[i]Greg Mankiw finds a graph that shows the "poor in the United States have about the same real income as the poor in western Europe. The rich in the United States, however, are much richer."[/i]

Umm, that graph doesn't show that. It says that "the poor" have about the same [i]percentage[/i] of the median income in western Europe as in the United States. But that's different from "the same real income."

For example, if the median income in the United States is $100,000 but the median income in Europe is $150,000 then the poorest households in the US would be earning $39,000 while the poorest households in W. Europe would earn $65,333 a year.

Even if the median incomes between the US and W. Europe were equivalent, the average percentage of median incomes in W. Europe is 44% vs. 39% here. 5 percentage points is significant.

Especially so if you factor in nontraditional forms of income.

The "poor" in Europe don't have to face the choice of either paying large amounts of their income for healthcare, or foregoing it altogether. They also don't work as many hours per year for the income they do make, effectively calibrating their compensation/hour upwards (average hours spent wage earning in W. Europe is about 1700 vs. 2000+ in the US).

They have generally better access to transportation, etc. as well, all of which mean that someone pulling down, say, $30K in the US isn't going to be anywhere near as well off as someone pulling down $30K in France.

greg

Regarding government social services as income is somewhat dubious, considering that taxpayers fund those services. Those services are a net benefit for some and a net loss for others.

Mankiw's chart tells us virtually nothing, for reasons other than the failure to compare the poor to a single standard as Gregory Travis pointed out.

First, the chart uses gross income and not net income.

Second, we aren't given the costs of living. That's a complicated task, as the cost of living is not uniform in a nation, at least not in this one. I suspect that rural Normandy is cheaper to live in than Paris, just as virtually any part of Texas is cheaper to live in than NYC.

Third, we don't have a measure of quality of living. Reducing quality of living to a dollar figure is a neat trick, though.