Comments

Catherine,

I get the feeling that I am being irrationally argumentative, but there are still a number of issues that nag at me. I think they may be making things appear worse than they really are.

First, though, I want to say that I buy totally the concept that American society is becoming more and more of a meritocracy, as mentioned in RisingInequalityPart2. In many ways that is preferable to earlier systems of favoritism. Still, I see the unstable “positive feedback” loop that is built in.

Here’s what bugs me, though. I don’t trust statistics about household income. In tough times (depression), there are fewer households. The head of household has not only his/her spouse and children living at home, but Granny can’t afford that retirement condo, either. Even after they begin earning, the kids may stay at home. So, this one household has the income of mom, dad, kids, and Granny’s Social Security check. Income per household looks pretty solid, even though the reality is that times are tough. If the economy is strong, there are more households. Granny lives in that retirement condo; the oldest son and daughter have their own apartments. Sure, their individual incomes are higher, because the economy is good, but with four separate households, the average income per household is actually lower. This is why challenger candidates for public office will raise stagnant household income as an argument against the incumbent. His/her policies are so bad that household income has remained stagnant for 30 years!

So, how might this affect the statistics on college attendance that you cite? Well, if the second and third quartiles are made up disproportionately of single person households, empty nesters, or families with only young children, why would we expect them to have students in college?

Further, I would guess that the top quartile has more two-income households, where the earners are far enough along in their careers to near the maximum annual incomes of their lifetimes. This would probably occur when the breadwinners are in their fifties. At what age do most people send their children to college? When they are in their fifties.

Thomas Sowell always cautions us to not think of income quintiles or quartiles as bins in which people spend their whole lives. Many twenty-somethings in the bottom half will eventually rise to the top quartile later in their careers. Now, I understand that upward mobility may really be diminishing because of the meritocracy effect, but I don’t think it’s been eliminated by any means.

Let’s do a thought experiment. We will use made up numbers. Let’s assume that the breakpoints between the income quartiles are at $20,000/yr, $40,000/yr, and 80,000/yr. Now assume one of those households at the bottom is a law student scraping by through school on $15,000/yr, and after graduation he accepts an offer to start at $60,000/yr. What does this do to our distribution? He moves from the fourth quartile to the second. The aggregate income of the bottom quartile loses his $15,000/yr, but replaces it with $20,001/yr from the lowest earner in the third quartile. Net effect of fourth quartile: +5,001. The third quartile loses that person making 20,001/yr, but gains someone dropping in from the second quartile earning $40,001/yr. Net effect of third quartile: +$20,000. The second quartile drops that person making $40,001/yr, but gains our lawyer making $60,000/yr. Net effect on second quartile: +$19,999. In this example, the top quartile is unaffected. So, what we have observed is what looks like very desirable upward mobility, but the statistics show the second and third quartile gaining four times as much (or roughly $15,000 more) than the fourth quartile does. Is this really bad?

It’s even more extreme when people from low-income grad student-like households move all the way into the top quartile over the course of a few years. Because anytime one migrates into that top quartile, there’s no limit on how much that person can earn to boost the income of the top quartile. If some poor soul making $12,000/yr won the lottery, it wouldn’t appear as much increased income for the bottom quartile; the winner would move into the top quartile, where he would contribute a healthy gain to the average. So, a poor guy gets rich, but the statistics say the rich got richer.

I’m not saying that there’s no trend. I am saying, though, that:

• Household income is a slippery statistic.
• The age of the heads of households is probably better suited at higher income levels for having kids in college.
• Quoting statistics by quartile or quintile that assume static sets of people in each group is misleading.
• If you want to measure income mobility; measure it. Don’t try to infer it from college household statistics.

Please excuse me if this comes across as argumentative or whiny.

-- DanK - 24 Aug 2005

Excellent points, Dan.

Sowell's point about income mobility is also good. The biggest change in my income ever, even bigger than when I got my first 'career' job, came because I left academia and went into the private sector. Nothing had really happened, I wasn't any differently trained or anything -- I was just being more efficient about where I put my productivity (in the purely economic sense only).

-- CarolynJohnston - 25 Aug 2005

Hi Dan--I think all the points you raise are incredibly important, & correct.

Also, I'm heartened by the thought that the top quartile may have far more than its share of kids (something I was wondering about myself).

I'm positive--from other things I've read--that you're right that the top quartile will have more two-earner families in it.

Actually, I think I'll just pull this whole thing up front.

Definitely, I believe in the income mobility issue. People start at the bottom--almost by definition--and move up.

I think there's some data these days showing less movement......but I can't site it at the moment (I just remember thinking it was fair & probably right when I read it).

-- CatherineJohnson - 25 Aug 2005