Conservatives, Income Mobility, and Inequality

I don’t have particularly strong views on the question of how much income mobility and inequality there is in the United States (relative to how much there should be, or relative to how much there is in other countries). But conservatives have been putting forward some arguments I either don’t understand correctly or don’t find convincing, and I was hoping Corner readers and contributors could straighten me out.

The first argument, pertaining to income mobility, seems to be that we have lots of it because when you follow individual households longitudinally, you find that they move between income groups fairly frequently. I don’t think this argument accomplishes what it’s supposed to: Of course people tend to make more as they get older, until they decide to scale back their effort or retire, and of course some households experience sudden shocks (losing a job, etc.) that can make them move up or down quickly. This is technically “income mobility,” but it’s not the kind of income mobility we mean when we talk about the American Dream (which might be more accurately called class mobility).

In this way of looking at things, if a young adult is rich relative to his peers (but is in, say, the middle quintile overall, when stacked up against much older income earners), enters his 40s richer than his peers (in, say, the fourth quintile), and retires richer than his peers (say, the fifth quintile), he is a classic example of American mobility. The same for a poor person who starts in the first quintile and ends in the third, ranking the same overall at retirement as the rich person did in his 20s. That’s silly.

The other argument, pertaining more to inequality, seems to be that if you follow the very richest income earners longitudinally, they tend to make less over time. Again, I don’t think this argument does what it’s supposed to; it’s simply an example of “regression to the mean.” Oftentimes, people at the very top of the income ladder in a given year are there because they had an unusually good year, and they might have worse years later on. It’s certainly valuable to know that the top 0.01 percent (or whatever) doesn’t comprise the same people year after year, but if the top 0.01 percent are making more and more relative to everyone else, that does seem to indicate rising inequality: The people who are raking in the dough this year are distancing themselves from the rest of us more than their predecessors did.

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