Despite Myths, Income Mobility is Alive and Well
From today's WSJ editorial "Movin' On Up," which is based on a Treasury Department study to be released today:
One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest quintile in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile.
Of those in the second lowest income quintile, nearly 50% moved into the middle quintile or higher, and only 17% moved down. This is a stunning show of upward mobility, meaning that more than half of all lower-income Americans in 1996 had moved up the income scale in only 10 years.
Also encouraging is the fact that the after-inflation median income of all tax filers increased by an impressive 24% over the same period (see chart above). Two of every three workers had a real income gain -- which contradicts the Huckabee-Edwards-Lou Dobbs spin about stagnant incomes.
Those who start at the bottom but hold full-time jobs nonetheless enjoyed steady income gains. The Treasury study found that those tax filers who were in the poorest income quintile in 1996 saw a near doubling of their incomes (90.5%) over the subsequent decade. Those in the highest quintile, on the other hand, saw only modest income gains (10%). The chart above tells the story, which is that the poorer an individual or household was in 1996 the greater the percentage income gain after 10 years.
Bottom Line: A prevailing mythology persists that: a) those in the poorest income quintile are doomed to a life of poverty, with no hope of ever rising to a higher quintile, b) those in the lowest income quintile are doomed to a life of falling real income, c) those who end up in the top quintile become lifelong members of an exclusive private club that is closed to new members, and d) the richest income group gets richer and richer over time, at the expense of lower income quintiles.