Johan Norberg in his "In Defence of Global Capitalism" claims: "Only 5.1 % of the Americans belonging to the poorest one-fifth in 1975 still did so in 1991. In the meantime nearly 30% of them had moved up into the wealthiest one-fifth and altogether 60% had arrived in one of the wealthiest one-fifths. By 1991 the people belonging in 1975 to the poorest fifth had raised their annual income (which at that time was only 1,263 dollars in 1997 prices) by no less than 27,745 dollars, which in absolute figures is more than six times the increase obtained by the wealthiest one-fifth.... On average, those falling below the poverty line in the USA only stay there for 4.2 months. Only 4% of America's population are long-term poor, i.e. remain poor for over two years. Meanwhile the poorest fifth is replenished with new people - students and immigrants - who then climb up the ladder of wealth."
To the last claim he attaches a reference to Michael W. Cox and Richard Alm, "Myths of Rich and Poor: Why We're Better Off Than We Think." NY: Basic Books, 1999. My questions: 1. Is it true? Or at least, is this commonly accepted? 2. Does he get all this information from that book? Are there other (commonly accepted) studies that confirm this. People like Krugman seem to dispute anything like this: From: http://www.j-bradford-delong.net/Economists/favorite_krugman.html "Armey cites a study that shows that there is huge income mobility in America. The message here is simple: Don't worry that some people find gold and some don't--next year you may be the winner. He gives numbers saying that fewer than 15 percent of the "folks" who were in the bottom quintile in 1979 were still there in 1988. He then asserts that it was more likely that someone would move from the bottom quintile to the top than he would stay in place. Again, he doesn't cite the source, but these are familiar numbers. They come from a botched 1992 Bush Administration study, a study that was immediately ridiculed and which its authors would just as soon forget. "This is why: The study tracked a number of people who had paid income taxes in each of the years from 1979 to 1988. Since only about half the working population actually paid taxes over the entire period, this meant that the study was already biased towards tracking the relatively successful. And these earners were then compared to the population at large. So the study showed that in 1979, 28 percent of this studied population was in the bottom 20 percent of the whole population; by 1988 that figure was only 7 percent. "This means, Armey asserts, that someone in the lowest quintile would be more likely to move to the highest than stay in place. Put kindly, it's a silly argument. For subjects of the study who moved from the bottom to the top, the typical age in 1979 was only 22. "This isn't your classic income mobility," Kevin Murphy of the University of Chicago remarked at the time. "This is the guy who works in the college bookstore and has a real job by the time he is in his early thirties." "In reality, moves from the bottom to the top quintile are extremely rare; a typical estimate is that only about 3 percent of families who are in the bottom 20 percent in one year will be in the top 20 percent a decade later. About half will still be in the bottom quintile. And even those 3 percent that move aren't necessarily Horatio Alger stories. The top quintile includes everyone from a $60,000 a year regional manager to Warren Buffett." Regards, Chirag New Bombay, India
