Tuesday, November 13, 2007

Income Inequality Not on Rise

Paul Gigot, writing a Wall Street Journal editorial, summarizes the findings of a U.S. Treasury department study of income mobility. The study finds that income mobility is essentially the same as it has been for the last 40 years. So when populist candidates like Edwards and Huckabee tell you that the middle class is disappearing, they are simply wrong. The data do not support that view.

The Treasury study covered the period from 1996 to 2005, and looked at pairs of tax returns from those two years. That is, they compared how a taxpayer was doing in 1996 with how s/he was doing in 2005, and they did this comparison for nearly 100,000 taxpayers. They found:
The after-inflation median income of all tax filers increased by an impressive 24% over the same period. Two of every three workers had a real income gain.

Notice, that they talk about the real or after-inflation income, not just the dollar amounts. And Gigot quotes the Treasury as saying of U.S. taxpayers:
The basic finding of this analysis is that relative income mobility is approximately the same in the last 10 years as it was in the previous decade.

So ... let's not hear any more about the vanishing American middle class. The evidence suggests it is doing just fine.