The Wall Street Journal comments on a recently released US Treasury Department study that examines income mobility in the US over the last decade. Not surprising to those of us who understand the dynamic nature of our economy, upward mobility has been quite healthy.
"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."
Furthermore, the study shows evidence contradicting the chorus being sung by the "real wages have been stagnant" crowd:
"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."
The biggest losers over the last decade? The extremely rich.
"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."
Kind of takes the wind out of the sails from those populist, class warriors constantly trying to tell you that only the rich get richer, while the poor get poorer.
The article concludes with this comment directed at those "progressives" who think that the tax code exists to "reduce inequality":
"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."
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.
http://www.polecolaw.blogspot.com
I was also curious about the retirement factor.
Of course you expect people’s income to increase as they age. But this is a lesson that needs to be told as it seems much of the political and media rhetoric about the “poor” misleads people into thinking that the poor is the same group of people over time. The report tends to support the notion that most people are only poor for a relatively short time, and are there only as a temporary stop to higher income levels. Therefore, policies to “reduce inequality” are misguided because it attempts to “correct” an income gap that is just the natural difference derived from various levels of work experience. Such policies then lead to fewer opportunities for those at the lower end of the income ladder to climb up into the higher brackets.