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June 25, 2003

INCOME MOBILITY....There is little question that income inequality has increased in the United States over the past few decades. In fact, the increase has been so dramatic that conservatives no longer even try to deny the basic facts, but instead suggest that, really, things aren't all that bad if you're just willing to look below the surface a bit.

Their favorite archeological dig along these lines — it's practically a mantra on the Wall Street Journal editorial page — is that what really matters is not income inequality but income mobility. Sure, inequality has gotten worse, but who cares when America is a land of opportunity where the poor so often become rich?

This has always been a bit dishonest, since "poor" often refers to college students and other young people who naturally become better off as they grow older. But it turns out that even taken on its own terms, it's a bogus argument because income mobility is also decreasing in America. The rich are getting richer, they are staying richer, and the poor are increasingly stuck being poor.

The charts on the right are from an article by Katherine Bradbury and Jane Katz published a few months ago in the Boston Fed's Regional Review. The top chart shows the familiar increase in income inequality: the richest quintile has grown far faster than any of the others. The bottom chart shows the surprise: fewer people are moving up, fewer people are moving down, and more people are staying put.

So here's what's happening:

  • We live in an era in which highly skilled people are increasingly valuable and unskilled workers are worth less and less. In other words, left on its own, income inequality will naturally increase.

  • Our tax policies are increasingly geared not to ameliorating this trend, but to making it worse. Tax rates on the rich are decreasing, while tax rates on the poor and middle class are increasing.

  • At the same time, income mobility is going down. If you're at the bottom, that's probably where you're going to stay.

It's possible to justify these policies if the result of lower taxes and higher inequality is higher economic growth. After all, why fret that the rich are getting richer if their hard work is driving a fast growing economy that benefits everyone, while all those poor schlubs in Europe are stagnating thanks to their misguided egalitarian instincts? Unfortunately, there's little evidence to back this up. There doesn't appear to be any correlation at all between high inequality, low tax rates, and economic growth.

This is fundamentally unhealthy in a democratic society. When the rich absorb more and more of the economic growth of the nation, and the poor begin to lose hope of economic advancement, you have a potentially toxic combination. George Bush and the policies of the Republican party are making this ever worse, and someday soon the poor and middle class are going to figure out what's going on. How about 2004?

Posted by Kevin Drum at June 25, 2003 09:01 AM | TrackBack


Comments

Viva la revolucion!

Posted by: John Yuda at June 25, 2003 09:07 AM | PERMALINK

There's a book an American exceptionalism called "Only in America?" that pretty much debunks the economic mobility myth in the U.S. It's fairly convincing. And given that this myth is relied upon so heavily on the WSJ editorial pages, it's a worthwhile read.

Posted by: Marc at June 25, 2003 09:09 AM | PERMALINK

"We live in an era in which highly skilled people are increasingly valuable"

Actually, highly skilled people are becoming less valuable, as high-skill jobs get shipped off overseas.

Posted by: Jon H at June 25, 2003 09:10 AM | PERMALINK

Bravo. This post is a succinct and well-researched explanation. Particularly important is noting that income inequality is a natural outgrowth of an increasingly skill-driven and entrepreneurial economy. Extremist fiscal policies that exacerbate rather than ameliorate this phenomenon are the real problem.

Posted by: Militant Moderate at June 25, 2003 09:26 AM | PERMALINK

Sigh. Here we go.
There's a couple of problems with this analysis. First, no thought of secondary or tertiary causes and/or effects is considered. We just think, Geez, there are a lot of rich people and a lot of poor people in this country. Somethings wrong!
Also the Zero Sum theory of economic growth. The rich are soaking it all up, and leaving none for the poor, as though economic opportunity is a punch bowl being passed down a table.
For instance: It's possible that avenues for income mobility are so wide open, that anyone who really wants to become wealthy - and by that I mean is willing to, in Carville/Begala speak, "Kiss Ass, Kick Ass and Work Your Ass Off" - can do so. I remember working with many people in my father's generation and even my generation who were brilliant but had lower middle class jobs, because that was the best thing available for them at the time, due to considerations of class or race or social background. Those barriers don't exist any more, or at least not anything like they used to. People who are smart and motivated can get ahead. This leaves the losers - and yes, they do exist - clustered at the bottom of the ladder. I've worked in these neighborhoods, I know what I'm talking about. I've also talked with far, far too many immigrant families who live in lower-income neighborhoods (you know, they used to be called slums) who love it in the USA, as you can get ahead by just working hard. Which was never an option where they came from.
Also, what about overall quality of life? Differential measurements can be tricky. I've also seen people on welfare who have more consumer goods than my parents had when I was 7.
Also, what about the effect of taxes and regulation killing income mobility? Talk with anyone who owns a business that they're trying to expand, and they'll tell you what I mean. There's a "hump" in business growth that prevents people from expanding the exact type of manufacturing businesses we need. Big companies can afford to avoid taxes, they can get tax breaks from cities and towns (even the feds), and get lawyers and lobbyists to get out of regulations. Small businesses? On your own, pal. This is an effect that doesn't show up in most analyses.
Dammit, I gotta go. Haven't looked over those stats, but they look interesting. Will get back to it in an hour or so. But, beware of comparing the USA with Sweden, a country that has fewer people than the NYC metro area.

Posted by: Tony at June 25, 2003 09:33 AM | PERMALINK

Kevin- you have provided absolutely no data whatsoever regarding Bush, yet you make a sweeping indictment of his policies. From the charts I am looking at, it looks like most of the dips in mobility and the increase in inequality came underneath the leadership of the second coming of Jesus- excuse me, Bill Clinton.

Posted by: John Cole at June 25, 2003 09:39 AM | PERMALINK

chirp chirp

Posted by: paradox at June 25, 2003 09:45 AM | PERMALINK

"Also the Zero Sum theory of economic growth. The rich are soaking it all up, and leaving none for the poor, as though economic opportunity is a punch bowl being passed down a table."

*sigh* Yet another rightie who doesn't understand economics. The distribution of economic growth is a zero sum game *by definition.* In any given year, GDP growth can by any absolute amount (and since GDP growth = national income growth because GDP = National income) but there is only 100% of that growth that can be distributed to different quintiles, therefore, by definition, the more of that income growth that goes to the top fifth the *less* there is left to go to other quintiles.

Posted by: Lorenzo at June 25, 2003 09:49 AM | PERMALINK

Conservatives are winning the debate because they have shifted the arguments to that of character alone. I suppose they started on this tack in the 80s with Reagan, that was his biggest selling point, but it really got driven home with Clinton. Remember Bush was supposed to restore "dignity" to the white house? How often does one come across a pundit still claiming that the US fell into an immoral morass because Clinton got a blowjob? Nothing but character was relevant during Bush's campaign, Gore out-policie'd and out-idea'd him at every turn.

In the 80s Reagan got everyone hating "welfare queens", Contras were good guys fighting for freedom. Later Clarence Thomas got on the bench by saying black people ought to "pull themselves up by their bootstraps", Lybia got bombed for literally no good reason except Quaddaffi had a bad enough character to blame stuff on...

By shifting the debate to one of character they've essentially won the war. It rhetoricaly fits every one of their issues: We live in a free country where everyone has an equal opportunity so if someone is poor it's because they have bad character. If someone is rich they have good character- there's no other reason for rich and poor. So, there's no reason to tax progressively, to do so would be punishing those that have good character and rewarding those that have bad character.

Every argument turns into one of character. Bad public schools? Let people go to private school! If they can't afford to that's they're own fault, they're poor because they have bad character, those with bad character don't deserve a hand-out. Lower taxation of capital? Only someone with good character is able to build capital, they shouldn't be punished for having good character. Estate tax? Only someone with good character was able to build all that wealth, they shouldn't be punished. Allowing corporations to set their own environmental standards? A corporation is led by people who made it, and therefore have good character, so of course they can be trusted. Racism? There is no other reason for racism than individuals with bad character acting badly. No such thing as institutional racism, no such thing as historical context, nothing but some people with bad character (so therefore no reason to reform anything or promote anything via things like AA).

The desire to dismantle social programs? Social programs only benefit those with poor character, why should people with good character pay to give hand-outs to those with bad character?

Of course some jackhole will probably refute this claim on a literal basis (as if I mean pundits and politicians are literally talking about "character"), but it seems pretty obvious to me. The modern conservative platform makes no sense whatsoever unless you think of it as a basic argument between good and bad character. None of their programs do what they say they'll do. Supply-side economics does not increase tax income, nothing trickles down; standardized tests do not improve schools, less environmental regulation does not mean less pollution; bombing Iraq does not mean less terrorism.

It's pretty easy, they do it themselves. Iraq? Saddam was bad, 'nuff said. France? They're arrogant, 'nuff said. Santorum? He's a good guy, 'nuff said. And on and on and on. It's a very easy debate to win, all they have to do is smear the other side and lie about their programs. If they never admit to lying, it's the same as not lying. After all, Bush, for example, is the president. He wouldn't be there unless he had good character. People with good character don't lie, they only make mistakes.

Posted by: Tim at June 25, 2003 09:54 AM | PERMALINK

Tony provided a perfect example. Anyone could advance, if only they had the right character- right?

Posted by: Tim at June 25, 2003 09:56 AM | PERMALINK

John Cole: which of Kevin's three bullet points are wrong?

The ability of unskilled workers to get higher salaries? Considering the ample evidence of wage stagnation for 30 years, doesn't seem so.

Reduction of tax rates on the rich? you have to concede this one. Bush's tax policy is largely about eliminating tax on capital.

Reduction of income mobility? Is the graph wrong?

So it's Clinton's fault. Big deal. Do you have a solution, or do you believe that it's not a problem?

JC, you tend to put a lot of blame for the world's problems on Clinton. that's fine; he wasn't the greatest president ever and he faced an extremely hostile Congress for much of his administration. but your comments tend to stop there. does the bush admin have any obligation to address those problems? Isn't it fair commentary to say that a problem which got bad under Clinton is now getting worse?

Or is GWB your 2nd coming?

Posted by: FDL at June 25, 2003 09:56 AM | PERMALINK

When some inequality apologist goes on about 'but those folks on welfare have more CD players than my granpop and granma ever had' one always thinks -- how much better must life be for the top quintile than it was for the top quintile in the 1950s?

And then one rembers Paul Krugman's comment that Paul Allen doesn't have a LearJet, he has a Boeing 737 (or was it two?)

Posted by: Matthew at June 25, 2003 10:01 AM | PERMALINK

I believe Cole's point was that both graphs tend to exacerbate during the Clinton Administration. Certainly the "inequality" graph does.

Tony's point about small business I thought was very accurate. If any group deserves some tax "relief" it would be small businesses employing less than 20. It's not just the quantity of regulations, but the amazing cost of simply conducting business. That burden should be shifted directly to large corporations.

Why does everyone assume that their personal experience must be stereotypical? "I saw a poor person 20 years ago in college and he looked lazy." Therefore all poor people are lazy? That logic is poor to say the least.

Posted by: Double B at June 25, 2003 10:06 AM | PERMALINK

Hell, I'm a great counter-example to Tony. I'm pretty comfortably in the second quintile, yet I spend about 1/3 of my day reading blogs.

Go figure.

Posted by: John Yuda at June 25, 2003 10:08 AM | PERMALINK

Of course, when deadlines loom, I also tend to spend 16-20 hours a day working, barely remembering to stop and eat.

Posted by: John Yuda at June 25, 2003 10:10 AM | PERMALINK

Until public schools in poor neighborhoods consistently offer the same quality of education as public schools in wealthier neighborhoods, we can't realistically expect poor children to grow up to be not-poor. Sure, there are always going to be people who manage to overcome seemingly insurmountable obstacles to go from rags to riches, whether through intelligence, athletic skill, or creative talent.

But not everyone is blessed with remarkable abilities. There are plenty of mediocre people, who because they were born into middle class families, were able to get a decent education and live mediocre, comfortable lives. But if the same mediocre person was born into a poor family, with no access to a decent education, chances are that they will not have the knowledge or skills to dig themselves out of the low-income bracket.

I've seen it with my own eyes...a man I was engaged to once was from a poor family living in the Bronx. He was blessed with a natural intelligence (near photographic memory, a sharp, curious mind), but his half-brother was simply mediocre. Not dumb necessarily, just not bright. My ex-fiance benefitted from a program called Prep for Prep that sent him to an expensive prep school in Manhattan and he went on to college and now has a white collar job. His brother stayed in the public school system and graduated without acquiring what I would consider to be the necessary reading and writing skills for a decent job. He now works at a pretzel stand in the mall. If he has children, they will probably go to a sub-standard school where they will languish unless they turn out to be exceptionally intelligent, driven or talented.

Education is the way to break out of this cycle, but unfortunately, many poor people don't have access to a quality education.

Posted by: Lisa at June 25, 2003 10:13 AM | PERMALINK

Lorenzo - the whole conservative argument - which Economics DOES NOT contradict - is that over the long haul reducing inequality through taxation and distribution will reduce the size of that GDP growth number. So your choices are not "2.5% growth and high inequality" and "2.5% growth and low inequality", but rather "2.5% and high" or "2.0% and low". Yes, you can redistribute this year, but it will affect people's behavior NEXT year. Look at the CCSD study - doesn't it appear that GDP growth per hour worked is growing much faster than GDP per capita in high tax countries, while the reverse is true in low tax countries? Doesn't that suggest that low tax countries are parlaying productivity gains (the first number) into increased income (the second) much more effectively than high tax countries?

If you run a linear regression where the y variable is (GDP per capita growth) - (GDP per hour worked growth) and the x is tax rate, using the cssd study numbers, the coefficient on tax rate is negative, with a t of about 1.6. Not significant - but the cssd study isn't going to find significance even if it is there, because the sample size is WAY too small, it is way to short of a time frame. The way to do this is to use 15 or so similar countries, ANNUAL growth rates and ANNUAL tax rates, and a long (40 years) time series, use panel data analysis, and control for everything you can.

Posted by: rvman at June 25, 2003 10:19 AM | PERMALINK

RVman-

Huh? So you're saying low tax countries are more efficient at increasing GDP?

I don't see that, but even so, so what? The question is not GDP growth but where that growth is gowing. If the US more efficiently grows GDP it really doesn't matter if that growth is going up to the top classes.

And please, please show me a study, any study that shows purchasing and capitalizing decisions are based upon tax rates. I'd really, really like to see that.

And then again, even if it were generally true (progressive tax structure reduces overall consumption, or whatever), what's your point? It really doesn't matter if all of the growth is being absorbed by the top 10% or so.

But of course, if that is your argument you're simply wrong. There's no reason to think that lower income taxes for the richest individuals will effect buying patterns one iota. See, that's the thing about being rich- you can always spend as much as you want. And the thing about being poor- you can only spend everything you have.

Posted by: Tim at June 25, 2003 10:35 AM | PERMALINK

Whoops. income was the only thing that was supposed to be bold.

Posted by: Tim at June 25, 2003 10:36 AM | PERMALINK

Lisa: Bravo

rvman: Also true, so it's a fundamental question of values. Is greed king? Is GDP growth the end-all-be-all, at the expense of the general welfare? Some say yes, some say no. They often vote for different parties.

I don't like the first graph. Say you've got 5 people (representing the 5 quintiles) who make $20k, $40k, $60k, $80k and $100k. Increased productivity gives the nation-of-5 a 10% raise, and they decide that each of them individually share that 10% raise; now they make $22k, $44k, $66k, $88k and $110k. Now, if you graph this, you notice that the bottom guy only got $2k but the top guy got $10k--they are diverging. However, this is an arguably fair policy (although bleeding heart liberal commies like myself would prefer a more progressive picture, maybe tax the top guy a little more since he gets much more out of the services provided by government, etc.)

What makes more sense is comparing the ratios between these quintiles. For example, comparing the top quintile divided by the median (100/60 & 110/66 = same ratio). Or, lowest to highest. I especially like the stats about corporate culture lately that compare median wage to top wage. I suspect that if you compare the ratio of the top quintile to the median income that you'll still see a (admittedly less dramatic) departure over the past generation or two, meaning we have an exponential divergence in real money.

But that's just me.

Posted by: Stoffel at June 25, 2003 10:39 AM | PERMALINK

Ryman, can I ask you something? How do you come up with a single figure for "tax rate" in any given country?

I wonder about this since I recently made an effort to calculate the difference in American tax rates over time, and the only way I could figure out to do it was to consider total tax collections as a percentage of GDP each year. This concept does not take into account any diffferences in tax rates on rich vs. poor or on capital vs. labor, which, given that we're addressing structural changes in income distribution here, is useless for addressing Kevin's post.

So tell me, how exactly are YOU doing that fancy figgerin' you're talking about in your post? What "tax rate" number do you use?

Posted by: Julia Grey at June 25, 2003 10:41 AM | PERMALINK

Fiddling with tax rates won't make unskilled workers more valuable. There are a few things public policy could do: restrict the supply of unskilled labor competing with them (through trade or immigration restrictions), or increase their skills, for which a radical change in education is probably necessary. Neither are likely to be too popular with the right or the left.

Posted by: tc at June 25, 2003 10:43 AM | PERMALINK

"This has always been a bit dishonest, since "poor" often refers to college students and other young people who naturally become better off as they grow older."

Naturally become better off? And all this time I thought it was a result of their education. Are we now arguing that education isn't worth it, or can we admit that working at an education is an investment that can pay off in real wealth in the long run?

This interesting formulation is repeated again:"We live in an era in which highly skilled people are increasingly valuable and unskilled workers are worth less and less. In other words, left on its own, income inequality will naturally increase."

Naturally increase? Is it natural that someone remain unskilled for his entire lifetime? Why would that be natural? If you want to use this argument to ask for funding for schools, great, but I strongly suspect that you want to use this argument to redistribute wealth directly, which just leaves the people STILL unskilled. Nice.

The income inequality vs. economic efficiency statistics are almost laughable. I cannot believe that someone who just two days ago criticized Colson, would cite a source which tries to pretend that the teeny-tiny economies of Dennmark and Sweden, which wouldn't even be able to compete with San Diego County in terms of economic output, are precisely equivalent to large scale economies for purposes of determining economic growth. You might as well do a study of Palo Alto income distribution and economic growth and then try to compare it to France. Lets look at the large economies on that list in descending order of economic growth
Country Growth GINI
Australia 2.2 0.3378
US 1.7 0.3837
UK 1.7 0.3430
Canada 1.0 0.3019
France 1.0 0.2623
Germany 0.9 0.3069

For statistical purposes you should understand that one full standard deviation in the GINI index is approximately .07.

In the large economies there is a clear break between the higher growth economies and the lower growth economies in terms of GINI.

But even if you are correct, and there is no relation between income distribution and growth, it doesn't at all indicate that there is a problem which needs to be fixed by government intervention. It especially doesn't indicate that the problem needs to be fixed by government intervention that involves crass redistribution of wealth.

By way of example I would love to get behind a drive to educate people much better than they are currently being educated. I think the nation as a whole would be better off with a well educated work force. It would help absolute wealth a great deal. Everyone would be much richer than now. It might do nothing to change income distribution, and I don't see why that is a problem.

Posted by: Sebastian Holsclaw at June 25, 2003 10:55 AM | PERMALINK

"Lorenzo - the whole conservative argument - which Economics DOES NOT contradict - is that over the long haul reducing inequality through taxation and distribution will reduce the size of that GDP growth number."

I know that this is the argument used by some conservatives, however, it was not the argument being made by the person I was responding to.

As for the argument about redistribution slowing GDP, I believe Cal himself has posted proving that it isn't the case. If/when I have the time, I'll try and dig up the post.

Posted by: Lorenzo at June 25, 2003 10:57 AM | PERMALINK

Tony--

You know some people who worked hard and bumped quintiles? And upon this anecdotal basis you form the belief that everyone who would like to bump quintiles but doesn't, doesn't work hard?
Ridiculous belief-formation behavior. Inductive fallacies aside, why should we want a society in which more and more work is required to acheive prosperity? That appears to be what the statistics indicate unless you are of the belief that folk are somehow lazier now than in previous decades. I hadn't noticed.
Tony, taxes have been steadily falling while income mobility has decreased in the 70s, 80s and 90s, yet you suggest cutting taxes in order to increase income mobility.
There's a point at which your political views have to face the tribunal of facts lest they denigrate into blathering articles of faith. By my lights, conservatives who continue with tricklish economic apologetics in the face of all evidence accumulated since the project began have fallen into such an abyss...

Posted by: timothy at June 25, 2003 10:57 AM | PERMALINK

I used the same "tax rate" cited in the study Brad referenced to show that growth ISN'T correlated with tax rates and inequality, but that the latter two are.

I'll grant that Bush's tax cuts aren't exactly the most useful things in the world. Even many libertarians only support them because of their direction rather than their focus. For the record I would rather roll SS, Medicare, and Income taxes back together into one rate, or privatise the former two, rather than have the current system for "income" taxes. Dumping the cut-off on SS taxes would be good. (A real "flat" tax would have to roll the three together to be fair.)

I don't actually think that the relationship between high taxes and high growth is direct, or spending related (or particularly "laffer"). The high tax rates are in countries with very generous welfare programs. These programs provide an alternative to labor as an income source, and so encourage non-work as a lifestyle choice. Higher productivity provides more resources to redistribute, and so better benefits, which reduces labor supply, and thus GDP growth. If we provide welfare, we have to find a balance between "enough to survive" and "enough to encourage low-product, but important workers to not work and collect benefits instead".

I don't believe that increasing inequality (which appears to be real) means that ALL of the growth is being absorbed by the top quintile. Let's be real - can you honestly claim that the lives of the poor today aren't better than they were 25 years ago, by orders of magnitude? How many of these "very poor" have large color TVs, VCRs, cable? Washer and Dryer, not washer and line? a car? I imagine many of them aren't just driving a better car than they were 25 years ago, the very worst off are driving the same car the guy in the top quintile was 25 years ago - literally. Those graphs of real income over time are wildly misleading, because our inflation adjustment methods are lousy at catching qualitative improvements, which are where much of the gain in welfare in the last 25 years has come from. Anyway, Wal-Mart alone has made lower quartile people's lives far better.

Just our of curiosity, everything I've seen on income inequality has been income, or wealth driven? Does anyone have any decent data on CONSUMPTION per capita, or consumption per household, inequality? A more important figure when talking about welfare.

Posted by: rvman at June 25, 2003 11:05 AM | PERMALINK

Sorry, Calpundit, I meant you, not Brad (DeLong, where I had been reading just before coming over here.)

Posted by: rvman at June 25, 2003 11:10 AM | PERMALINK
Naturally become better off? And all this time I thought it was a result of their education. Are we now arguing that education isn't worth it, or can we admit that working at an education is an investment that can pay off in real wealth in the long run?
Sebastian, we've been over this. College students are counted as poor because most of them are, obviously, spending the bulk of their time on school-related activities (be that studying or partying). Those who do work tend to work subsistence-type jobs such as pizza delivery or waiting tables.

The problem is the income mobility statistics don't consider the student's background. So if Warren Buffett's kid is in college, he must be poor.

Generational income mobility is a much more worthwhile way of looking at things, but most studies I've seen either don't do this at all or marginalise it. Admittedly, I don't go around searching out income mobility studies.

Naturally increase? Is it natural that someone remain unskilled for his entire lifetime? Why would that be natural? If you want to use this argument to ask for funding for schools, great, but I strongly suspect that you want to use this argument to redistribute wealth directly, which just leaves the people STILL unskilled. Nice.

Two things here:

  1. First, I'd love to see programs aimed at sending blue collar and retail/service workers for training, be it vo-tech/trade school type stuff or management stuff, or even colleges. Problem is, if you need your factory job to pay the rent and eat, you can't exactly quit and go to school.

  2. We'll always need people to work the unskilled jobs - picking the food we eat, working at the mall, cleaning our bathrooms. These people perform important services to our continued lifestyle, and they deserve to be compensated for it so they don't have to clean twice as many toilets just to eat.

To wrap this up (and still quoting Sebastian):
By way of example I would love to get behind a drive to educate people much better than they are currently being educated. I think the nation as a whole would be better off with a well educated work force. It would help absolute wealth a great deal. Everyone would be much richer than now. It might do nothing to change income distribution, and I don't see why that is a problem.

I think we agree, ina general sense, here. Thing is, I'd be a proponent of proactive government programs to get people more education. You may be as well; but I'm pretty sure most of the current administration and most GOP members of the House are against it. Something about pledging never to raise taxes for any reason whatsoever.

Posted by: John Yuda at June 25, 2003 11:21 AM | PERMALINK

As An Acceptable Poverty takes shape...

Middle class income mobility within one's lifespan doesn't interest me that much. I'm more focused on intergenerational income mobility. How often does the son of a sharecropper or mill worker or person on welfare change quintiles?
If it happens seldom, then America is breaking the promise of equal opportunity. If our public schools aren't educating everyone at such a level that they can 'be all they can be,' then we are lying when we mouth the platitudes about "work hard and you can be whatever you want."

It's a funny thing, these increases in GDP. Where do they come from? Is all the economic activity done by the people with the most money? Or do we recognize the consumer surplus we derive from people whose labor produces goods and services that are worth more to us than we are paying?

Posted by: PG at June 25, 2003 11:23 AM | PERMALINK

rvman:

How many of these "very poor" have large color TVs, VCRs, cable? Washer and Dryer, not washer and line? a car?

Yeah! Poor people shouldn't be allowed any entertainment! Make them sit around in their tiny houses thinking about what they've done! And let them clean their clothes by walking down to the river (remember, don't let them have a car, even a shitty old one - if they have a car we must be giving them too many handouts) to beat their clothes off of rocks!

And, dammit, why don't they just subsist on ramen noodles, peanut butter and water? It was good enough for me in college, it's good enough for the guy who cleans my bathroom.

Anyway, Wal-Mart alone has made lower quartile people's lives far better.

That's debatable. Look at the comments thread to last week's post about unions if you want more on that.

Posted by: John Yuda at June 25, 2003 11:26 AM | PERMALINK

The thing that seems most odd about gloomsayers is the focus on the negative. Bradubury and Katz report in their article that about half of the poorest families moved up at least one notch in the most recent decade, as they have in previous decades. About a quarter moved up at least two notches. Almost an eighth moved up at least three notches. There seems to be a pattern that feels intuitively proper.

As others have mentioned above there are reasons why others don't progress, that their initial circumstances and opportunities retard their progress, and that changes in family structure have made life difficult for some. It seems we would do well to expend effort to improve the opportunities of those who begin "in a hole" and to help families, whatever their structure, to thrive.

The evidence provided by Bradubury and Katz is that the system works remarkably well and that those who don't thrive have basic needs that are not being met. As others have mentioned poor education and socialization are important impediments to mobility.

When we abandon the emotional comfort of gloomy attitudes and consider what the consequences for all of society would be if we did improve education and socialization things look even brighter. Economic productivity would increase to the benefit of all of society, not just those who currently languish. Perhaps more importantly, the pool of useful minds would increase in size and make increased contributions to social and cultural wealth.

The benefits of greater inclusion and ennoblement are both economic and social. This is the eternal consequence of increased suffrage. Not just a political vote, but a piece of the franchise, a voice in everyday life as well as a ballot on rare occasions. the contributions of mind as well as backs and hands. Increased suffrage pays dividends to all of society, compounded moment by moment.

The politics of resentment and spite aren't helpful. Jealously gazing across the hearth stones of those who are more successful and plotting revenge is the end stage of dysfunctional attitudes, the point when members of society turn on one another and greedily advance their interests at the expense of others. Better we should cooperate with one another to improve the lot of all than to prey on one another in a Darwinian nightmare.

Posted by: back40 at June 25, 2003 11:29 AM | PERMALINK

These programs provide an alternative to labor as an income source, and so encourage non-work as a lifestyle choice.

Uh, huh. From whence do you make this assumption? Don't tell us welfare encourages anything unless you have some sort of evidence it does. Living on the dole doesn't exactly give one the means to do anything but sleep and eat.

How many of these "very poor" have large color TVs, VCRs, cable? Washer and Dryer, not washer and line? a car?

I don't know. Do you? No, so why not put that straw-man argument to rest. Besides, your 'technology as a leveler' argument ridiculous. Owning a TV or a car does not make one virtually not poor. Poverty is not about not owning consumer goods, it's about not having the means to do anything besides "get-by". You're essentially arguing consumer technology makes most "poverty" obsolete, since a poor person can afford things a rich person 20 or 30 years ago could not. By that line of logic there is no such thing as poor if today's poor enjoy consumer goods better and cheaper than those from the past. This of course would mean there's no such thing as poverty, since that's how progress works. Puh-leaze.

Anyway, Wal-Mart alone has made lower quartile people's lives far better.

You're out of your mind. First of all, you continue to back up your arguments with unsupported, sometimes bizarre assumptions, second, although Walmart has brought down the cost of some basic consumer goods across the board, there's no logical reason to assume they have been brought down, all across the nation, not just in Walmart stores, to such a point as to significantly increase the poor's buying power or ability to save or anything like that. I find it really bizarre that you can write something like that and expect it to be taken seriously. It also ignores the depressing effect Walmart has had upon wages in the retail sector. It's a familar story, Walmart comes to town, drives a few businesses out of business, hires more people part-time then full-time, squashes unions, etc. Also, if Walmart was able to significantly drive prices down wouldn't that mean lower revenue for producers, which might mean fewer jobs or lower wages? I would suspect, though I would never claim it to be fact, that the depressing effect Walmart has on wages cancels out any depressing effects it has on costs. But then again I think the entire line of reasoning is BS anyway.

You have a very odd idea of the poor, what poverty means, and what Europe's system is like.

Posted by: Tim at June 25, 2003 11:42 AM | PERMALINK

Stoffel,
The graph indeed does not show well the growth in the inequality. But the growth of inequality is real.
I tried to make the following:

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