When Scott and I wrote “The Truth About Income Inequality,” one of the highlights of our pre-internet career, we emphasized the remarkable degree of income mobility that has long characterized the American economy. The rich man and the poor man, we argued, are largely the same man in different stages of life. In recent years, some have tried to show that income mobility has lessened, but longitudinal studies don’t support that claim. Greg Mankiw, chairman of Harvard’s Department of Economics, links to an article in–surprisingly–the New York Times that contains some stunning data:
Thomas A. Hirschl of Cornell and I [Mark Rank of Wash U] looked at 44 years of longitudinal data regarding individuals from ages 25 to 60 to see what percentage of the American population would experience these different levels of affluence during their lives. The results were striking.
It turns out that 12 percent of the population will find themselves in the top 1 percent of the income distribution for at least one year. What’s more, 39 percent of Americans will spend a year in the top 5 percent of the income distribution, 56 percent will find themselves in the top 10 percent, and a whopping 73 percent will spend a year in the top 20 percent of the income distribution….
It is clear that the image of a static 1 and 99 percent is largely incorrect. The majority of Americans will experience at least one year of affluence at some point during their working careers. (This is just as true at the bottom of the income distribution scale, where 54 percent of Americans will experience poverty or near poverty at least once between the ages of 25 and 60)….
So a majority of Americans will be in the top 10% of income at some time during their working lives. That makes a mockery of the Left’s portrayal of a rigid caste system that–somehow!–must be combated by ever-higher taxes and more government spending.
The Democrats’ current campaign against income inequality is puzzling, if you think about it. Income inequality is a wonderful thing. In fact, a society without income inequality would scarcely be worth living in. No income inequality means no promotions; no advancement; no reward for training, education, hard work or experience; no benefit to being talented, creative or innovative. Imagine if you graduated from high school (or dropped out, for that matter) knowing that no matter what you did, you could never exceed the income you earned as a first-year novice in the labor market. Income inequality is just another word for opportunity.
Once you concede that income inequality in itself is a good thing, the only real question is whether a hard-working person with reasonable abilities has a good shot at success. Academic studies yield the same answer as our own common observation: yes, the hard-working and talented (even modestly talented) can still get ahead in America.