more than the average European by a wide margin. About USD22’000 per year per household. This is between the total national average consumption of Canada and the Netherlands.

Meaning that the bottom 20% of Americans alone consume more than the average citizen of most rich nations.

While this is based on an accurate study, groups citing this study fail to contextualise this figure. Because according to the IRS, the bottom 20% of the US workforce make just USD5000 to USD10’000 dollars a year on average.

The 20% above that make less than USD20’000 per year per person. And 50% of Americans work in ‘low wage professions’ earning less than USD30’000 a year.

In other words, the bottom 20% of households earn a mean of USD25’000 and a median of USD20’000 a year before taxes. But spend USD22'000 a year.

This is both the highest rate of people earning less than 50% of per capita GDP and the highest rate of people living on under $10’000 a year in any MEDC.

This either indicates there is something deeply wrong with these figures or that poor Americans are spending more per year than they make. Indicating some sort of spirally debt problem where people unable to meet the basic necessities of life are trapped in never ending quagmires of debt.

That can’t be the case, right?

Why debt to income ratios are worse than they appear.

https://seekingalpha.com/article/4381481-why-debt-to-income-ratios-are-worse-appear

Oh.

But ignoring that what are the official statistic on poverty in America?

The world banks assess poverty on a number of scales from USD1.5 per day as absolute poverty to USD5 a day.

2% of Americans live on USD5 a day. About the same percentage as Russia. Among all other MEDC’s that number is between 0% and 1%.

Meanwhile the US government assesses poverty as USD12’000 per person per year plus an additional USD4500 per person per year in a household. Slightly more if you live in Alaska or Hawaii.

So 12% of Americans live in poverty.

However, by EU standards 40% of Americans live in poverty.

The EU uses a different standard to try and account for differing living costs across their diverse economies; 60% of the median income per year. EU states range on this scale from 4% living in poverty in Austria, to 20% in Romania.

Any properly accurately contextualised account of poverty places Americans as the most overworked and underpaid workers among all MEDC's.

Even taxation.

American's sometimes argue that while things are different in America, taxes are lower and that makes it worth it, or level out. Europeans are taxed to death so American’s are probably just as well off if not better because the American worker pays virtually nothing by comparison in tax.

Let’s look into that.

An American earning USD25’000 a year will pay in 2020 approximately USD2700 in federal income taxes, with additional state income tax ranging from 0% – 13%

An Australian earning USD25’000 will pay about USD2000 in federal income taxes, Australia has no state income tax.

But what about insurance?

Of the USD2000 an average Australian roughly USD300 goes to healthcare.

The average Australian’s taxes also include healthcare, subsidised education, subsidised parental leave, sick leave and disability insurance.

Average insurance costs are complicated for Americans.

Average cost of an employer healthcare plan is USD20’000 per year for a family or USD3400 per year for an individual.

25% of low-income households do not have insurance. And a small percent of poor American’s are eligible for Medicaid

Employers cover an average of 70% of this cost leaving the individual to pay USD1300 per year.

Australian - USD2000 a year total in income tax. (Includes insurance)

American’s - USD2700 (plus up to 13%) a year in income tax (excludes insurance)

So, in order for a low-income American worker to receive the same basic services as the Australian they have to pay almost double for it.

And that is just insurance. Every other MEDC provides guaranteed paid parental leave, sick leave, and paid vacation.

America has no guaranteed parental leave or holidays, or sick leave. The mean average is 10 weeks of maternity leave just ahead of Malawi who guarantee 8 weeks paid. By comparison Estonia gives mother 62 weeks of 100% paid parental leave.

But in case you are thinking this doesn’t seem too bad the minimum wage in Australia is 19USD per hour. America's minimum wage USD7.5 meanwhile is just above Andorra's as the second lowest in any MEDC.

A Nation by the few for the few

So, are all the claims of American prosperity and affordability a lie? No. America does have the lowest rate of tax in any MEDC on those earning over USD100’000. The average household wealth of the top 10% is top five in the world, just behind Norway.

America is cheap and affordable and beneficial for the top 10%.

Otherwise in every metric to measure economic prosperity that contextulises inequality Americans are at the bottom. Save the one metric that is skewed by the single wealthiest group of people on the planet.

Other factors which America tops and bottoms the list among 35 MEDC's are:

Highest

Child mortality

Homelessness

Prison population

Lead exposure

Inequality

Hours Worked

Poverty rate

Healthcare costs

Lowest

Life Expectancy

Healthy lifespans

Social Benefits

Social support

PISA scores

Minimum wage

And just to rub salt in the wound America is also bottom of the developed world on almost every quality of life index.

All this in the richest country in the world.