We are the 81%

Strange column in the Isthmus this week by conservative columnist Larry Kaufmann, who says people are wrong to think about inequality as a problem when the great purring engine of American productivity is lifting all boats.  (Not a mixed metaphor — in the world of this column the engine is so awesomely strong that it actually lifts up millions of boats on some kind of mechanized platform.)  Oh, and also, Occupy Madison is a bunch of smelly hippies who should shut up already.  Kaufmann:

So is the American dream still alive?  In terms of absolute mobility, the answer is yes.  Between 1968 and 2006, 81% of children had a higher inflation-adjusted family income than their parents did…”

Now, let’s be fair — 81% is pretty good!  And that figure doesn’t sound so implausible:  after all, America is a richer country than it was in 1968, so why wouldn’t most individual Americans be richer?

Still, I wanted to check up.  So I went to the source; Kaufmann ascribes it only to the Pew Economic Mobility Project, which publishes a lot of papers, but after a few misses I found the 81% figure in “Family Structure and the Economic Mobility of Children,” whose lead author is UW-Madison economist Thomas DeLiere.

And the 81% number is right there on page 11.  But there’s a footnote, reminding us that these numbers are “adjusted for family size.”  That is: for the purposes of this computation,  a family with four children counts as lower-income than a family with two children and the same household income; the bigger family has to divvy up those dollars between more people.  Without this adjustment, the proportion of children whose household income as adults exceeds the income of their childhood household drops to 66%.

That’s still a large majority!  But there’s more — you’ve still got to ask why household incomes went up so much between 1968 and 2006.  Another paper from the Economics Mobility Project reveals of a big chunk of the reason; the proportion of women in the workforce went from 40% to 60% over that period.  Median individual income for men actually dropped over this period.  (And no, the figures in DeLiere’s paper aren’t adjusted for this; I asked him.)

So yes:  almost all present adults have more money than their parents did.  And how did they accomplish this?  By having one or two kids instead of three or four, and by sending both parents to work outside the home.  Now it can’t be denied that a society in which most familes have two income-earning parents, and the business-hours care of young children is outsourced to daycare and preschool, is more productive from the economic point of view.   And I, who grew up with a single sibling and two working parents and went to plenty of preschool, find it downright wholesome.  But it is not the kind of development political conservatives typically celebrate.

Further reading:  My guess is that Kaufmann learned about the EMP study from research manager Scott Winship’s article on the research in National Review, since he quotes Winship:  “The finding of pervasive upward absolute mobility flies in the face of liberal accounts of a stagnant middle class.”  Winship’s piece is longer, better written, and more careful than Kaufmann’s;  he doesn’t dodge the fact that the flow of women into the workforce drives a great deal of household income growth, but he doesn’t place a lot of importance on this.  Winship is a Ph.D. economist who does this stuff for a living, so his view must be given a lot of weight.  But I can’t make out what the argument is from the single paragraph in NR.  Is he saying that men’s earnings are decreasing because they’re voluntarily taking on fewer hours of work?

Winship also emphasizes the finding that children in Canada and Western Europe have an easier time moving out of poverty than Americans do.  This part is absent from Kaufmann’s piece.  Maybe he didn’t have the space.  Maybe it’s because a comparison with higher-tax economies would make some trouble for his confident conclusion: “the punitive redistribution policies favored by Occupy Madison will divert capital away from productive initiatives that enhance growth and earnings opportunities for all, while doing nothing to build the stable families and “bottom-up” capabilities that are particularly important for helping the poorest Americans escape poverty.”

When the Isthmus is running a more doctrinaire GOP line on poverty than the National Review, the alternative press has arrived at a very strange place indeed.

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8 thoughts on “We are the 81%

  1. Richard Séguin says:

    Good research, JSE.

    It’s past bed time for myself here, but I couldn’t resist saying for now that I found the article particularly nauseating when I read it yesterday. A few sleepy thoughts follow.

    “81% of children had a higher inflation-adjusted family income than their parents did” — higher by what percentage? If I have a higher inflation-adjusted family income than my parents but it is only by 1%, then is that significant? No! The author does not give us any real information to evaluate the significance of his statistic. On the other hand, the advantage of a two income family and fewer children is very clear. Moreover, a bothersome thing about references to inflation in this sort of context is that inflation is never clearly defined for the reader. Does the official definition of inflation include the price of food or gas or higher education or a house? Better check that! I know that I’m paying a lot more at the market for food than I did a few years ago despite supposedly very low inflation, my property taxes have sky rocketed over the years, and the market value of my house is probably at least ten times the price of my parent’s house, but my salary before I retired was not ten times what my father made. How about you? Consider also the students now who have to leave college with massive debts before they are even confronted with buying a house or condo and how they will be totally ground down by the financial system. This was not the case when I was a kid when education was actually supported by tax dollars.

    I also hate it when conservatives pejoratively refer to “hippies.” I was never a hippie, but that was my generation, and I have to say that they have no idea what they’re talking about. Hippies currently exist only in their imagination.

  2. nichole says:

    Excellent research.

  3. nichole says:

    Oh, Isthmus is hiring a pop music writer, too, if you know anyone who’s interested: http://www.thedailypage.com/jobs/

  4. Besides Jordan’s points, Kaufmann simply chose a starting date in his favor. The inexorable rise in income inequality, and the phenomenon of a stagnant median in the face of a rising average, only started around 1980. As well, in the 1990s there was enough economic growth that median household income also rose. So starting in 1968 is simply generously early; it includes the tail end of the second wind of industrialization in the mid 20th century.

    By contrast, median income in the past 10 or 11 years has outright fallen, after adjusting for inflation, but things have continued to march forward for the top 1%.

  5. JSE says:

    To be fair to Kaufmann, he took the starting point from the linked EMP paper, which does not (as far as I can see) give any similar numbers for (e.g.) the period 1980-present; he didn’t select the endpoint himself to make his numbers look good.

  6. Nadia Hassan says:

    I agree that this is awesome digging into a question.

    As to Winship, he was a Democrat and I don’t know if he still is. He was very much about centrism and dissing left-wingers, and so his point may be that claims about inequality are exaggerated by liberals with ideological blinders on.

    Scholars in this area debate inequality trends in part because of tax reform in the mid 1980s. A discussion on this point can be found at

    http://noapparentmotive.org/blog/2011/03/12/winship-vs-piketty-and-saez/

    One point that comes up frequently is how the focus should be on opportunity, growth, etc. rather than distribution per se. A pair of economists at IMF found that inequality had an adverse effect on long-term growth.

    http://blog-imfdirect.imf.org/2011/04/08/inequality-and-growth/

  7. [...] friend Jordan Ellenberg has a really excellent blog post over at Quomodocumque, which is one of my favorite blogs in that it combines hard-core math [...]

  8. affinis says:

    Regarding the Pew Economic Mobility Project – check out a prescient blog item from 2007:

    http://agonist.org/ian_welsh/20070227/centrist_conservative_balanced

    The analysis was destined to have a right-wing tilt.
    “This will understate inequality and mobility compared to the current standardly used studies. That’s why it’s being done.”

    Also see “The Down Escalator” (letters to the editor) here:

    http://www.thedailypage.com/isthmus/article.php?article=35503

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