Income mobility still the highest in the US and quite high at that...

[6SpeedTA95]

Great article on income mobility

Movin' On Up
A Treasury study refutes populist hokum about "income inequality."

Tuesday, November 13, 2007 12:01 a.m. EST

If you've been listening to Mike Huckabee or John Edwards on the Presidential trail, you may have heard that the U.S. is becoming a nation of rising inequality and shrinking opportunity. We'd refer those campaigns to a new study of income mobility by the Treasury Department that exposes those claims as so much populist hokum.

OK, "hokum" is our word. The study, to be released today, is a careful, detailed piece of research by professional economists that avoids political judgments. But what it does do is show beyond doubt that the U.S. remains a dynamic society marked by rapid and mostly upward income mobility. Much as they always have, Americans on the bottom rungs of the economic ladder continue to climb into the middle and sometimes upper classes in remarkably short periods of time.





The Treasury study examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile.
Of those in the second lowest income quintile, nearly 50% moved into the middle quintile or higher, and only 17% moved down. This is a stunning show of upward mobility, meaning that more than half of all lower-income Americans in 1996 had moved up the income scale in only 10 years.

Also encouraging is the fact that the after-inflation median income of all tax filers increased by an impressive 24% over the same period. Two of every three workers had a real income gain--which contradicts the Huckabee-Edwards-Lou Dobbs spin about stagnant incomes. This is even more impressive when you consider that "median" income and wage numbers are often skewed downward because the U.S. has had a huge influx of young workers and immigrants in the last 20 years. They start their work years with low wages, dragging down the averages.

Those who start at the bottom but hold full-time jobs nonetheless enjoyed steady income gains. The Treasury study found that those tax filers who were in the poorest income quintile in 1996 saw a near doubling of their incomes (90.5%) over the subsequent decade. Those in the highest quintile, on the other hand, saw only modest income gains (10%). The nearby table tells the story, which is that the poorer an individual or household was in 1996 the greater the percentage income gain after 10 years.

Only one income group experienced an absolute decline in real income--the richest 1% in 1996. Those households lost 25.8% of their income. Moreover, more than half (57.4%) of the richest 1% in 1996 had dropped to a lower income group by 2005. Some of these people might have been "rich" merely for one year, or perhaps for several, as they hit their peak earning years or had some capital gains windfall. Others may simply have not been able to keep up with new entrepreneurs and wealth creators.

The key point is that the study shows that income mobility in the U.S. works down as well as up--another sign that opportunity and merit continue to drive American success, not accidents of birth. The "rich" are not the same people over time.

The study is also valuable because it shows that income mobility remains little changed from what similar studies found in the 1970s and 1980s. Some journalists and academics have cited selective evidence to claim that income mobility has declined in recent years.

But the 58% of lowest-income earners who moved to a higher income quintile in this study is roughly comparable to the percentages that did so in several similar studies going back to the late 1960s. "The basic finding of this analysis," says the Treasury report, "is that relative income mobility is approximately the same in the last 10 years as it was in the previous decade."





All of this certainly helps to illuminate the current election-year debate about income "inequality" in the U.S. The political left and its media echoes are promoting the inequality story as a way to justify a huge tax increase. But inequality is only a problem if it reflects stagnant opportunity and a society stratified by more or less permanent income differences. That kind of society can breed class resentments and unrest. America isn't remotely such a society, thanks in large part to the incentives that exist for risk-taking and wealth creation.
The great irony is that, in the name of reducing inequality, some of our politicians want to raise taxes and other government obstacles to the kind of risk-taking and hard work that allow Americans to climb the income ladder so rapidly. As the Treasury data show, we shouldn't worry about inequality. We should worry about the people who use inequality as a political club to promote policies that reduce opportunity.

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This is a HUGE study, some 97,000 tax filers. This completely destroys the arguments of some democrat and republicans, namely edwards and huckabee who continue to tout the "falling incomes" "tow america's" "failing opportunity" etc etc etc.

It is quite clear and has been in numerous other studies that this simply isn't the case. Everyone has a great opportunity to succeed in this country and as this study clearly finds, most do succeed at moving up the income rung. In fact those most likely to fail at improving their situation are the vaunted and hated "rich" or "upper class" or "top 1%". My guess is that since most people will not read this article, huckabee and edwards will both pretend it doesn't exist and continue to spout their lies about the downfall of the american dream and lack of opportunity it what is the most mobile country in the world when it comes to income growth.

This study really deserves to be front page news across the nation, it needs to lead the network news and be on every front page from Kalamazoo, to New York, to LA. It proves that this lack of income mobility is a figment of politicians heads.

[David Octavius]

I think they are talking about the "income gap" and there is a large income gap that is growing.

That 58% moved into a higher income rung does not mean anything if we are not given the definition of what that higher income rung means. Nor does it say how many of the filers were considered low income, so 58% for all I know could of been out of a total 1000 filers who were considered poor. The percentage looks great but the numbers and the sample size is very small.

Moreover your analyzing tax returns for persons over 25, inevitably people will earn more regardless of standing simply by being in the workplace longer. That doesn't mean you are doing better, a single person at say 30 making about 30K, makes 45K by 40, but if he has a wife and kids did he really go into a higher income bracket? His expenses actually increased more than his income!

This "study" proves nothing and didn't destroy anything.

[6SpeedTA95]

Originally Posted by David Octavius

I think they are talking about the "income gap" and there is a large income gap that is growing.

That 58% moved into a higher income rung does not mean anything if we are not given the definition of what that higher income rung means. Nor does it say how many of the filers were considered low income, so 58% for all I know could of been out of a total 1000 filers who were considered poor. The percentage looks great but the numbers and the sample size is very small.

Moreover your analyzing tax returns for persons over 25, inevitably people will earn more regardless of standing simply by being in the workplace longer. That doesn't mean you are doing better, a single person at say 30 making about 30K, makes 45K by 40, but if he has a wife and kids did he really go into a higher income bracket? His expenses actually increased more than his income!

This "study" proves nothing and didn't destroy anything.

They're clearly talking about moving up in total income and income quintiles. They stated that numerous times in the study. All of those points are stated very clearly, a rung is a quintile, something that is a very common measurement tool when talking economics.

If someone is making 30k at 30 and at age 40 is making an inflation adjusted 45k yes he moved up. He CHOSE to have kids, he is still making considerably more money and that would push him up a quintile, this is not hard to understand.

By using your logic when my household income hits 100k but I go out and buy my newer bigger house I will not have gotten a raise because I am chosing to have kids and buy a bigger house

[WickedLou9]

I think what this study is looking at is simply an increase in money earned, but doesn't take into account cost of living. Incomes HAVE risen. However what you can actually do with that money is not as much as it used to be.

[6SpeedTA95]

Originally Posted by WickedLou9

I think what this study is looking at is simply an increase in money earned, but doesn't take into account cost of living. Incomes HAVE risen. However what you can actually do with that money is not as much as it used to be.

Uhhh read the study, it clearly accounts for inflation.

[WickedLou9]

Originally Posted by 6SpeedTA95

Uhhh read the study, it clearly accounts for inflation.

I'm not really talking about inflation.

[6SpeedTA95]

Originally Posted by WickedLou9

I'm not really talking about inflation.

I think what this study is looking at is simply an increase in money earned, but doesn't take into account cost of living.

Thats inflation. It's accounted for.

[Publius]

Originally Posted by WickedLou9

I'm not really talking about inflation.

Cost of living rises at the same rate as the rate of inflation in almost every circumstance, when averaged out across all the different costs of living (food, gas, etc.).

[6SpeedTA95]

Originally Posted by Publius

Cost of living rises at the same rate as the rate of inflation in almost every circumstance, when averaged out across all the different costs of living (food, gas, etc.).

Correct.

[WickedLou9]

Originally Posted by Publius

Cost of living rises at the same rate as the rate of inflation in almost every circumstance, when averaged out across all the different costs of living (food, gas, etc.).

But the official inflation figures that they use do not take everything into account. Don't they leave out some key elements like the cost of fuel?

[6SpeedTA95]

Originally Posted by WickedLou9

But the official inflation figures that they use do not take everything into account. Don't they leave out some key elements like the cost of fuel?

No, the CPI leaves out the cost of food and energy. Inflation is figured based on the CPI and accounts for fuel and food. However, real inflation numbers for any given period lag substantially when compared with the CPI because they have to gather all the data related to the items (as you indicated) that are left out of the CPI.

edit: CPI is also referred to as "core inflation"

[Galactic Gigolo]

America, FUCK YEAH!

And for once I'm saying that in all seriousness.