Income Growth

[nathanm]

Just for reference, in case anyone would like to see a handy visualization of (inflation adjusted) income growth between 1947 and 2012:

http://public.tableausoftware.com/views/INCOMESMASTER/Dashboard1

The contrast between the 1947-1979 period and the 1979-2012 period is rather stark.

[Gaspar]

Just for reference, in case anyone would like to see a handy visualization of (inflation adjusted) income growth between 1947 and 2012:

http://public.tableausoftware.com/views/INCOMESMASTER/Dashboard1

The contrast between the 1947-1979 period and the 1979-2012 period is rather stark.

The rich are getting richer.  The poor are getting richer too.  Do you think these are the same groups of people over time?  

Use your noodle.  This discounts income mobility.  

[Gaspar]

Here is a nice little study on income mobility from the Treasury Dept.  The thing that is amazing and should really be celebrated as evidence that this is without a doubt the best country in the world **chants USA USA** is that far more of those at the top today used to be in the middle and bottom. 

If you continue to cultivate the habits of the wealthy, you have a very high probability of becoming wealthy.


http://www.treasury.gov/resource-center/tax-policy/Documents/incomemobilitystudy03-08revise.pdf
This study examined income mobility of individual taxpayers age 25 and over for the
period from 1996 through 2005 using information reported on individual income tax
returns. The key findings are that there was considerable income mobility of individuals
in the U.S. economy during the 1996 through 2005 period and that the degree of income
mobility among income groups is unchanged from the prior comparable period (1987
through 1996).

The analysis found that more than half of taxpayers (56 percent by one measure and 55
percent by another measure) moved to a different income quintile between 1996 and
2005. About half (58 percent by one measure and 45 percent by another measure) of
those in the bottom income quintile in 1996 moved to a higher income group by 2005.

Economic growth resulted in rising incomes for most taxpayers over the period from
1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting
for inflation. In addition, the real incomes of two-thirds of all taxpayers increased over
this period. Further, the median incomes of those initially in the lower income groups
increased more than the median incomes of those in the higher income groups.

The analysis also found that the composition of the very top income groups changes
dramatically over time. Less than half (40 percent or 43 percent by different measures)
of those in the top 1 percent in 1996 were still in the top 1 percent in 2005. Only about
25 percent of individuals in the top 0.01 percent in 1996 remained in the top 0.01 percent
in 2005.

[Cats Cats Cats]

How do these income mobility numbers work on people like Paris Hilton?  She technically had no money when she was say.. She might inherit a ton.  Is that considered mobility?

[Gaspar]

How do these income mobility numbers work on people like Paris Hilton?  She technically had no money when she was say.. She might inherit a ton.  Is that considered mobility?

I think the more important question is WHO CARES!

Well, I suppose some people care.  In fact I know several people who would rather focus on the envy of others and cry "UNFAIR" than focus on their own opportunities.

We had a wonderful example of this flavor of entitlement with the flair and fizzle of the occupy movement.

There will always be those who enjoy wealth by circumstance, and those who suffer poverty through the same.  "Fair" is not a concept that exists in nature, but "evolution" is.  It's not what you have that is important, it's what you strive to become.

Freekin fortune cookie! 

[nathanm]

Hmm, really, poor are getting richer? Since 1979, the real income of the bottom 20% of the income distribution has dropped by 12%. I guess in bizarro world that is an increase.

As far as income mobility goes, how about this from your compatriots at AEI:



Or if you prefer, we can take all income mobility between 2001 and 2007, which biases the result towards upward mobility since the period was one of economic expansion:



It would be interesting to look at the raw data and see how many of the people escaping the bottom 20% were people who were in college with low or zero income in 2001 but had graduated and entered the workforce by 2007. Regardless, for the bottom two quintiles, they were more likely to remain in the same quintile or see their wealth decline than rise, and that was during an economic expansion.

Only the upper two quintiles have significant upward mobility as a group. The middle 20, in that particular time period, were as one would expect, slightly more likely to go up to the next quintile. Not surprising, given the economic expansion at the time.

Even when they cherry pick the period (although that was the Fed's doing), AEI can't show data to indicate that the bottom two quintiles have statistically significant upward mobility. Not surprising, given that they are the ones that have seen declines in real income since 1979. Whether or not you acknowledge it, Gaspar, it takes money to make money.

(On preview, sorry Gaspar, didn't mean to give you apoplexy)

If anyone is interested in how economic changes have affected relatively normal people, try this fine Frontline episode: http://www.pbs.org/wgbh/pages/frontline/two-american-families/

[Cats Cats Cats]

Here are the income levels that consitute a jump in quintile in Gaspars link.

          1996              2005      
Bottom    Under 15,326    Under 19,488      
Second     15,326      19,488      
Middle      25,787      33,120      
Median     31,785      41,242      
Third        38,881      51,257      
Fourth      60,897      83,138   
Top 10%    85,387      120,211
Top 5%     116,425      171,856
Top 1%     284,603      463,615
   

[Cats Cats Cats]

Hmm, really, poor are getting richer? Since 1979, the real income of the bottom 20% of the income distribution has dropped by 12%. I guess in bizarro world that is an increase.

He is saying that about half of the bottom 20% aren't in the bottom 20% after 9 years.  So those aren't the same people.  So if you make $15,000 in 1996 and then get a huge raise those 9 years and make $19,500 then you jumped a quintile baby!  You made it to the big time!

[Conan71]

Nathan, why do you obsess over this in the first place?

What's your solution?

[Gaspar]

He is saying that about half of the bottom 20% aren't in the bottom 20% after 9 years.  So those aren't the same people.  So if you make $15,000 in 1996 and then get a huge raise those 9 years and make $19,500 then you jumped a quintile baby!  You made it to the big time!

This is one of Nate's old dittys.  As seen in his last reply, the argument will begin to feature non sequitur examples and shifts.  I need to go the way of Conan and become wise enough not to engage him any more.

Ya'll have a good weekend and don't get too poor.  

[Cats Cats Cats]

I would like to see the mobility from 30 or 35 and up.  That would be interesting to see what happens after you get over the job entry raises.  Promotions at my job are heavily weighted toward the beginning of your career.

But none of this is new information.

[nathanm]

Let's keep in mind that the 31% of people who moved from the bottom quintile to the second quintile moved into a quintile whose lower bound decreased during that time. In other words, their wage may not have changed one iota. And that even the fourth quintile was more likely to drop a quintile than see their wage increase enough to put them in the top quintile.

Basically, Gaspar and the objectivists like to claim that because there is significant mobility between middle and fourth it doesn't matter that the bottom and top quintiles are not (in the main) part of that income mobility. It's working for him, so clearly it can work for everybody! Put another way, rather than a rising tide lifting all boats, we've punched holes in the boats of the bottom 40% so that the tide rises for the rest of us as they sink. (Is it time for a shout-out to Archimedes?)

Conan, I don't think one post every few months counts as an obsession. But if you wonder why I care at all, it's because our country has done its best by all measures of progress when economic gains are distributed across the entire income distribution and not concentrated among those at the very top. Basically, selfishness. I want more cool smile and we're not going to get it if we sideline 40% of our population.

Gaspar, rich of you to accuse me in advance of doing what you've already done. I posted about income growth and you posted some irrelevant smile about income mobility. Talk about a non sequitur. Regardless of whether people move from the bottom 20% of the distribution to somewhere else in the distribution, the fact remains that those who are at presently at the bottom of the distribution make less than they did in 1979. Mobility is completely irrelevant. My bad for letting you lead me off topic.

[AquaMan]

Nathan. Sheen. You guys rock.

My father was a house painter by trade. He hired lots of crews to paint big expensive homes around town. There are guys who say they can paint. They have all the good tools, spray equipment, all the right color samples and they talk about stains and color matching. Then there are painters. You don't know the difference till you see their finished work.

[Red Arrow]

My father was a house painter by trade. He hired lots of crews to paint big expensive homes around town. There are guys who say they can paint. They have all the good tools, spray equipment, all the right color samples and they talk about stains and color matching. Then there are painters. You don't know the difference till you see their finished work.

My mom always told me I looked good in whatever color I was painting.

[nathanm]

What's your solution?

Stop subsidizing those with incredibly high incomes by allowing them to treat earned income as investment income, or better yet, make all income subject to the same rate structure. Stop making business owners in the middle quintiles subsidize the entry of competitors into the market. Stop allowing utilities to steal from ratepayers. Stop outsourcing government functions to overpaid contractors who chronically under deliver. Stop investing public pension money in hedge funds that charge outrageous fees for worse than index fund performance and then blaming the unions for the pension fund being short. Stop allowing politicians to take bribes as long as they're called "speaking fees" and are paid after the politician leaves office. We don't really need to do anything. We just need to quit doing some of the things we are doing, because they have led to trillions of dollars in unjust enrichment that would be called theft if you or I did it.

Or maybe the problem isn't the legalized bribery, maybe it's that only 37 Congresspeople are in the bottom 80% of the wealth distribution. That doesn't seem very representative of the nation as a whole. I wonder if anyone has researched how that has changed over time...