Income Mobility

Our friends at the Wall Street Journal edit page (not to be confused with the lefties in the Journal newsroom) have spent a lot of energy over the years refuting the Two Nations concept first enunciated 160 years ago by conservative Benjamin Disraeli.  You know how it goes in his novel Sybil, or The Two Nations:

Two nations; between whom there is no intercourse and no sympathy... the rich and the poor.

The image presented is of two separate enties, like Kipling’s east and west—ne’er the twain shall meet.  Actually (and I’m half way through it, so can’t be sure how it turns out) it looks like the angelic (but poor) Sybil may have noble blood in her veins.  It seems likely that she was cheated out of her birthright by the evil Whig landowners who despoiled the monasteries in the 16th century.

But what if the two, the rich and the poor, are mixing it up, with the poor rising into the middle class and the rich falling away from their riches?  It rather spoils the Two Nations narrative, that’s what it does.

In an unsigned editoral the Journal folks point up a US Treasury study on income mobility released today.  It is a “longitudinal study,” following the experience of actual taxpayers over a ten year period.  Here’s a link to “Income Mobility in the U.S. from 1996 to 2005” (pdf).  It paints a picture of remarkable, persistent income mobility. 

What about people at the bottom of the income pyramid?  How did they do?

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.

That’s quite something.  Guess who ended up worst off?  That’s right: the 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.

Rather spoils the fun doesn’t it?

But the message is unmistakable.  The United States is not a still, stratified lake, but a churning, turbulent river.  And, not surprisingly, there is a definite reversion to the mean.  People who are rich have a good chance of losing out.  People who are poor have a decent chance of making it into the middle class.

And that’s how it should be.