The United Nations has just released a new report on international development, titled “Development for Everyone”. It focuses on equality, distinguishing between absolute inequality and relative inequality. It points out that in terms of the Gini coefficient, a statistical measure used to gauge a country’s income inequality, one kind of inequality is rising while the other is falling:
“Rising incomes around the world have been accompanied by widening inequality … Although income inequality … has narrowed across the world as a whole because the incomes of developing and developed regions have been converging. Relative global inequality has declined steadily over the past few decades … This happened despite an increasing trend towards inequality within countries.
By contrast, absolute inequality, measured by the absolute Gini coefficient, has increased dramatically. [For example, in] 2000 one person in a country earns $1 a day and another person $10 a day. With economic growth, in 2016 the first person earns $8 a day, and the second person $80 a day. The relative difference between the two remains the same (the second person has 10 times more than the first person), but the absolute difference has gone up from $7 to $72.”
(Source: United Nations, 2016 Human Development Report: Development for Everyone)
Even though the difference between absolute and relative inequality is increasing, the key thing to take away is that the tremendous growth in developing countries has decreased relative inequality between states and diminished poverty. And, arguably, reducing deprivation and raising living standards are more important than lessening income inequality.
So why the focus on money? In many other vital areas inequality is declining across the globe. Here are five charts which pin-point where.
Life expectancy is one of the best measures of the overall standard of living. Even for Africa, the poorest continent, the life expectancy gap with North America has narrowed. North American life expectancies were about 29 years longer than Africans’ in 1960, but only 18 years longer in 2015. This progress occurred despite the catastrophic AIDS epidemic that slowed Africa’s life expectancy significantly. Asia and South America have gone even farther towards closing the life expectancy gap with North America, narrowing it to roughly 6 and 5 years, respectively.
Life expectancy gains are partly due to falling rates of infant mortality—another area in which poor countries are catching up with rich ones. In 1960, 144 out of 1,000 African children died before their first birthday, compared to 26 out of 1,000 North American children. In other words, 118 more African children than North American children died as infants out of every 1,000. By 2015, that number had shrunk to 43.
Better nourishment is also to thank for longer lives. In 1991, close to 30 per cent of Africa’s population was undernourished, compared with “5 per cent or less” of North America’s population. By 2015, fewer than 20 per cent of Africans were undernourished. The absolute inequality between the poorer areas of the globe and the richer ones shrank considerably, even as undernourishment became rarer worldwide.
The education gap between rich and poor countries has diminished as well. In 1950, Americans spent nearly seven more years learning than Chinese students on average, and nearly eight more years leaning than Indians. By 2015, average years of schooling in the United States exceeded the Chinese average by only five years and the Indian average by about six years.
Internet use tells a similar story. China, in particular, has rapidly narrowed the gap. In 2000, a little under 2 per cent of Chinese used the internet, compared to 43 per cent of Americans. That means a gap of 41 per cent. By 2015, that gap had shrunk to 24 per cent.
As these charts show, poor countries are actually making faster progress than rich ones in many areas. In some cases, this is simply because richer countries have “reached the finish line” it’s impractical to school children past a certain number of years, for example, or levels of malnutrition might already be at zero.
In other cases, the rapid adoption of technologies and growth-friendly policies from a standing start is giving poorer countries a boost that enables them to progress at breakneck speed. Even bearing this in mind, why do some places develop more quickly than others? What explains the incredible pace of change in China, for example? The UN report nails it with this sentence:
In China and India, opening up the economy to the world accelerated growth, which in turn helped address human development challenges — reducing poverty, improving health outcomes and extending access to basic social services.
So rather than rush to complain about the increase in absolute inequality, we should stop and consider how globalisation and free exchange, though unpopular among those who think they only benefit the rich, are to thank for shrinking relative inequality and plummeting poverty across the world.
Thanksgiving Dinner Will Be 8.8 Percent Cheaper This Year
Be thankful for the increase in human knowledge that transforms atoms into valuable resources.
Gale L. Pooley —
Summary: There has been a remarkable decrease in the “time price” of a Thanksgiving dinner over the past 38 years, despite nominal cost increases. Thanks to rising wages and innovation, the time required for a blue-collar worker to afford the meal dropped significantly, making food much more abundant. Population growth and human knowledge drive resource abundance, allowing for greater prosperity and efficiency in providing for more people.
Since 1986, the American Farm Bureau Federation (AFBF) has conducted an annual price survey of food items that make up in a typical Thanksgiving Day dinner. The items on this shopping list are intended to feed a group of 10 people, with plenty of leftovers remaining. The list includes a turkey, a pumpkin pie mix, milk, a vegetable tray, bread rolls, pie shells, green peas, fresh cranberries, whipping cream, cubed stuffing, sweet potatoes, and several miscellaneous ingredients.
So, what has happened to the price of a Thanksgiving Day dinner over the past 38 years? The AFBF reports that in nominal terms, the cost rose from $28.74 in 1986 to $58.08 in 2024. That’s an increase of 102.1 percent.
Since we buy things with money but pay for them with time, we should analyze the cost of a Thanksgiving Day dinner using time prices. To calculate the time price, we divide the nominal price of the meal by the nominal wage rate. That gives us the number of work hours required to earn enough money to feed those 10 guests.
According to the Bureau of Labor Statistics, the blue-collar hourly wage rate increased by 240.2 percent – from $8.96 per hour in October 1986 to $30.48 in October 2024.
Remember that when wages increase faster than prices, time prices decrease. Consequently, we can say that between 1986 and 2024 the time price of the Thanksgiving dinner for a blue-collar worker declined from 3.2 hours to 1.9 hours, or 40.6 percent.
That means that blue-collar workers can buy 1.68 Thanksgiving Day dinners in 2024 for the same number of hours it took to buy one dinner in 1986. We can also say that Thanksgiving dinner became 68 percent more abundant.
Here is a chart showing the time price trend for the Thanksgiving dinner over the past 38 years:
The lowest time price for the Thanksgiving dinner was 1.87 hours in 2020, but then COVID-19 policies struck, and the time price jumped to 2.29 hours in 2022.
In 2023, the time price of the Thanksgiving dinner came to 2.09 hours. This year, it came to 1.91 hours – a decline of 8.8 percent. For the time it took to buy Thanksgiving dinner last year, we get 9.6 percent more food this year.
Between 1986 and 2024, the US population rose from 240 million to 337 million – a 40.4 percent increase. Over the same period, the Thanksgiving dinner time price decreased by 40.6 percent. Each one percentage point increase in population corresponded to a one percentage point decrease in the time price.
To get a sense of the relationship between food prices and population growth, imagine providing a Thanksgiving Day dinner for everyone in the United States. If the whole of the United States had consisted of blue-collar workers in 1986, the total Thanksgiving dinner time price would have been 77 million hours. By 2024, the time price fell to 64.2 million hours – a decline of 12.8 million hours or 16.6 percent.
Given that the population of the United States increased by 40.4 percent between 1986 and 2024, we can confidently say that more people truly make resources much more abundant.
An earlier version of this article was published at Gale Winds on 11/21/2024.
The Typical US Worker Out-Earned Inflation by $1,400 a Year
“While higher costs for everything from milk to medicines have preoccupied U.S. consumers in the pandemic era, earnings have also risen enough, on average, to push up households’ purchasing power a bit. And blue-collar workers have been the biggest beneficiaries.
An analysis published in July by economists at the Treasury Department found that the median worker can afford the same representative basket of goods and services as they did in 2019 — plus have an additional $1,400 a year.”
“The median household net worth of older millennials, born in the 1980s, rose to $130,000 in 2022 from $60,000 in 2019, according to inflation-adjusted data from the Federal Reserve Bank of St. Louis. Median wealth more than quadrupled to $41,000 for Americans born in the 1990s, which includes the generation’s youngest members, born in 1996.
The turnaround has been so dramatic that millennials—mocked at times for being perpetually behind in building wealth, buying homes, getting married and having children—now find themselves ahead.
In early 2024, millennials and older members of Gen Z had, on average and adjusting for inflation, about 25% more wealth than Gen Xers and baby boomers did at a similar age, according to a St. Louis Fed analysis.”
