More inequality correlates with less economic mobility

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    Jan 15, 2012 4:35 PM GMT
    So much for the assertion that it's easier to raise your income in the US.

    ak_ineq2.png
    Diagram from Alan Krueger, the Chairman of the White House Council of Economic Advisers.
    http://www.whitehouse.gov/sites/default/files/krueger_cap_speech_final_remarks.pdf

    http://jaredbernsteinblog.com/inequality-and-mobility-revisited/This scatter diagram compares something called the “intergenerational earnings elasticity” (y-axis) with a measure of income inequality on the x-axis. The former measure links kids’ earnings when they’re adults to that of their parents. It’s one of those “how-far-does-the-apple-fall-from-the-tree” metrics, wherein higher numbers represent less mobility. So, basically, this figure is asking whether countries with higher inequality are countries with less mobility. Clearly, the correlation is strong.

    The points cluster around an upward sloping line, indicating that countries that had more inequality across households also had more persistence in income from one generation to the next…Countries that have a high degree of inequality also tend to have less economic mobility across generations.
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    Jan 15, 2012 4:35 PM GMT
    http://www.nytimes.com/2012/01/05/us/harder-for-americans-to-rise-from-lower-rungs.html?pagewanted=all
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    Jan 15, 2012 5:39 PM GMT
    q1w2e3 saidhttp://www.nytimes.com/2012/01/05/us/harder-for-americans-to-rise-from-lower-rungs.html?pagewanted=all

    Former Senator Rick Santorum of Pennsylvania, a Republican candidate for president, warned this fall that movement “up into the middle income is actually greater, the mobility in Europe, than it is in America.”

    Yet we have them saying that the "US is turning into Europe and we are doomed!"..
    I just dont understand how you can talk out both sides and bullshit both ways.
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    Jan 15, 2012 7:04 PM GMT
    This is why the 99% movement is so appealing. Americans are losing their faith (rightly) that they can expect for their lives or their childrens' lives to improve.
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    Jan 16, 2012 3:31 AM GMT
    ginicontrib.png
    http://jaredbernsteinblog.com/dividends-capital-gains-and-the-growth-of-income-inequality/
    The largest single contributor to the growth of inequality, 1996-2006, was dividends and capital gains. Adding in business income, like profits from a hedge fund, comes to 0.061, more than explaining the 0.057 point increase in the Gini index.

    It may surprise you that income from earnings reduced inequality’s growth over these years. It’s not because the distribution of earnings became more equal—to the contrary. It’s because earnings are a) less skewed than cap gains, dividends, and business income, and b) comprised a significantly smaller share of income in 2006 than in 1996.

    In other words, a more equal type of income (earnings) was a smaller share of total income at the end of the period, and visa versa: a more skewed income source comprised a larger share.

    Note also that tax changes led to higher inequality. As I noted in yesterday’s post, and as other analysis has corroborated (see CBO inequality study), and as anyone who’s been paying attention should know, federal taxes have become less progressive over time.

    I can think of a good solution to both of these last two problems: the increased inequality-inducing function of cap gains, and the diminished progressivity of taxation. Tax capital gains and dividends as regular income. Stop favoring them in the tax code. The research is quite clear that privileging these income types has little to do with investment patterns, and instead leads to all kinds of timing and game-the-system distortions.
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    Jan 16, 2012 3:43 AM GMT
    0114krugman1-blog480.jpg

    http://krugman.blogs.nytimes.com/2012/01/14/things-were-supposed-to-be-quiet-about/You see the contrast: a doubling of family incomes in the post war generation compared with maybe 20 percent since, and family incomes growing in line with GDP before, lagging far behind since, with the difference basically being the rising share of the 1 percent.

    This is real stuff, not some trivial envy-driven concern. But we must be very, very quiet about it, right?
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    Jan 16, 2012 3:49 AM GMT
    this is complete and utter twaddle . . . the real reason that Americans are not rising economically is that they have lost the bedrock values such as thrift and deferred gratification that sustained and boosted previous generations . . .


    . . . previous generations of middle and lower middle class Americas did not get married in Hawaii or at a resort, nor did they, early on in life, go on vacations at Disneyworld or Mexico . . . such things would have been unthinkble . . . there has been a most unfortunate shift in values, but those who understand this can still do very well in America


    but the slime loves to hate America . . . and the slime loves, in the name of compassion, to pickpocket the working man
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    Jan 16, 2012 4:05 AM GMT
    http://www.americanprogress.org/events/2012/01/krueger.htmlLastly, I want to emphasize that restoring more fairness to the economy would be good for all parts of American society. This is not a zero-sum game. The evidence suggests that a growing middle class is good for the economy, and that a more fair distribution of income would hasten economic growth. Businesses would benefit from restoring more fairness to the economy by having more middle class customers, more stable markets, and improved employee morale and productivity.
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    Jan 16, 2012 4:42 AM GMT
    noren saidthis is complete and utter twaddle . . . the real reason that Americans are not rising economically is that they have lost the bedrock values such as thrift and deferred gratification that sustained and boosted previous generations . . .


    . . . previous generations of middle and lower middle class Americas did not get married in Hawaii or at a resort, nor did they, early on in life, go on vacations at Disneyworld or Mexico . . . such things would have been unthinkble . . . there has been a most unfortunate shift in values, but those who understand this can still do very well in America


    but the slime loves to hate America . . . and the slime loves, in the name of compassion, to pickpocket the working man


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    You know what, you make a good point here about the "bedrock values such as thrift and deferred gratification". young marrieds now are going into debt to have everything their parents worked 20 years for, most now expect to have it all put together in their first several months of marriage. Getting into debt for instant gratification played a huge part in our economic collapse here in the US, one family at a time, one village, one town, one county, one city at a time and collectively it all came in on us because payment day came due.

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    Jan 20, 2012 12:37 AM GMT
    An updated graph with more countries:

    figure-21.png
    http://milescorak.com/
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    Jan 20, 2012 1:01 AM GMT
    noren saidthis is complete and utter twaddle . . . the real reason that Americans are not rising economically is that they have lost the bedrock values such as thrift and deferred gratification that sustained and boosted previous generations . . .


    . . . previous generations of middle and lower middle class Americas did not get married in Hawaii or at a resort, nor did they, early on in life, go on vacations at Disneyworld or Mexico . . . such things would have been unthinkble . . . there has been a most unfortunate shift in values, but those who understand this can still do very well in America


    but the slime loves to hate America . . . and the slime loves, in the name of compassion, to pickpocket the working man





    Pure bullshit.

    My grandparents who were not wealthy went on a cruise to Europe when they got married in the 1940's and it was something that was commonly done at the time.

    The fact is that the quality of life for middle class Americans today is vastly worse than it was prior to the Repub's implementation of their tax cuts for the rich economic policy in the 1980's .

    Middle class families in previous generations could get by on just ONE income.
    Now in most middle class families, Mom has to go to work too just for them to be able to afford the basic necessities of life.

    Middle class workers in previous generations got pension plans and job benefits from their company that guaranteed a secure retirement and that made their pay checks stretch further.

    Out of control corporate greed has slashed or eliminated job benefits and pension plans have become a thing of the past.

    Corporate greed is also the reason for the stagnant wages that have forced middle class families to become two-income families.

    At the same as wages for middle class workers have stagnated - the corporate big shots at the top have showered themselves with huge salaries and bonuses.

    And FYI - YOU are the one who's blaming America.
    Blaming average Americans for the fact that they've gotten screwed by Repub economic policies and corporate greed is just despicable.

    The "unfortunate shift in values" that we've seen since the Repubs came up with their tax cuts for the rich pro-corporate economic policies is a shift away from economic policies that work for middle class Americans to economic policies that help the rich get richer and corporations pay no taxes while average Americans get screwed.