Wednesday, November 14, 2007

I wish I was poor - they get richer!

Here's a brief tidbit... we've all heard the claims that "the rich are getting richer and the poor are getting poorer." Actually, there are a variety of those claims whittled into a handy quiver of cliches. But how true is it? Or is it true at all?

According to the Treasury Dept.'s latest statistics... well... see for yourself...

In the 10 years between 1996 and 2005, the lowest quintile (20%) almost doubled their median income. Not bad, eh? What's more, people didn't stay in their income groups. Nearly 58% of income tax filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. About 25% of them jumped into the middle or upper-middle income groups (third and fourth quintiles), 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. (I'm not entirely sure how that is possible mathematically unless there is an increase in the number of people overall.)

Let's think between the lines here... this is not simply your income increasing along with everyone else's. That is your income increasing fast enough to have passed other people's. Sure, there's a bit of "churn" there since people must have moved down. That will always be happening to some extent as people get promotions, demotions, lay offs, their businesses do better or worse, etc. The important implication of all of this is that people are not locked in to their lot in life. There is no inherent "caste system" either implicit or explicit (like how the evil Republicans must be trying to keep people repressed in order to protect their cronies).

So how do things change? Unless there are an overwhelming number of "life's lotteries" (see my commentary on how Barack Obama thinks) going on that we don't know about, there must be something specifically individual to this phenomenon. Could it be that... if you try to do something valuable, you may succeed at doing something valuable... and you will be rewarded with something valuable?

Welcome to the individualist, capitalist market at work. Adam Smith would be proud.

(Some of the statistics here were taken from a Wall Street Journal Opinion Feature.)

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