BTW, the Norberg quote is from pp. 75-76 of "In Defence of Global Capitalism." Timbro, 2001.
Chirag ----- Original Message ----- From: Chirag Kasbekar <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Tuesday, April 16, 2002 5:26 PM Subject: Income mobility in the US > 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
