Where do the poor people come from....?

If you want to understand the poor, study the rich. They create the poor, or at the very least, decide how many of them they will tolerate.

In most advanced countries the average worker pays an average of about 35% tax. A big chunk of this tax goes to the "poor" of society in the form of public education, healthcare and some form of social security. These Governments, for all their inefficiency, seem to have gotten a lot of it right. The majority of these countries have abolished life threatening poverty, starvation and widespread disease. A miracle which would have been inconceivable a few hundred years ago in any of these countries. Unsurprisingly, rich people believe they are taxed too high and poorer people believe that they are ripped off by the rich. Rich and poor alike believe they could all be better off if the government wasn't so wasteful.

The U.S. is a strange animal in this regard. It has low voter turnout, especially in mid-term elections. The rich and middle classes vote, the poor don't. This is the opposite of a country like India. As a result the rich are more represented in the U.S. Government and the poor wonder why the policies go against them. This is one reason why the voters in the U.S. are going to punish the Obama administration in the upcoming mid-terms for spending a lot of their money on healthcare for the poor, something taken for granted in most other countries.

I looked over some stats. The most common stat used to measure income disparity is the Gini Co-efficient but I've picked another one here as I think its more intuitive. I've divided the Consumption of the richest 10% by the poorest 10%. The rankings based on this stat is almost identical to using the Gini stat. The raw data is here:

http://siteresources.worldbank.org/DATASTATISTICS/Resources/table2_7.pdf

But some interesting ratios I calculated:

In the U.S. the richest 10% consume 16 times the amount the poorest 10% consume

U.K. the number is 14

Germany 7 times

Finland 6 times.

The poorest African and South American Countries vary between 50 and 150.

The U.S. has more of the problems of poverty than, say, Germany. Higher crime rate, higher incarceration rate and more health problems and lower life expectancy for poor people. However, the U.S. has a higher entrepreneurial rate, higher average income and number of millionaires per capita. The argument is too much wealth redistribution (via taxes) curbs incentive and innovation for all and brings down everyone, even the poor.

However, when you compare the incomes of the bottom 10% in each country, the U.S. comes near the bottom. http://www.contorno.org.mx/pdfs_reporte/diciembre08/growing_unequal_ocde.pdf page 37.

One of the most disturbing statistics I've seen in recent years (from the Economist) is the levels of "escape". If you are born to parents in poverty, what is the likelihood that you will remain in poverty all your life. Using a somewhat inaccurate and blunt value of, say, the bottom 20% being "poor", the chances of getting out of the bottom quintile in the U.S. is about 1 in 7, whereas in Finland is about 1 in 2, and the U.K. is about 1 in 3. Essentially, if you are born poor in the U.S. you stay poor, and since the poor don't vote, it's likely to stay that way. Not the American Dream you expected.