What income inequality?
Posted by BrianIf you watch a Democrat debate you’re likely to get an ear full about income inequality. A new study by the Treasury Department says not so fast.
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.
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.
The study also showed downward mobility for the top earners. All in all, despite all of the political rhetoric America’s economy remains a meritocracy fraught with opportunity. Does everyone earn the same? No - and they shouldn’t. Are some people ridiculously wealthy? Yes - and they tend to judiciously shield their wealth from taxation while simultaneously calling for higher rates of taxation on the rich even though they choose not to make voluntary contributions to our public treasury.
You can’t have opportunity without some disparity. That opportunity affords you the ability to change your lot in life if you so choose.
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November 13th, 2007 at 1:36 pm
Hamilton advocated equal opportunity to pursue inequality. I like that.
November 14th, 2007 at 10:11 pm
The Treasury Report referred to is extremely poor in my opinion. It makes no adjustment for retirement from the higher income levels nor for the lower earners who mature over the 10 year period. It is also worded in some instances in ways that make it misleading when quoted. For example, the quote about the 24% gain for all tax filers is all tax filers in the study (which you would expect as they age). In a footnote, the report notes the average increase for all families in the US over the time period was closer to 5%. You can get additional details at my blog if you like.