Tuesday, April 12, 2011

Today in inequality reading: Kevin D. Williamson

The numbers generally cited in support of this argument do not actually tell us much about what has happened to the incomes of wealthy households over time. That’s because the people who are in the top bracket today are not the people who were in the top bracket last year. There’s a good deal of socioeconomic mobility in the United States — more than you’d think. Our dear, dear friends at the IRS keep track of actual households (boy, do they ever!), and sometimes the Treasury publishes data about what has happened to them. For instance, among those who in 1996 were in the very highest income group isolated for study — the top 0.01 percent — 75 percent were in a lower income group by 2005. The median real income of super-rich households went down, not up. The rich got poorer. Among actual households, income grew proportionally more for those who started off in the low-income groups than those that began in high-income groups.
Kevin D. Williamson, via nationalreview.com

This piece appeared a day ago and I've been waiting to see a good blogospheric response to it. I'm still waiting. All the data I've looked at in recent months suggests that income mobility is as stagnant as wages in the lower quintile—and, in fact, what makes the income inequality problem a problem is that there's not much chance you're going to be able to work your way out of those lower quintiles.

But I'm not an economist: I rely on economists to make sense of the data for me. And I'd really like to know if Williamson's right or wrong about this, or if this information looks different within a larger picture. Anybody out there?


namefromthepast said...

Thanks for the link Joel.

Further reading from the report.

"In addition, the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the higher income groups."

I offer the possibility that the bottom 25% of earners who remained in the bottom 25% were there because of social programs rather than in spite of them.

50% of taxpayers were in a different quintile after 9 years.

Are the data that support liberal social programs made up by overeager progressives?

Now that I think about it I did see a hockeystick graph on one of the articles you cited earlier...

KhabaLox said...

"I offer the possibility...."

But you don't offer any evidence, or even theory. I might as well offer the possibility that the 25% who remained did so because jack-booted Carnegie thugs have their feet on the poor's neck. ;)

"In addition, the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the higher income groups."

This statement is based on Table 3 of the Treasury report, which says that the median income of the bottom quintile increased 90.5% from 96-05 and the median income of the top quintile increased 10% in the same period.

This data from the Commerce Department (Census Bureau) shows a different picture. It measures a slightly shorter period (1996 to 2003), and the numbers are 4.3% growth for the lowest quintile and 9.4% growth for the highest quintile.

According to footnote 19 from the Treasury report, the difference comes from the Census data including new entrants to the economy, while the Treasury report only includes households who filed both in 1996 and 2005. It would follow then, that the Treasury report numbers are even more skewed by not including people working in the black and gray markets.

It's also important to note that this Treasury report only covers 10 years. The Census data linked to above goes back to 1967, and it shows that the rich have increased their income substantially more than the poor over that time:
10th %tile: 35.3%
20th %tile: 28.4%
50th %tile: 29.9%
80th %tile: 57.2%
90th %tile: 67.8%
95th %tile: 73.8%

Also, the part about the top 0.01% is almost completely worthless. That represents about 10,000 households. 75% of them fell out of the top 0.01% true, but it does not say how far they fell. In fact, based on Table 1 of the Treasury report, it's save to assume that more than 88.4% of them remained in the top 1% (or even the top 0.5% or top 0.05%).

namefromthepast said...

KhabaLox your critique is fair. I didn't offer any theory or back up the number. I could have offered my thoughts in a more constructive way.

Possibly a better way would be to suggest that there is undoubtedly a number of participants in the lower income brackets that are there because it is easier or more secure to stay put than to work out of it.

Habits are hard to break and people(myself included) find excuses, rather than solutions, with regards to to many issues in life.

My fear is that a good percentage of social programs are enabling people rather than empowering them.

Joe said...

The report certainly inaccurately represented the poor as a monolithic group that doesn't change over time, and is conveniently and totally inaccurately portrayed by the intellectually limited as the oppressed held down by the jacked-booted owners of the means of production (don't these fools realize that the Soviet Union collapsed) when the truth is these intellectually limited statists want to make the poor totally and categorically dependent on government largess.

I digress.

The point that no one pointed out about the bottom 25% is how dramatically it changed since 1965. The Immigration Act of 1965 open the flood gates of impoverished non-northern European whites to immigrate to the United States in record numbers, and thank God it did. America is always stronger with massive immigration and the more ethnically diverse the better.

Again I digress.

So since 1965 we have had a steady stream of impoverished immigrants showing up. The bottom 25% should have exploded to 50% under the "jack-booted oppression" or however that old worn out line of balderdash runs today from the tired intellectually challenged.

Why did the bottom 25% explode with this massive five decade sustained wave of immigration? Because the economy grew, absorbed the immigrants, and allowed them to improve their standards of living to rise out of the bottom 25% just as new impoverished immigrants replaced them.

The proof of the is that the impoverished immigrants have kept coming for the last five decades. The votes of their feet make a total mockery out of the quickly growing extinct population of intellectually challenged ranters of "jack-booted" exploitation.