Sunday, February 21, 2010

The Gini Coefficient

I must have been sick the day I was supposed to learn about the Gini Coefficient.

It's a ratio, first described in a mathematics paper by statistician Corrado Gini in 1912, that quantifies the disparity of a distribution. I know that sounds arcane, but it's useful for describing income distribution, particularly by country. In the ratio, the number 1 represents a country where one person has all of the income, while zero represents a country where each person has exactly the same income.

World map with countries color-coded to reflect Gini coefficient
Ratios around the world currently range from a low of .25 (Sweden) to a high of .73 (Namibia). The U.S. is much higher than most developed countries at about .47, keeping company with Mexico and China. (You can click the map to see it larger and check the ratios for yourself.)

While the Wikipedia entry lists several reasons why the U.S. could appear worse in this comparison than might be considered fair, our nation's ratio is still pretty darn distant from most other developed countries. Here's a look at the Gini ratio for the U.S. vs. Canada, beginning the year the numbers were first computed for the U.S.:

Graph showing US Gini vs. Canada's... US is much higher

Clearly, we're not moving in the right direction. If real democracy is partly based on the presence of a large middle class, what does this increasing income inequality mean for the U.S.? Even Alan Greenspan seems to think it's a problem. Elizabeth Warren has also written recently on the disappearance of the middle class.

I first heard about the Gini Coefficient in a BoingBoing post about economist Samuel Bowles. Bowles' work focuses on the wasted "guard labor" used to protect the rich and their property from the poor. His research shows that as many as 1 in 4 American workers are employed in guard labor. And while I'm sure those people are happy to have a job, I think we can all agree that guard labor is not producing anything worthwhile.

Other research by one of Bowles' associates found that an American born to parents whose income falls in the bottom 10 percent has a 1.3 percent chance of ever making it to the top 10 percent. Although that's much better odds than winning the lottery, it doesn't lend much support to the idea that America is a meritocracy where great social mobility is common.

But what about education, the great equalizer? Here's what Bowles has to say about that:

“Being willing to sit in a boring classroom for 12 years, and then sign up for four more years and then sign up for three or more years after that—well, that’s a pretty good measure of your willingness to essentially do what you’re told.”

Sources of the data in the above table: U.S here, Canadian here


Ms Sparrow said...

Ouch! A Master's Degree means you're not a creative or inventive free-thinker?

Daughter Number Three said...

Keep in mind that the person who's quoted has a Ph.D. So perhaps he is making fun of himself, too.

But I found his words a refreshing counter to the usual belief that education is a panacea. Our educational system does require a lot of doing what you're told without really understanding why, especially before college. So a person who can't deal with that is usually at a disadvantage.

I think of two people I know who never finished high school, but later went to college and graduate school because they wanted to, not because they had to.

Education for its own sake is always good. Education for the sake of getting a job or attaining a level of wealth tends not to be so good, unless the person discovers a bit of education for its own sake along the way.

(Not super well-thought out, but it's all I've got at the moment.)