Posted by Lex, on November 13, 2007
Everybody knows that rising income inequality causes social tensions which threaten our democratic, free market experiment.
As is all-too-often true though, everybody is wrong:
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. Those in the highest quintile, on the other hand, saw only modest income gains (10%). The nearby table tells the story, which is that the poorer an individual or household was in 1996 the greater the percentage income gain after 10 years.
Only one income group experienced an absolute decline in real income–the richest 1% in 1996. Those households lost 25.8% of their income.
It’s not terribly surprising that employed people starting off on society’s bottom rung see the biggest proportion of gains, since they’re starting from a smaller number and even modest increases in compensation as they gain work experience and skills causes larger percentage gains. Nor is it particularly surprising that the very wealthiest tend to see see their incomes drop at faster levels – a fair proportion of those who have arrived at the very top no doubt look for an opportunity to come off the grid and enjoy the fruits of their labor. What’s interesting is the fact that even the middle, fourth and fifth quintiles all experience the kind of upward mobility which so frustrates the market stifling redistributionist schemes of veteran class warriors.
If only poor people had the decency to stay poor, we could do something to help them!