Contrary to what you may have heard, not only the rich are getting richer

The latest inequality statistics from the Congressional Budget Office have produced a funny reaction. Both liberals and conservatives have embraced them as proof that their ideology is right — liberals, because the gap has grown; conservatives, because earnings have risen across the board.

Conservatives say a rising tide lifts all boats, and that’s a good thing. Liberals can’t seem to get past the fact that some people have bigger boats than other people do.

But what interested me is the fact that the CBO report doesn’t give us an indication of mobility, other than to observe, “the population with income in the lowest 20 percent in 2007 was not necessarily the same as the population in that category in 1979.”

Yeah, no kidding.

Twenty-eight years passed between 1979 and 2007. The trajectory for most Americans is to start at the lower end of the income spectrum when they begin working and steadily move up until they peak, usually sometime in their 50s, after which their income declines until retirement. The CBO data tell us nothing about average earnings, only aggregates for an entire quintile, and they tell us nothing about mobility.

The Census Bureau, on the other hand, has data about both topics. And they tell quite a different story than the simplistic, “The rich are getting richer faster than the rest of us.”

If you were 20 years old in 1979, you were 48 in 2007. And your earnings, adjusted for inflation, would have jumped from an average of $37,414 to an average of $87,391 — a 134 percent increase.

Is that as large an increase as CBO reports for someone who was in the top 1 percent in both 1979 and 2007 (275 percent)? No. But then, not many people would have remained at such a lofty level for so long. It’s more likely that someone in the top 1 percent in 1979 would have moved down by 2007.

That 134 percent increase is twice as large, however, as the increase for someone who was in the top quintile all those years (65 percent, again per CBO). For that matter, the increases for the 15- and 25-year-olds of 1979 would also have been near or greater than that of a constant top 20 percenter.

Now let’s look only at quintiles. The biggest percentage increase a household could have made between 1979 and 2007, by moving up just one quintile, was the 155 percent increase, on average, that it would have seen by moving from the lowest group to the second-lowest group. And the biggest increase for a two-quintile move was the 340 percent rise by moving from the lowest group to the middle group.

All of this to say: The biggest gains were for the upward steps that Americans were most likely to make, as they moved from the beginning of their careers to their peak earning years. We must consider that fact as we weigh inequality statistics.

There are lots of other factors at play when it comes to inequality. James Pethokoukis of the American Enterprise Institute has compiled not one but two lists of them. Among the economic research findings that he reports are explanations that inequality varies widely from the official statistics when one considers such factors as differences in household size (households at the top of the income scale are also more likely to have more people in them) and in inflation (inflation has been faster over the past 30 years for the kinds of goods richer households buy vs. the goods that consume the bulk of poorer households).

There’s value in the CBO’s report, but it’s far from the whole story. And it’s dangerous to take the top-level findings at face value, and to continue to stoke class-based grievances because of them.

– By Kyle Wingfield

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250 comments Add your comment

Don't Tread

October 27th, 2011
1:40 pm

“Liberals can’t seem to get past the fact that some people have bigger boats than other people do.” How true.

Then they want to take those bigger boats away from the “other people” to make sure everyone has the same size boat. (It’s only fair.) It would be too much to ask them to actually build themselves a bigger boat.

RPaul

October 27th, 2011
1:44 pm

Nonsense… You continue sticking your face in the rear of the rich. I wonder if you are even able to breath. The level of greed in corporate America is astonishing. That is what is wiping out the middle class.

Billy Bane

October 27th, 2011
1:50 pm

Obama is a millionaire.

Billy Bane

October 27th, 2011
1:51 pm

” The level of greed in corporate America is astonishing.”

BP, GM or GE? Either way, they’re all owned by the Democrats.

Class of '98

October 27th, 2011
2:09 pm

Nice work, Kyle. Helping liberals think for themselves is a tough job, no?

ByteMe

October 27th, 2011
2:11 pm

By international standards, the United States has an unusually low level of intergenerational mobility: our parents’ income is highly predictive of our incomes as adults. Intergenerational mobility in the United States is lower than in France, Germany, Sweden, Canada, Finland, Norway and Denmark. Among high-income countries for which comparable estimates are available, only the United Kingdom had a lower rate of mobility than the United States.

In other words, if you’re born poor, you have a 1 in 20 chance of getting rich, but if you’re born rich, you have a 40% chance of staying rich.

Billy Bane

October 27th, 2011
2:16 pm

” if you’re born poor, you have a 1 in 20 chance of getting rich”

Or you could just work hard, stay out of trouble and go to college.

Billy Bane

October 27th, 2011
2:16 pm

“Helping liberals think”

Hooked on Phonics couldn’t solve that problem for libs.

JeffersonD

October 27th, 2011
2:17 pm

This is a great article, it finally takes a sophisticated look at statistics. One of the most harmful results of “leveling” policies is that while it may pull down the top level closer to the bottom it also creates more downward pressure for someone on the bottom economically to move towards the top. So the rich stay rich and the poor stay poor until ultimately you end up back into an almost caste or feudal system, but the worst bit is that slowing growth at the top slows growth at the bottom. If self made billionaires such as Ted Turner or Steve Jobs had more of their assets and company assets taken by government, there would be fewer people working for CNN or Apple or the many other companies that share a symbiotic relationship in the ecosystem of our economy.

Gordon

October 27th, 2011
2:23 pm

I think an interesting question to ask is this: What are the rich doing to keep the poor from getting richer?

Kyle Wingfield

October 27th, 2011
2:24 pm

ByteMe: I think you’ve mixed up the comparison. I’m talking about an individual’s mobility within his lifetime, which static quintile-to-quintile comparisons over time (like CBO’s) don’t address. And what counts as “rich”? If it’s the top 1% or even top 5%, then I wouldn’t expect the chances to be much greater than that; even over time, only so many people can fit in the top 1%, by definition. And if you’re saying you have a 5% chance of moving from the bottom quintile to the top one, well, I wouldn’t find that surprising. But what are the chances of moving from the bottom to the middle, or the middle to the top? And doesn’t that count as real mobility?

I would also wonder how much intergenerational mobility has to do with things like education — i.e., is a child likely to achieve more or less the same education level as his parents?

UGA 1999

October 27th, 2011
2:27 pm

Kyle…nice try but the left will only listen to left wing propaganda.

Billy Bane

October 27th, 2011
2:28 pm

“What are the rich doing to keep the poor from getting richer?”

Nothing.

Don't Tread

October 27th, 2011
2:29 pm

That’s ok…there’s plenty of that at Bookman’s.

JDW

October 27th, 2011
2:35 pm

@Kyle, I will take a closer look later but what jumps out at me now is that income growth of 137 percent from 79 to 07 is a compound growth rate of about 3 percent. I am not sure but that might not even cover inflation. Sounds like Mr. Middle Class American just worked and advanced in their career for 28 years to lose ground.

@@

October 27th, 2011
2:37 pm

I read the same AEI article just the other day. Didn’t bother to bring the facts since liberals would nah…nah…nah ‘em away. Without their class warfare, they’ve got nuthin’.

When our daughter was small, she’d see a car pulling a boat. “Look, Daddy, they have a boat and we don’t.”

We still don’t have a boat but she will soon have a masters degree in a field that’s in demand. She’ll be paying for the last four years of her education. It wouldn’t be right to have someone else pay for it.

Kyle Wingfield

October 27th, 2011
2:37 pm

JDW: These are inflation-adjusted figures.

Billy Bane

October 27th, 2011
2:38 pm

“Without their class warfare, they’ve got nuthin’.”

Without unions they got nuthin either.

Lil' Barry Bailout (Revised Downward)

October 27th, 2011
2:49 pm

In other words, if you’re born poor, you have a 1 in 20 chance of getting rich, but if you’re born rich, you have a 40% chance of staying rich.
——–

Duh. People who are stupid and lazy are more likely to be poor, and guess what? They pass those same values and ethics on to their spawn!

Billy Bane

October 27th, 2011
2:51 pm

“Duh. People who are stupid and lazy are more likely to be poor”

Don’t forget drugs.

Lil' Barry Bailout (Revised Downward)

October 27th, 2011
2:55 pm

What are the rich doing to keep the poor from getting richer?
———

Cue the chirping crickets on that one.

@@

October 27th, 2011
2:58 pm

Five secrets to acquiring a million dollars in liquid assets:

1. Sets your sights on where you’re going.

2. Educate yourself.

3. Pursue your passion. It pays off.

4. Grow your money

5. No guts, no glory. No risks, no rewards.

6. Stop spending needlessly.

Just so you know…not all millionaires were born that way. Hard work and sacrifice. If you choose to take a different path, don’t whine. You have no one but yourself to blame. If, at first, you don’t succeed, then try, try again.

ByteMe

October 27th, 2011
3:04 pm

Kyle, I’m not confusing them at all. And you left demographics out of your comparison… after 30 years someone making a lot of money will likely be retired and someone making very little will likely be hitting their prime earning years.

Maybe this will help you see things differently: http://www.economicmobility.org/assets/pdfs/EMP%20American%20Dream%20Report.pdf

The story changes for a younger cohort. Those in their
thirties in 2004 had a median income of about $35,000
a year. Men in their fathers’ cohort, those who are now in
their sixties, had a median income of about $40,000 when
they were the same age in 1974 (see last two bars of Figure
4). Indeed, there has been no progress at all for the
youngest generation. As a group, they have on average
12 percent less income than their fathers’ generation
at the same age.

In other words, compared to earlier generations AT THE SAME AGE, we have less average income than our parents. But the top 1%? Nah, they have more still.

ByteMe

October 27th, 2011
3:05 pm

What are the rich doing to keep the poor from getting richer?

Sending their jobs overseas to someone who can afford to work for $0.75/hour.

Jimmy62

October 27th, 2011
3:11 pm

Don’t bring math in to this! All that matters is that I can’t afford health insurance. I know, because I was just looking up my bank account on my iPad while sitting in front of my flat screen TV. I kept getting interrupted by calls on my iPhone. It’s bull! Rich people have assistants for this kinda stuff, I should be able to have that, too!

@@

October 27th, 2011
3:13 pm

Sending their jobs overseas to someone who can afford to work for $0.75/hour.

Unions and the high cost of compliance.

At some point, I fully expect the “health catastrophy” to come up. There’s an ap for that.

High deductible, low premium policies.

My husband’s cousin introduced me to this lady.

Looks angry.

When she got to this part:

Now you might be asking yourself, what about people who are indigent and can’t afford any insurance at all? Do we leave them out in the cold? Absolutely not. We do what people have done with regards to the poor since time immemorial. We cover them through voluntary charitable giving, be it religious or secular.

I thought…can’t count on the religious’ endeavors since the left is out to destroy those.

Jimmy62

October 27th, 2011
3:13 pm

ByteMe: If they weren’t doing that, then you’d have to pay a lot more for the goods you purchase. Maybe if we didn’t have a minimum wage keeping people out of the labor market, then so many jobs wouldn’t be shipped overseas, and goods made here would cost less.

Kyle Wingfield

October 27th, 2011
3:25 pm

ByteMe: Left out demographics? It’s right there: “The trajectory for most Americans is to start at the lower end of the income spectrum when they begin working and steadily move up until they peak, usually sometime in their 50s, after which their income declines until retirement.” One of my main points is that this trajectory undermines the static quintile-to-quintile comparisons.

And your figures don’t match the ones from the Census Bureau. In large part, I think, because the stats you cited refer only to men, rather than to households. Between 1974 and 2004, the employment rate for men over 20 fell by 6 percentage points, while the employment rate for women over 20 rose by nearly 15 percentage points. The household figure is more pertinent imo.

DW

October 27th, 2011
3:27 pm

This is just a pointless exercise in dicing up statistics for political points. THE FACT REMAINS THAT RICH CONTINUE TO GET MUCH RICHER WHILE POOR FOLKS SINK.

I just dont get how the wingnuts on here can continue to defend this system. YOUR NOT RICH. YOUR NOT EVER GOING TO BE RICH. IF YOU WERE RICH, YOU WOULD NOT BE BLOGGING ON AJC.COM. By rich, I mean billionaire, not joe schmoe with a million in assets.

rene

October 27th, 2011
3:29 pm

kyle,

in your journey to eagle scoutdom did you procure a badge
on how to f the little people? it seems to be a personal goal
you adore…

Pat

October 27th, 2011
3:30 pm

@DW, you are somewhat correct. 99.9999% of us will not be billionaires, but the drive to increase our wealth is what makes the economy work.

Lil' Barry Bailout (Revised Downward)

October 27th, 2011
3:31 pm

This is just a pointless exercise in dicing up statistics for political points. THE FACT REMAINS THAT RICH CONTINUE TO GET MUCH RICHER WHILE POOR FOLKS SINK.
——-

Well yeah, it’s pointless if folks like you ignore data that don’t fit your politics.

Try reading Kyle’s post then get back to us.

DW

October 27th, 2011
3:32 pm

@Pat
I get that! How does screwing over poor and middle class people with fair taxes, etc. help though?

Kyle Wingfield

October 27th, 2011
3:32 pm

Yep, DW, that’s a fact…as long as you don’t look at the facts.

Btw, of course I’m not a billionaire. I have spent absolutely zero seconds of my life trying to become a billionaire. If I had, I wouldn’t be blogging on ajc.com. So, on that point, you’re right.

Pat

October 27th, 2011
3:33 pm

@DW, Don’t blame them, blame the IRS and government that allows the tax rules and regulations.

DW

October 27th, 2011
3:34 pm

@lil barry
“Is that as large an increase as CBO reports for someone who was in the top 1 percent in both 1979 and 2007 (275 percent)? No.”

Kyle own admission.

Billy Bane

October 27th, 2011
3:36 pm

“How does screwing over poor and middle class people with fair taxes, etc. help though?”

Uhhhhh, it lets them keep more of their OWN money, cupcake.

DW

October 27th, 2011
3:38 pm

@BILLY BANE

SUUUURE it does. Hows that kool-aid taste?

Kyle Wingfield

October 27th, 2011
3:39 pm

DW @ 3:34: By all means, don’t read the rest of the paragraph. I’d hate for you to get tripped up by the entire argument.

DW

October 27th, 2011
3:40 pm

@Pat
Im not blaming anybody… While i would like a simpler tax code, I dont want one that screws over the poor and middle class AND I dont want one that increases the deficit.

Billy Bane

October 27th, 2011
3:44 pm

“SUUUURE it does. Hows that kool-aid taste?”

Prove me wrong, cupcake.

Billy Bane

October 27th, 2011
3:44 pm

“I’d hate for you to get tripped up by the entire argument.”

Kyle 1

DW 0

Billy Bane

October 27th, 2011
3:45 pm

“I dont want one that screws over the poor ”

The poor don’t pay a lot of taxes as it is, DW.

DW

October 27th, 2011
3:45 pm

@KYLE

Sorry man, but you are taking facts that the CBO put out and mixing them with old Census data AND THEN making assumptions!

It’s more likely that someone in the top 1 percent in 1979 would have moved down by 2007.”

You do have a point about upward mobility and all that but the fact remains poor are staying or getting poorer and rich are getting richer. Hard to skew that one.

DW

October 27th, 2011
3:46 pm

@Billy

You are right about that fact. So, why do we need to take money from people who DONT have it and give breaks to those that have almost ALL of it?

Lil' Barry Bailout (Revised Downward)

October 27th, 2011
3:47 pm

“Is that as large an increase as CBO reports for someone who was in the top 1 percent…”
———-

I don’t know about you, but what someone else earns isn’t really any of my concern, and it doesn’t bother me a bit to know that others earn more than me.

What is the reason for your envy and greed?

Lil' Barry Bailout (Revised Downward)

October 27th, 2011
3:48 pm

“So, why do we need to take money from people who DONT have it”
——–

We don’t. Next question.

Pat

October 27th, 2011
3:51 pm

Well said Lil’ Barry

Billy Bane

October 27th, 2011
3:53 pm

“So, why do we need to take money from people who DONT have it and give breaks to those that have almost ALL of it?”

Ask Obama that question since he bailed out banks etc.

Billy Bane

October 27th, 2011
3:54 pm

“I don’t know about you, but what someone else earns isn’t really any of my concern”

Same here. I want everyone to be rich if they work hard, and legally to get it.