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- [Instructor] The goal of this video
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is to understand how median per capita income after taxes
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has trended in the United States
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in comparison to some other countries over a 30-year period.
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And the 30-year period for this chart is from 1980 to 2010.
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For example, in this first comparison,
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the United States is compared against Canada,
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and you can see at the beginning of this time period,
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the median per capita income after taxes
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in the United States was higher than that of Canada,
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but then over the course of this 30-year period,
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it looks like they've gotten pretty close to each other.
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So you could say that the rate of increase in Canada
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over that period has been higher for this group,
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and so that's what got them to parity.
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In Norway, we're looking over that same time period again,
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from 1980 to 2010, and we're seeing
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a similar story in Norway.
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There was actually a fairly large gap
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between the median per capita incomes after taxes
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between the two countries in 1980, and that gap has closed.
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Now on one level, you might say,
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hey, the rate of increase of median per capita income
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after taxes in Norway is greater,
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but on another level, you could say,
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well, even at the end point,
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someone making that median per capita income after taxes
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in the United States will still be better off
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even at the end of our time period, at 2010.
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And we see that generally true for all of these countries.
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They all have steeper curves, so a higher rate of change,
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but the United States, on an absolute level,
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has stayed higher, although the gap has gotten smaller
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for most of these.
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So you could interpret it either way,
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but it's probably leading to other questions.
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You might say, all right, this is just
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for those folks in that 50th percentile,
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the people in the middle, the median per capita income.
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What about people at other points in the distribution?
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What we just saw is for the median year,
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and you can see the U.S. curve in this burgundy type color,
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and then, instead of showing the median over and over again
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over that time period, it just plots the other countries
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right over here, so you can see trend in Canada.
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At the beginning of the period, the median per capita income
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after taxes was lower than that in the United States,
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and then it closes the gap.
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And then we can see the other countries, Norway,
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Netherlands, Britain, Sweden, so on and so forth.
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And this is useful, because you can see,
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even though the rate of improvement is deeper
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for these other countries, at least for the median,
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you're still better off being in the United States.
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But the picture does change a little bit depending on
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which countries you look at and which extreme you look at.
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You can see that for that fifth percentile,
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there are countries like Germany,
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where if you're in that fifth percentile,
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you were better off in 1980 and in 2010,
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relative to the United States,
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but the rate of improvement is actually similar,
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and I'm speaking in very rough terms,
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to that of the United States.
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And then you have countries like Ireland where,
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at the beginning of the period,
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you would've been worse off if you were
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in the fifth percentile being in Ireland,
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and at the end of the period,
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it looks like you were slightly better off.
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And then, we can see that trend for the 10th percentile,
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20th percentile, so on and so forth,
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and the benefit of being in the United States
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over that time period, and the improvement
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in inflation-adjusted after tax income over time,
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seems to be more dramatic in the United States
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as you get to the higher percentiles.
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When you see this 95th percentile,
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the United States was already better off
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than everyone else in 1980, and the gap between
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those 95th percentiles has only increased.
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Now there's several takeaways that you could have from this.
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One is that the rate of improvement
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in some of these other countries is steeper,
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but on the other hand, for example,
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if we look at Ireland or Spain,
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the rate of improvement is steeper,
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especially for some of the lower percentiles,
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but folks still have finished up at an absolute lower level.
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So even in 2010, you'd be better off
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being in the United States.
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Another question that some of you might be asking
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is why do you see this phenomenon in the United States
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that the rate of growth in inflation-adjusted
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after tax income over time seems to be highest
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for the upper income folks in the United States.
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It could be because of tax policy.
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The U.S. does have, relative to many of these countries,
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a lower effective highest marginal tax rate.
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So for the people in the highest incomes,
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they're paying a lower percentage of their taxes
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than people in other countries,
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even though many of them might be paying a higher percentage
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relative to some of the other income brackets.
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You could also say that it might not be a fair comparison.
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The United States has a much larger economy
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than most of these countries.
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The only ones that come even close
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to the United States out of these would be Germany,
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but their economies are still
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less than one-fourth the size of the United States.
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Now there could be other dynamics at play
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that we talk about in other videos,
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but it's at least interesting to know
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what the data tells us.