Myths
There are a couple of pervasive myths out there that are used to imagine that economic progress is bad, or unfair, or not compatible with "social justice".
The first is usually stated something like "People are getting wealthier over time, but inequality is increasing!" as if the second refutes the first.
The second is along the lines of "the poorest 20% still make about the same as they used to." or various statistics about the poorest 20% of people over time thrown in.
Financial Inequality
Consider the following scenario:
Jack is an engineer. He makes $100K/year.
Jill is a lab assistant. She makes $50K/year.
Obviously, Jack's financial situation is double that of Jill's. Taking this simplified situation as a society, we'll say this simplified society has a financial inequality of $50K, as Jack is paid $50K more than what Jill receives.
A series of technological advances and productivity innovation hit our simplified society. Over time, everyone in society is paid twice as much as a result!
So now consider:
Jack is an engineer. He makes $200K/year.
Jill is a lab assistant. She makes $100K/year.
Our updated simplified society now has a financial inequality of $100K! Clearly Jill is worse off and would rather go back to the society with more equality where she only made $50K each year, right? This is what we're meant to believe when told that despite everyone increasing in wealth over time, inequality is increasing... Apparently jealousy is more important to some folks than absolute levels of wealth.
To them, I say to cast your eyes on the vast majority of the people in the world, to whom the average wealth of the bottom 20% of people in the U.S. is something they can never hope to achieve. If you're reading this sentence, you're likely in the top 1% of income earners in the world. If you're in poverty in the U.S., with welfare benefits included, that puts you in the top 10% of the world. Just think, 6 Billion+ people are poorer than that. People in many places still spend hours of labor every day to supply themselves with hopefully clean water. You probably walk a few feet to your indoor plumbing and get clean water on-demand.
Now consider all the people who've ever lived. Where do you fall in the historical wealth scale? Top 0.01%? Top 0.0001%? Wealthier in material conveniences, knowledge and leisure than many of the "super-wealthy" of only 100 years ago, with no mobile phone, no internet, no hot/cold running water, no dishwasher, no car, no decent roads, no TV shows, etc...
So before complaining about financial inequality, ask yourself if you're willing to right now take half your own wealth and make several actually poor people in the world tremendously wealthy by their standards. Maybe you should do so voluntarily, but do you really believe that they need to get together and force you to pay them your "fair share"? If so, I look forward to your advocacy of financial equality.
Bottom 20% over time
People, especially left-wing article writers, like to throw around statistics about how the poorest 20% in the U.S. are doing over time. Leaving aside the fact that they are among the incredibly super-wealthy by world historical standards, obviously that doesn't make them feel better about only having digital cable with HBO, live sports and on-demand movies in HD instead of visiting actual concert halls each weekend. They may even have to put up with basic digital cable and rental movies or a netflix subscription!
But, there's good news. Most of the people in the "bottom 20% of income earners" in the U.S. will change categories. What's that you say, people's income changes over time? Yep, it turns out that a college student in the bottom 20% of income earners, might get a decent job and move into the middle classes of income earners, then ultimately retire as one of the top 20%. While at the same time, these article writers are lamenting that this same person isn't improving as fast as other income groups.
Oops, they don't actually mean the same person. They really mean a "new" poor person. See, the original bottom 20% of income earners they're talking about have mostly moved on to become richer and wealthier. Over time, new people are born (poor), go to school (poor), get a job (richer), get a better job (even richer), retire (wealthy, but poor in terms of income measurements), and die (no income statistics anymore) . People's situations change with time and the results of those changes are generally much better in the U.S. than in more "equal" countries. They're comparing different groups of people over time and trying to say there is something meaningful about the fact that they're different groups of people however many years later. Well duh, they're actually comparing different people... why would you expect them to be the same?
It's common for these folks to mistake the group for the individual and talk about a group as if it's an actual person, rather than a collection of individuals. Imagine going to the beach and watching a social scientist analyzing sand. He scoops up a shovel of sand and says "Hmm... very dry sand." then dumps it out again. He walks over closer to the waves and scoops up another shovel of sand and says, "Ah-hah, lots of water in this sand! The sand in my second sample is much wetter than the sand in my first sample, therefore I have a new theory, sand has become wetter over time." Does the fact that it isn't the exact same sand matter? After all, it's all just a shovel full of sand, right? Interchangeable?
Now if you took the 20% lowest income earners in 1960 and tracked those same exact individuals over time for 50 years, you might be able to say something meaningful about what has happened to their income and wealth. But to compare those people to a different group of 20% lowest income earners 50 years later is meaningless.
Finally, notice how it's always done using percentages. If they used absolute measurements of income instead, someone might notice that the "poorest 20%" of income earners now are much wealthier than the "poorest 20%" of income earners were 50 or 100 years ago. But if you simply define the bottom 20% as "in poverty", then you'll always have 20% of the people labeled as "in poverty", no matter how rich they become. Think about that the next time you see any measurement talking about the bottom 20% of income earners over time.
Summary
"There are three kinds of lies: lies, damned lies and statistics." from Mark Twain has an accurate theory concerning the order in which untruths are told and people are fooled. Watch out for that third kind and take anything relating to financial inequality and the bottom 20% with a huge shovel full of sand.