The constant productivity of the bottom 10%
Lane Kenworthy has a presentation on The Politics of Helping the Poor. In this PowerPoint, he looks at the differences between countries where households at the 10th income percentile have earnings growth along with GDP growth and in countries where the 10th percentile hasn’t had an income increase despite significant GDP growth.
Countries with income growth in the 10th percentile of households: Denmark, Sweden, Finland, Norway, Austria, Belgium, France, Netherlands, Spain, Ireland, United Kingdom
Countries with no income growth in the 10th percentile of households: Australia, Canada, Germany, Italy, Switzerland, United States (except for the late 1990s)
Afterwards, the sources of income for bottom-income-decile households were analyzed. The explanatory factor of income growth was that in countries where the bottom decile have kept up, it has been due to an increase in government transfers and not an increase in earnings or other market income. The exceptions to this are Norway, where everyone benefited from an oil boom, and the Netherlands which had increased government transfers and an increase in income in the late 1990s.
The PowerPoint concludes that in order to help the bottom decile of households, strong social programs are the only way and that if these social programs are pushed through, the population will come to support them even if they don’t want them right now. It should be noted that focusing on increasing the average income of the bottom decile shouldn’t be confused with the actual goal of humanitarian policies, since a generous immigration policy would help far more people even if it generated a decrease in income for households at the bottom decile in the statistics. The approach of only looking at the income of those in the bottom decile each year also ignores that some of the bottom decile households are households with large amounts of human capital such as graduate students, and many people in the bottom decile in one year won’t be there 10 years from now.
Overall, this is a very bearish perspective on the bottom decile of workers. This presentation highlights that there is almost nowhere in the world where workers in bottom decile are increasing their private sector earnings, so the conclusion takes for granted that the only way to help these people is to encourage them to be economic parasites. It certainly seems like the globalized world is leaving this group behind, but it might be better to not treat them as a group and focus on upwards income mobility than to focus on raising average levels.
