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Monday, June 06, 2005

Herbert's Immobile Mind

Never to miss a chance to show uninformed he is, Bob Herbert provides us another dose today in the NYT in his editorial "The Mobility Myth". He quotes his fellow NYTer David Cay Johnson, see post below, about how there is no mobility of people among the income tiers in America. He writes:

Put the myth of the American Dream aside. The bottom line is that it's becoming increasingly difficult for working Americans to move up in class. The rich are freezing nearly everybody else in place, and sprinting off with the nation's bounty.

Herbert further refers to Johnson's article:

For every additional dollar earned by the bottom 90 percent of the population between 1950 and 1970, those in the top 0.01 percent earned an additional $162. That gap has since skyrocketed. For every additional dollar earned by the bottom 90 percent between 1990 and 2002, Mr. Johnston wrote, each taxpayer in that top bracket brought in an extra $18,000.

How many Americans stayed at the bottom since 1950? During the boom 50 years, it has not required much effort other than to wake up, shower, dress and give your employer a reasonable amount of effort to realize exceptional wealth (certainly relative to our European counterparts). Absent a few hard luck stories or laziness, most two-earner families who began their careers in the 1950's have retired quite well lately.

Steve Antler of Econopundit puts it well:

This US "gap between richest and poorest" has to be the most rigged datum in the history of economic thought. The highest percentiles have no income ceiling. The lowest are perpetually augmented by immigrants whose massive upward income mobility remains untabulated because immigrants' starting incomes were earned outside the US.

So think about it for a moment. Because of massive prosperity and economic growth, the number of "poorest" Americans is constantly augmented by newcomers -- while at the same time top incomes of the few most successful is continually redefined upward. And economic success is twisted into a narrative of economic failure: "look at it," they scold, "look at that ugly income gap."

Don Boudreaux of Cafe Hayek further assesses Herbert's claims in a letter to the NYT today:


Consider Mr. Herbert’s suggestion that Scandinavians are better off than Americans because income mobility is higher there than in America. If it’s true that income distribution in Scandinavia is more equal than in America, then moving from one income quintile to another would naturally be easier in Scandinavia than in America. An American whose real income rises by, say, $10,000 is less likely to move into a higher income quintile than is a Scandinavian whose real income rises by the same amount. In both cases, however, the workers are equally better off despite the statistical artifact that in America, unlike in Scandinavia, the worker doesn’t move into a higher income category.

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