Friday, July 11, 2008

American Dream--Statistical Analysis

After reading Adam Shepard’s book “Scratch Beginnings”, my blog of June 9th, I wondered if anyone had done any statistical work on income mobility in the USA. My impression from 50+ years of living here is that the American Dream is alive and well, although from what I’ve heard from many politicians and pundits it’s “dying, if not deader than a doorknob!”

The USA has always had a reputation of being a country where meritocracy rather than hierostocracy ruled the day….you were judged upon how well you performed rather than to whom you were born. That difference is visible today when compared to Europe. We are all given somewhat equal opportunities to succeed whereas Europeans would just prefer that everyone is equal.

The U. S. Department of the Treasury did a November, 2007 report on “Income Mobility in the U. S. from 1996 to 2005.” Here were some of their key findings:
There is considerable income mobility of individuals with roughly half of the taxpayers who began in the bottom quintile of income moving up to a higher one.

About 55% of taxpayers moved to a different income quintile.

Of those at the highest incomes (the top 1/100 of 1%), only 25% remained there over 10 years. The medium real income of these highest earners declined over 10 years.

The degree of income mobility from 1987 to 1996 is similar to that from 1996 to 2005.

Median incomes for all taxpayers increased by 24%, adjusted for inflation, with 2/3 of all taxpayers increasing during that period. The median income of the lowest income groups increased by a greater percentage than the highest income groups.

49.4% of those in the lowest quintile in 1996 saw their incomes more than double (adjusted for inflation) in the next 10 years.
Economic historian Joseph Schumpeter once compared income distribution of the population to a hotel where some of the rooms are very luxurious but others are small and shabby. All of the rooms are always occupied but people are constantly moving rooms. I’d much rather have our system where someone like Adam Shepard can move from the absolute worst room in the place to one slightly better but with his eye on the penthouse.

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