TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, July 11, 2012

84% of Americans Exceed Their Parents' Income, 50% Exceed Their Parents' Wealth

New York Times:  Only Half of Americans Exceed Parents’ Wealth, by Catherine Rampell:

[From The Pew Charitable Trusts, Pursuing the American Dream: Economic Mobility Across Generations:]

In absolute terms, intergenerational income mobility looks pretty good. Five out of every six Americans have family incomes that are higher than their own respective parents’ incomes were:

Note: Income is adjusted for family size.Pew

The country looks far less mobile when you look at relative income classes, though. Americans born into the very top or bottom quintiles were likely to remain there as adults:

Note: Numbers are adjusted for family size.

... The wealth numbers show somewhat less mobility, at least in absolute terms.Only half of Americans are wealthier than their parents were. What’s more, children born into the top wealth quintile were least likely to surpass their parents’ affluence (and their parents’ incomes, too, as you may have noticed from the earlier chart):

Note: Wealth is adjusted for age and includes home equity.Pew

Nearly three-quarters of people born into the bottom of the wealth distribution ended up richer than their parents were, whereas only one-quarter of people born into the very top of the wealth distribution accumulated a bigger fortune than their parents had. ...

As with incomes, relative mobility in the wealth distribution is also somewhat discouraging. The class you were born into is pretty “sticky,” especially if you were very poor or very rich.

Note: Wealth is adjusted for age and includes home equity.

Of Americans born into the bottom quintile of wealth, 41% remain there in adulthood, double the share you would expect if wealth were randomly assigned. Likewise, 41% of Americans born into the top quintile of wealth remain there as adults. Just 7% of the richest Americans topple all the way to the bottom.

New York Times, Richer Rich, and Poorer Poor, by Catherine Rampell:

[T]he typical American in each income quintile earned more than his counterpart from a generation earlier.

Notes: Numbers are adjusted for family size. Each quintile contains 20 percent of the weighted sample. The dashed line represents the 95th percentile of the P.S.I.D. sample.Pew

The median person in the panel today earns a family income of $51,177, whereas the comparable figure from a generation ago was $27,036 after adjusting for inflation. You can see similar bumps upward for the typical family in other quintiles, and that the very highest earners got the biggest raises.

The median family in the top quintile earned $49,075 a generation ago, and $111,115 today, an increase of 126% in inflation-adjusted terms. That’s a much bigger raise, no doubt, but at least every income strata saw its earnings rise.

The trend for the distribution of wealth looks somewhat different.

Notes: Wealth is adjusted for age and includes home equity. Each quintile contains 20 percent of the weighted sample. The dashed line represents the 95th percentile of the P.S.I.D. sample.

Unlike with income, there were not across-the-board gains for wealth. The median person in the poorest quintile has a family net worth that is 63% less than that of his counterpart a generation ago: $2,748, versus $7,439.

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Comments

How much of this is just a shift to two earner households?

Supposedly, real median male wages haven't increased at all.

Posted by: Anon | Jul 11, 2012 2:09:14 PM

Lies, damn lies, and statistics.

Posted by: Jake | Jul 11, 2012 5:31:07 PM

Paul, aren't you overdoing it with all these articles from left-wing The NY Times?

Posted by: Woody | Jul 11, 2012 7:37:32 PM

It would be interesting to see how the increase in income vs the decrease in the value of a dollar.

Posted by: T | Jul 12, 2012 7:11:05 AM

Wouldn't it be fascinating to know if the European "social democracies", using the same methodology, have more or less income and wealth mobility?

Posted by: DLN | Jul 12, 2012 9:03:08 AM

Are these figures in constant dollars (i.e., adjusted for inflation)?
If not, they are meaningless.

Posted by: PacRim Jim | Jul 12, 2012 10:14:26 AM

Classism is classless.

Posted by: AMTbuff | Jul 12, 2012 11:56:46 AM

This entire article is nothing but air. When I was a kid in the 1950s we got 5 loaves of bread for a dollar. Now its what $3.50 a loaf?
When I got my first real job in 1973 my mother me told I was earning more than my father ever did. When my son got his first job, Electrical Engineer, he is making TWICE my high pay after 30 years on the union scale job.
The numbers mean NOTHING.

Posted by: bgarrett | Jul 12, 2012 11:57:22 AM