Do the data contradict claims of American economic decline?
Core argument: Data show 70% of 30-year-olds outperforming their parents on lifecycle economic achievements, challenging the claim that U.S. economic mobility has ended.
Contrary to popular narratives of economic stagnation, data reveals that 70% of 30-year-olds are outperforming their parents in terms of lifecycle economic achievements. This challenges the belief that economic mobility has ended. The Gini coefficient, a measure of income inequality, has remained relatively stable since 1989, especially when considering after-tax transfers. Additionally, inflation-adjusted median household income has risen by approximately $25,000 over the same period, while poverty rates have declined. These statistics suggest that economic conditions for younger generations are improving, undermining the notion of American decline.
Ed Comment: Plz show me the evidence and analysis Winship uses to say 70% of today's children are better off than their parents. How does this compare to the 3 other studies I recall -- 2 that came out a few years ago around the sane time, one from Pew, I think, that said they were about the same, and the other from the Fed, I think, that said they were less, and the recent study that says workers take longer to mature in today's more complex world, but then earn more when they do?
Ben Comment:1) Winship on fertility goals and expensive kids:https://thedispatch.com/p/is-it-really-too-expensive-to-raise2) Winship discussing on the Gini coefficient and the inflation-adjusted median household income in the same piece:https://www.aei.org/articles/what-a-new-report-gets-wrong-about-economic-inequality/(it’s deep in the article and he’s citing a CBO report) 3) Winship refers to his previous research finding the 70% are better off than their parents here:https://www.aei.org/economics/is-the-united-states-still-a-land-of-opportunity-my-long-read-qa-with-scott-winship/but I cannot find the actual research. Steve, any ideas? I think the paper with the longer maturity of wage growth is the Demings paper (Attached but I’m not sure I did it properly, Steve - please attach in your normal way). Specifically, I think you want to look at figure 5. People are making more today because they’re more involved in “decision” making jobs as opposed to being managed. As for the other 2 - no idea.
Steve Comment:Demings writeup attached, the table Ben mentioned:
I suspect Scott is referring to work (attached) in did in early 2018 that found Americans had a greater chance of exceeding their parents’ income than the usual suspects (Chetty et al.) suggest, but that they had a lower chance of transcending their parents’ rank in the income distribution
I suspect Ed (let me know if I’m wrong) are referring the attached Fed/Pew studies, I also attached a Henry Grabar note when he attempted to reconcile the two (~)
Ed Comment:Thx. Is table 9 work that Winship did, or was he citing others? Is there a table like 9 that shows rank not income? If Americans had the same chance of exceeding their parent’s rank as other countries have, that would be astonishing given how much more disparate our test scores are and how much more disparate (and demanding) our jobs are. The returns to education are much higher in the US.
Steve Comment:Yes Figure 9 is his work, he doesn’t have a corresponding tables for rank, he does carve out male earning mobility which you might be interested in as men are seemingly more impacted by dysfunction than women
Ed Comment:PPS why is everything indexed to 20-24 across all cohorts? Don’t I want everything indexed to a common number say 20-24 year olds in the first cohort? If everything isn’t indexed to the same number, how can I tell how 55 year olds today compare to ones in the 1960s? instead I see 55 in 1960 indexed to 24 year olds in 1960 and 55 year old 2017 index to 24 year olds in 2017. But what if 24 year olds are richer/poorer today than 24 year olds were in 1960? And isn’t the income of 24 years olds unreliable/variable/driven by a wider dispersion of factors? Isn’t 10 basically 9 for rank? Rank is what mobility is, no? doesn’t it say that the us is more mobile that most/all? Add this graph to the entry. Not the questions I my other email
Ben Comment:No, 9 looks at families and 10 only looks at males. They are looking at the same outcome but with different underlying populations. As for what they’re looking at, Winship says: “ studies mistakenly claim to be assessing “relative mobility”—the link between parent and child ranks—but are actually about “absolute mobility” (the link between parent and child income levels). “ He goes on to say: "Summary measures such as the intergenerational elasticity (IGE), intergenerational correlation (IGC), and the sibling correlation are conventionally, but wrongly, thought to summarize relative mobility. In fact, they summarize absolute mobility; they depend not only on relative mobility (changes in rank) but on changes in the cross-sectional distribution of incomes between generations.” So it seems like he’s saying these studies really look at how much more money kids make than their parents, even if they claim to be about rank. Looks like his preferred interpretation is families make a lot more than their parents did (table 9) and males make more than their fathers but not as much more as the families make. Demings table 5: He’s showing growth rates so the interpretation is each point is equal to log(wage_agebin)/log(wage_20yearold). It’s not exactly what Ed is most interested in but that’s the interpretation of the graph.
Steve Comment:Need to spend some time on this to think about reconciling the Winship /Demings/Pew/Federal Reserve data. First none of these are really apples to apples (in the way we built the apple core) in that for starters fewer millennials head households than the comps in prior generations, women have entered the labor force and demographics change (younger generation is much more diverse) plus as Deming’s points out, there now might be a lag in earnings. Ben noted that Demings is showing growth rates and Kaplan is showing total career earrings, so the base case really matters. But here is the snapshot(though note Pew’s $69,000 in 2017 for median household and the Fed’s $78,200 for married couples in 2014) aren’t that directionally that far apart.)