This story from the Boston Globe talks about a UMass study showing that the median income of the bottom 20% of wage earners has declined from 1989-2006 when adjusted for inflation, while inflation-adjusted incomes of the top 20% have risen in the same period. This appears to give the lie to the old “trickle down” economic theory, if it hadn’t been discredited enough already. Not much discussion of the stagnant middle 60%, whose earnings have apparently kept pace with inflation but not gotten any better. Some dude from the Beacon Hill Institute is able to get away with making an unsupported claim about “income mobility” as a way of partially refuting the study’s implications. Perhaps the Beacon Hill Institute can commission their own study to show us just how much upward mobility we have in Massachusetts- until that comes out I’ll be skeptical of the idea. The Beacon Hill guy also makes a hilariously inappropriate analogy to Bill Gates, seemingly implying that the poor have hidden resources in Swiss Bank Accounts that they are tapping into for their slice of the good life. Credit cards, maybe- but overstuffed bank accounts I highly doubt.
The median income of the lowest quintile is $20K. We can assume that included in this quintile are people with $0 income (see the “hilarious” example provided in the article of why Bill Gates may fall into this quintile — depending of course on the study’s definition of income).
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p>Applying the definition of median, the range of incomes for this quintile is $0-$40K. The bottom range of this quintile never moves — it’s always at zero. So, whatever increases are made in the upper range of this quintile, the effect is diminished by the constant lower range.
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p>Not only is mobility not addressed in the “income gap” model, contributing factors to household income are ignored so that a simplistic “rich getting richer, poor getting poorer” message can come across. I found the wikipedia entry on household income in the U.S. contains many more data points — including dual-income households (a key factor, IMHO).
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p>I’m not saying that a stagnant, let alone declining, lowest quintile isn’t worthy of concern. I just don’t think there’s enough in the Globe article to justify the conclusions. BTW, I didn’t see the report listed at the UMASS Donahue Institute. Anyone have access to the source?
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Let’s see…
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p>Wages haven’t gone up.
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p>But the cost of everything else has, and basic necessities are skyrocketing (health care, gas, food, pretty much everything).
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p>What part of the calculation am I missing? People who are in the bottom quintile today are much worse off than people who were at the bottom quintile decades ago. How is that at all confusing, and what positive thing can be had of it? These people are struggling and they need some serious relief – wage increases that get them back to the level that we need them at, and we need to get these wildly inflating costs under control.
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p>Also, the “income mobility” argument is a terrible one. 3 reasons:
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p>1. Just because the people who are poor today weren’t the people who were then, doesn’t mean that they weren’t poorer today than they were then.
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p>2. The ability for one generation to do better than their parents, for example, is severly diminishing. With the cost it takes to get an education becoming way too expensive for most, there’s much less income movement today than in the 50s and 60s, for example. Back then, working class parents made enough to give their kids most of the same chances that white collar parents did. Now, hardly anyone can really afford an education, but we have a system of taking out massive, mortgage-sized loans that’s a system for disaster… that only makes it that more difficult for today’s generations to prosper.
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p>3. If you are in the bottom quintile today, working a full time job to make ends meet, where’s the time anyone has to get more education or training that will improve their situation in life? I really don’t see it. I know someone, for example, who’s a life long travel agent, sold her business because things never picked up after 9/11 due to the internet, really wanted to switch gears and go back to school to become a nurse… it would have been something she’d have loved and have made a lot more money doing it, especially in today’s travel market (she still works in the industry). However, even if she had the money to pay for the education itself (debatable), she didn’t have the money to stop working and go to classes for 2 years, since she had two young children. My next door neighbor is in the same situation – except, she’d like to become a teacher and just needs to finish school. Can’t. 2 mouths to feed. These are anecdotes, of course, but any family – especially with kids – will find it near impossible to pay for the education or training necessary to enjoy that income mobility you talked about, or to pay for everything else during the time it would take to get it.
Does not lead to the range of 0 to $40K for a $20K median. Rather, it is the income at which there is a 50/50 split (below/above) for that group. There could be 1000 people in that group, with 500 at $0 income, and 500 at $20,500 income.
You are correct. My error.
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p>It’s that fixed lower limit though, that retards growth in this model. I’ll think more on how to model or explain that, because I think it’s an important point.
is here.
All too often, poverty is treated like per se neglect. Over and over I see: “Find a job, ” or “get appropriate housing” on Service Plans – and parents do not get their own children back until they are able to get a job or housing.
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p>In one case – of which I have direct, personal knowledge – the fact that an otherwise fit father “took too long to get housing” was taken as a lack of commitment to a son he loves, who loves him – and his parental rights were terminated and the adoptive parents allowed to move to Illinois even though the same judge had found a strong bond between father and son.
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p>YUP. The rich get richer…
I just got into a huge fight with and old friend about something pertaining to this. Her and I come from the opposite sides of the tracks. I was complaining about how America is the most hypocritical place on earth where were spoonfed this crap regarding freedom and equality. In reality its freedom and equality for those who won life’s lottery or those who turn their back on their people and steal from then.
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p>Sad truth is that if your born working class in America you will stay that way even if you have the means and tools to do it. I will use me, I grew up in a single family home with a mother who worked two jobs. I joined the army to pay for school and went to state university. I have had my share of downs with layoffs, each time though I remember where I came from and keep on pushing along. Today you would think I am in a good place with a good job, but in reality I am not.
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p>I get paid well but when I adjust for inflation I am getting killed. I pay more in energy, more for food, student loans, rent. My salary slightly increases but its no match to real inflation. Meanwhile my wealthy friend is doing great, she has a nice Back Bay flat, new hybrid (cause she is saving the earth in style), and no bills since her trust covers that. Sad thing is that this girl never had and never will struggle, she traveled to Europe after college while I was getting shot at in Bosnia. When she hit 30 her father gave her a huge job, big salary. You meet allot of those types in Boston and sad thing is they have no clue how bad things are for the rest of us.
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p>Its a life of agony for those of us who came from nothing. America truly is a sham, its a place where only the select have a future while the rest of us get worse and worse each year. Its a shame, maybe one day people will get sick of it all and actually do something.
…and the unfairness goes back to the beginning. Remember, slavery and class divisions go back to the very beginning. A good book on this is: http://www.amazon.com/Slave-Na…
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p>However, Boris – what you have said is 100% accurate. For those who are not upper class, financially, life IS getting worse and worse each year.
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p>I tried to describe that in my post about the New Gilded Age – but even the Wall Street Journal agrees with you and I: http://blogs.wsj.com/wealth/20…
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p>My mother was a teacher, my father a dental technician – one born in this country, one not. They were able to give us a comfortable life, but not a fancy one. I cannot, even working very hard, provide even the same standard of living for my own children even with my college degree.
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p>I assure you, I don’t have a trust fund, I worked all through college and law school [at one point while in law school I had five part time jobs, I kid you not].
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p>Wealth in this country is progressively more concentrated, and the functioning of government here less and less democratic – on the other hand, I don’t think that we as a country are beyond the possibility of reclamation, and the impact of the internet is part of what may – and I say “may” assist in making organizing a turnaround possible.
Not mentioned in the original Globe piece was the fact, that I read just now in the finally available (and pretty short) report is the fact that, apparently, from 1999-2006 all MA “quintiles” have experienced adjusted wage decline – some more pronounced than others. I wonder what would happen if you looked at 10 income groups- if perhaps the top 10% would also be shown to have lost income relative to inflation, or whether my “class war”-style paranoia would find vindication in a net increase among the top 10%- or maybe only the top 1%.
It does strike me as odd that every single quintile shows a decline in the 1999-2006 period, particularly 1999 to 2000 which was a decent year for the economy.
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p>Looking at the source of data in the UMass study, it appears to use census data from 2000 and ACS data for 2006, just as the Detroit Free Press did in 2006 to produce some alleged bad statistics, according to McCardle, a writer for the Economist mag, because the Census data sets and the American Community Service data sets are non-compatible.
here
I firmly believe that the above-mentioned situation has been going on for several decades. The decline of unions, which began back in the late 1960’s, when Richard Nixon became POTUS, has greatly contributed to this. It used to be that a man or a woman who had a decent job and the backing of a union could/would often enough make a decent living to support him or her and/or their family. Nowadays, however, this same person often has to take 2-3 really crappy low-paying, non-union jobs to make ends meet. Sadly, as I said before, this situation began in the late 1960’s with President Nixon, continued on with Carter, began to snowball under Reagan, Bush I and Clinton, and has gotten even worse under 8 years of G. W. Bush II. The fact that more and more manufacturing jobs have been going overseas, and the disastrous NAFTA and CAFTA policies that were signed into law during the Clinton years have also contributed to this whole situation.