His basic point is that income misunderstandings are caused by the "widespread practice of confusing statistical categories with flesh-and-blood human beings". So lets summarize how this is done, by looking at some statistics from the category standpoint, and then switch to a per person outlook.
Example #1 - The gap is widening...
Category Viewpoint
The amount of income and proportion of all income in the top 20 percent bracket has risen over the years, widening the gap between the top and the bottom.
Per capita viewpoint
By US Treasury Department data, following individuals over time by looking at tax returns, the incomes of individuals who were in the bottom 20% in income in 1996 rose 91% by 2005, while the incomes of individuals who were in the top 20% in 1996 rose by only 10% by 2005. Those in the top 5% and top one percent actually declined.
So how can these both be true. Because people move between categories over time. The categorical viewpoint simply ignores this fact, and leaves you with a very different conclusion.
Example #2 - Rich are getting richer.
Category viewpoint
"Richest are leaving even the rich behind". This belief is based on the fact that income averages in the top 0.1 percent of income earners are rising.
Per capita viewpoint
Between 1996 and 2005 individuals in the "super-rich" category actually had their incomes fall 50%, dropping them out of the super rich. Among the top 1/100 of 1% of very highest income earners in 1996 - only 25% remained in this group in 2005.
Again, the movement of people between categories is completely ignored. In the case of the super-rich, they actually fall back into rich. Most people start at the bottom and work up. In fact, 3/4 of working Americans whose incomes were in the bottom 20% in 1975 were also in the top 40% of income earners by 1991. Only 5% of people in the bottom 20% where still there in 1991, while 29% of those had risen to the top 20%.
Another good fact, is that almost half of the Americans at or near minimum wage are 16 to 24 years of age. Certainly, they don't remain there. But in a country that is growing its population, its stands to reason this age group will continue to grow, giving the category viewpoint fuel for its fire. Just another way we are misled by stats that take the "category" approach.
Example #3 - Incomes have stagnated or grown only very slowly
Category Viewpoint
From 1967 to 2006, median real household income rose by 31%, adjusted for inflation. And in selected time periods the incomes rose less. This has led to the claim that incomes have "stagnated".
Per capita viewpoint
Per individual, income rose by 122% from 1967 to 2005. So more than a doubling is called "stagnation"?
Again, this is by looking at averages in groups or categories, rather than looking at the individual.
Another point Sowell makes is that the number of persons per household has been declining. But stats continue to look at "household" income rather than individual income. This is very convenient because it helps overstate their case. That are 39 million people in households whose incomes are in the bottom 20%, and 64 million people in households who incomes are in the top 20%. So even if everyone in the country had the same income, there would be a huge "disparity" between average households incomes.
One last misleading trend in income stats, is that they leave out income received in kind - such as foods stamps, and subsidized housing, which can also exceed the value of the cash income received in those in the lower brackets. In 2001, this amounted to 3/4 of the total resources at the disposal of people in the bottom.
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