Turning Good News into Bad

Posted: Nov 30, 2007 12:01 AM
Turning Good News into Bad

With housing prices falling, energy prices climbing and the stock market on a roller coaster, it's no wonder many Americans are worried about their economic condition. But a new study on economic mobility in the United States suggests most of us are much better off than our parents were. Two out of three Americans have incomes higher than their own parents, and nearly 80 percent of children whose parents were in the poorest group of Americans in the late 1960s have higher income than their parents.

The study was published by the Economic Mobility Project, a consortium made up of researchers from four widely respected public policy groups: the conservative American Enterprise Institute and Heritage Foundation and the liberal Brookings Institution and Urban Institute. The data come from an analysis of over 2,300 native-born Americans who were under 18 years of age in 1968 who were included in the Panel Study of Income Dynamics. The PSID is an annual survey of 8,000 families and is considered one of the best sources available for longitudinal data on income, health and social behavior for a representative sample of Americans.

In 1968, median family income for the group was $55,600 (measured in inflation-adjusted 2006 dollars), compared with $71,900 today -- a whopping 29 percent increase. But those numbers don't fully reflect how much better off families are today. Families in 1968 were larger on average, comprising 3.1 individuals in 1968 but 2.1 persons now. Since there are many more childless couples and single parents today, the average family's income is spread among fewer people.

And, since the study counted only cash income, it substantially understated the economic condition of the poorest families who receive non-cash assistance such as food stamps, subsidized housing and medical care. By all economic measures, the poor are better off today than they were a generation ago. Cash income alone among the poorest fifth of native-born Americans was up 18 percent in inflation-adjusted dollars during the period.

The findings will probably come as news to those Americans who think the middle class and poor are worse off today, a view Democratic politicians and the media hammer home every chance they get. The Washington Post, for example, headlined a story about the study by Post columnist Eugene Robinson "Tattered Dream," which argued that "the American Dream is nothing but false hope."

Robinson latched onto the finding that only 6 percent of those persons whose parents were in the poorest fifth of American families in 1968 had managed to climb into the wealthiest fifth by the time they were in their late 30s or 40s. He doesn't bother to quote the study's finding that "[c]hildren born into the bottom fifth are more likely to surpass their parents' income than are children from any other group."

What seems to irk Robinson and others looking for bad economic news is the finding that income among the top two quintiles has gone up more than among the middle and lower two quintiles -- 52 percent for the top fifth, 39 percent for the second fifth, while only 29 percent for the middle, 22 percent for the second lowest and 18 percent for the bottom fifth.

In other words, even though all Americans are much better off today than they were a generation ago, the most affluent Americans have improved their status relative to others. Robinson doesn't tell readers that more than 60 percent of children born into the wealthiest group don't stay there, slipping down into lower income groups, including almost one-in-ten who slip into the poorest fifth of Americans.

About one-third of all Americans are upwardly mobile, according to the study, meaning not only do they earn more money than their parents in absolute terms, but they improve their ranking relative to others as well. Another third, though their incomes are higher than their parents', remain at the same relative rank, and one-third slip into lower ranks than their parents'.

This seems to depict an almost perfectly mobile society, with equal percentages of Americans moving up, staying the same or moving lower in relative economic standing. But some folks, it seems, will always find a way to turn good news into bad.

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