On Nov 13, 8:58�am, sordo��@
privacy.net wrote:
> Movin' On Up
>
> A Treasury study refutes populist hokum about "income inequality."
>
>
http://www.opinionjournal.com> Tuesday, November 13, 2007 12:01 a.m.
>
> 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.
>
> Copyright © 2007 Dow Jones & Company, Inc. All Rights Reserved.
Interesting article. Thanks for posting it.