This first study, from the Pew Charitable Trusts, conducted by Leonard Lopoo and Thomas DeLeire uses the Panel Study of Income Dynamics (PSID) and compares the family incomes of children to the income of their parents.⁴ Parents income is taken from a series of years in the 1960s. Children’s income is taken from a series of years in the early 2000s. As shown in Figure 1, 84% earned more than their parents, corrected for inflation. But 93% of the children in the poorest households, the bottom 20% surpassed their parents. Only 70% of those raised in the top quintile exceeded their parent’s income.
A lot of studies of income distribution track percentiles. That is, they will compare the bottom 20th percentile in, say, 1970, with the bottom 20th percentile today. Those are not the same people. Yet the press almost always reports such studies as if they were the same people. Even worse, many social scientists do this, also.
There is much more at the link.
Imagine one performed the “follow-the-same-people analysis” starting with the people in the “today’s” (i.e., the most contemporaneous) cohorts and study them backwards. I have to assume that all contemporary cohorts would show even more parental out-performance when the starting parental population included those whose parents were not in the United States in the 1960’s. (I may be wrong, but I have to assume these same-people studies would not have focused on this immigrant effect, which like the marriage effect and the household size effect, distorts down the snapshot view of mobility, economic progress.)
Only 70% of those raised in the top quintile exceeded their parent’s income.
I actually surprised it is that high especially there is a lot less handing down businesses over generations. (The Trump today are exception not the rule on business.) The top 20% is extremely competitive and I would have thought a number of people would drop to the next level on a regular basis who might be fine being a well off family doctor or even teacher.
Anyway, the other reason why I don’t care for economic mobility with percentiles, is if people are moving percentiles, that means the same of people are moving down.
First, it sounds like regression to the mean, which isn’t that surprising. Second, a lot of people in the lowest quintile are students; their low current earnings may be a very temporary condition.
Gregory Clark did a wonderful job noting that “status” isn’t all about money. If you are an Oxford professor you have a lot of status, but maybe not a lot of money. Less money than a plumber perhaps. If you use “status” rather than just income, and overall family status rather than individuals within a family, there is remarkably little change in status over generations. Regression to the mean is low.
The goal of people who try to get rich mainly seems to be to make it so their kids don’t have to enter a cutthroat money grubbing profession. Do investment bankers want their kids to be investment bankers? I think that’s what happens if the kid can’t do anything more interesting.
I mean this seems to be the generational progression most people aim for:
Blue Collar Job -> Engineer/Accountant -> Investment Banker -> Kid becomes artist or something because he has a trust fund.
Right. Maybe quintiles of average income from 35-55 or something, adjusted for local cost of living, and correcting for human capital test scores …
Here’s a demographic snapshot for those interested in the data: http://www.aei.org/publication/explaining-us-income-inequality-by-household-demographics-2017-edition-2/
But of course correcting for those things is not the point. The point is that people are trying to tell a story about what is happening in America, whether it’s a ‘fair’ or ‘unfair’ or ‘racist’ country, system, economy, etc. so that, among other things, they can justify more or less state intervention, redistribution, and so forth. “Normative Economics.”
And, as you would expect, most of it is total BS.
Here’s a not-BS story.
Up until about 100 years ago – and even 50 years ago for many people – it was not uncommon for individuals with substantial innate gifts to be born and raised very poor. Many stayed that way, despite their talents, because of lack of access to resources, nutrition, education, and better opportunities (of which the economy at the time was only able to sustain a relatively small number). Very, very few people attended college or university, and even those that did were not often able to afford a much different lifestyle than middle class blue collar workers.
A lot of capability is inherited, but their parents were stuck too. There were many untapped geniuses mining coal, milking cows, baking bread, shoveling manure, and digging ditches and so forth. As a result of the poor correlation between “smarts+moxie” and income, and the fact that most women were busy with childcare and housework, pairings for procreation within mostly endogamous groups were, on average, not strongly correlated with genetic potential.
Then all that began to change after the industrial revolution, wealthier societies, and technological and social development. During the very long transition period, eventually most very poor children got access to nutrition and education, where individuals of talent were identified and subsidized to continue their studies. Increasing numbers of people went to college, and the nature of the economy had changed to expand the gap in the market value between work anyone could do, and work only smarter people could do.
Also, there was the sexual revolution and women started getting educated and joining the workforce. Status is highly correlated with income and education, and so marriage and mating became much more “assortative”.
In general, smarter people get a lot of their smarts from their parents, and get higher income from their smarts, and then marry other smart, wealthy people, then have smart kids, who go on to do well, just like their moms and pops. That is, they are becoming a naturally endogenous ‘caste’, selfishly keeping all those smart genes to themselves. Vice versa for the underclass.
All of which means that we’ve gone from:
1. Lots of poor, untapped talent, but little resources and opportunity, so low intergenerational upward mobility; to
2. Lots of poor, untapped talent, but more resources and opportunity, so lots of them able to use their talents to rise up SES levels; lots of intergenerational upward mobility
3. Very little poor, untapped talent left, decreasing intergenerational upward mobility.
No magic dirt. Null hypothesis. Environmental inputs like nutrition and some access to education and opportunity and significantly less racism are mostly at the ‘saturation’ and strongly diminishing marginal returns levels.
Now the matter of whether that’s ‘fair and just’ is a whole other question. Most conservatives and progressives don’t believe this story, and pronounce the current situation as being mostly just or unjust based on their bad stories (which conveniently support their political formulas).
There has been some adaptive movement of the progressives towards slight acknowledgement of some aspects of the above story (as least, intra-racially), and even stipulating that various inequalities arise ‘naturally’ (that is, not as a result of animus-based discrimination), declaring that it’s still the result of the unfair ‘genetic lottery’, and that no one ‘deserves’ the gifts that allow them to out-earn their less fortunate compatriots, and thus should not be allowed to keep anything in excess of what is required to incentivize hard work, entrepreneurship, and innovation.
That is, even when we get to the end of the “oppression narrative” road, we can always travel further along the absolutist egalitarianism road.
Complementary to this is Dan Seligman’s theory (from 20 or more years ago) that contrary to the stereotype of the unattractive bookworm, the best place to find attractive young women is on a selective college campus.
Just as smart hard-working kids from poor backgrounds did better and married other smart hard-working people, leading to smart hard-working children, something similar happened with good-looking people from poor backgrounds.
The flip side is that poor people tend to be less attractive. Watching shows like “Jerry Springer” will provide a good deal of evidence for that hypothesis.
Seligman is right, especially within subpopulations. Two quick points on this:
1. Where do innate, intra-human sexual aesthetic preferences come from? For our remote ancestors, they were ok proxies for health, fertility, genetic quality, and adaptive fitness. Imperfect proxies, and hardly the whole game when it comes to sexual attraction, but still ok.
2. Just like health and good looks, intelligence level seems to be a kind of sum of how many of a large number of influential genes are closest to their ideal coding. Little deviations and mutations from those ideal codings can leave you with genes that code for proteins that still ‘work’, just not as well, or will results that are at least not fatal. That’s genetic load, and they are like spelling mistakes in a passage that is still intelligible. People with fewer spelling mistakes tend to be smarter, healthier, and better looking. One day (perhaps soon!) it might be possible to just “spell check” an embryo’s DNA, and end up with the superhuman version of that human, potentially many standard deviations better along many dimensions than that human would have otherwise been. I’d bet we’ll see successfully spell-checked animals before 2050, so humans may be too within our lifetimes. That’s going to be a real game changer, and will probably vitiate most of the assumptions behind our long term worries or plans.
The way I like to imagine it is that many proteins are mechanical machines, and some can tolerate some variation from normalcy and be slightly misshapen and still get their job done, just not as well. Imagine a car built with an axle that was just slightly too small. Maybe it could still drive, but not as fast, and turns are rough. Wholly apart from its driving capability, however, it definitely looks weird and not normal, and an instinct that those weird looks probably meant worse performance would be correct.
“and thus should not be allowed to keep anything in excess of what is required to incentivize hard work, entrepreneurship, and innovation.”
Of course, who is to say what amount is necessary to incentivize hard work, entrepreneurship, or innovation? As if it was an easily calculable thing, and not subject to the usual politics that makes things go crazy. For instance, currently the answer seems to be “don’t let them keep enough to have replacement TFR.”
Or the basic moral question. Are smart people glorified batteries? To be exploited to the maximum amount possible without causing them to break (again, as if we could possibly calculate and implement something that precise). Or are they independent individuals with rights to pursue their own happiness, not to be slaves since they were so “lucky.”
Not to mention that based on this criteria why show more sympathy to people of the first world then people of the third world, and given current demographic trends won’t that mean the vast majority of people in the world merging into a kind of giant quasi third world living condition.
In practice “your just genetically lucky, therefore…” is fraught with peril. Peril for individual rights, peril for nations, peril for economies, peril for future generations. Saying that we can “figure out and implement” some political regime that sheers the high IQ lamb just right is about as utopian as other envy based economic solutions (communism). “To each according to his needs, from each according to his ability,” was already tried once. They couldn’t figure it out.
As anything other than a call for individual voluntary noblesse oblige its more trouble then its worth.
https://www.smbc-comics.com/comic/2011-07-13
To expand on your thoughts, the vast of economic growth of the Post-WW2 was the historical exception and not the beginning of history. Between the experience of The Great Depression and WW2 (along with a LOW labor supply) the 1950s was heaven to 80% of Americans. And we vastly over-estimating the quality of living of the past as we think as a poor farmer in 1896, was probably the ‘Middle Class of 1896. And they did consider themselves Very Poor as there was 10- 20% of the population living a completely day to day. (I always assume Chaplin’s tramp character was so popular in 1916 because a lot people lived that existence for even a short period.)
Anyway when thinking about history, we always need to remember the famous line from Monty Python about the King “Being the only one not covered in Shit” from The Holy Grail. It was more true than anything else.
I agree with Handle that most of the discussion about the direction of the economy is a masquerade that uses stylized facts to promote certain policy agendas.
So when we read things like “Middle Class Families Haven’t Seen Their Incomes Rise Since 1963”, it’s interpreted as a normative argument for certain social changes, regardless of its literal accuracy.
People buy into this narrative if they feel like it accurately describes a trend they agree with and are willing to overlook embellishments in how the argument is used if the basic message “feels right”.
In this vein, I do think Russ is tilting into the wind with the message he’s putting out there. It’s factually accurate, and a useful rejoinder to most narratives you see in the MSM, but the fact that household incomes have risen 17% over the last 40 years instead of 0% isn’t enough to change people’s overall mood.
I think this is especially true because a lot of the facts that he cites in support of his argument are probably adaptations to lower growth. I’d guess that if we had the same productivity & income growth from the 50’s and 60’s and median earners were making $73,000/year we wouldn’t observe all of the changes in household composition that exist today.
I think being good looking is enhanced by being smart, particularly for women. A dumb girl who tries to dress up looks trashy. A smart girl who dresses up looks great whatever her actual looks. So hair, makeup and clothes could be reliable IQ indicators.