27 January 2014

Poverty in America in Global Context

The graph above comes from the work of Branko Milanovic of the World Bank. It shows income distributions by "ventile" (that is, 5-percentile bins) for the US, Brazil, China and India. Here is how the New York Times describes the graph:
The graph shows inequality within a country, in the context of inequality around the world. It can take a few minutes to get your bearings with this chart, but trust me, it’s worth it.

Here the population of each country is divided into 20 equally-sized income groups, ranked by their household per-capita income. These are called “ventiles,” as you can see on the horizontal axis, and each “ventile” translates to a cluster of five percentiles.

The household income numbers are all converted into international dollars adjusted for equal purchasing power, since the cost of goods varies from country to country. In other words, the chart adjusts for the cost of living in different countries, so we are looking at consistent living standards worldwide.

Now on the vertical axis, you can see where any given ventile from any country falls when compared to the entire population of the world.
So what does the graph show?
Notice how the entire line for the United States resides in the top portion of the graph? That’s because the entire country is relatively rich. In fact, America’s bottom ventile is still richer than most of the world: That is, the typical person in the bottom 5 percent of the American income distribution is still richer than 68 percent of the world’s inhabitants.

Now check out the line for India. India’s poorest ventile corresponds with the 4th poorest percentile worldwide. And its richest? The 68th percentile. Yes, that’s right: America’s poorest are, as a group, about as rich as India’s richest.

Kind of blows your mind, right?
So according to Milankovic, the poorest 5% in the United States. as a group, are richer than 68% of the world's population. They are richer than the richest in India, about 80% of Chinese and 50% of Brazilians.

Presenting such data is not to minimize relative poverty or inequality in the United States, but rather to make the point that a discussion of poverty or inequality in the US is a very different conversation than a discussion of poverty or inequality at the global scale.