Thomas Sowell questions the current US preoccupation with inequality.
Americans in the top one percent, like Americans in most income brackets, are not there permanently, despite being talked about and written about as if they are an enduring "class" -- especially by those who have overdosed on the magic formula of "race, class and gender," which has replaced thought in many intellectual circles.
At the highest income levels, people are especially likely to be transient at that level. Recent data from the Internal Revenue Service show that more than half the people who were in the top one percent in 1996 were no longer there in 2005.
Among the top one-hundredth of one percent, three-quarters of them were no longer there at the end of the decade.
These are not permanent classes but mostly people at current income levels reached by spikes in income that don't last.
And Robert Samuelson takes a similar line.
Contrary to media coverage, the findings in three recent Pew studies qualify mostly as good news:
-- When compared with their parents in the late 1960s, families today have a median income that's 29 percent higher at $71,900 (and this understates gains in living standards, because families are about 25 percent smaller and the income figures exclude fringe benefits and non-cash government benefits).
-- About two-thirds of today's adults have incomes higher than their parents did -- a result that is roughly similar for both blacks and whites (the children of the middle-income group of blacks were not typical).
-- Almost 60 percent of the children born of the poorest families moved up the income distribution (23 percent into the second poorest fifth and 6 percent into the richest fifth).
Indeed, the high degree of intergenerational economic mobility is Pew's most interesting finding. What happens at the bottom of the income scale also happens at the top. About 60 percent of children born of the richest fifth of parents do not themselves end up among the richest fifth; about 23 percent drop into the next to highest group and 9 percent fall to the bottom. Parents influence their children's destiny but do not determine it.Everyone knows that economic inequality has increased in recent decades. The richest 10 percent to 20 percent of Americans have gotten richer faster than the rest. But the people at the top are not all the same people or even the children of the same people. This vindicates one version of the American Dream. There is opportunity. People do move up -- in both total income and class rank. Economic success is not static.
All true, but as I have pointed out before, the most surprising evidence on economic mobility compares the United States with other countries. The findings do not give strong support to the idea that America is the land of opportunity. Movement out of the top and bottom quintiles is lower than in many other countries, including Canada and (maybe) Britain. Yes, there is opportunity, and people do move up--but not as readily (out of the lowest quintile, anyway) as elsewhere.
These studies focus on measuring income, but do the results still hold if one measures net worth instead? It seems to me entirely possible, if not quite likely, that income level and net worth are related in a very non-trivial way, and it is certainly not clear to me which is the more relevant measure. Does anyone have any thoughts and/or data on the relationship between the two or the relative merits of each?
Posted by Craig | November 28, 2007 5:16 PM