Lies, Damn Lies, and Statistics
I came across two stories recently that show why the quote above is so popular.
The first quotes studies to show overall wage stagnation.
Even in a growing economy, only about a third of Americans can be considered upwardly mobile -- meaning they will end up with more inflation-adjusted income and a higher relative economic standing than did their parents. The rest are maintaining their standing or falling behind; about one-third slip down the income scale over the course of a generation.
When specific groups are considered, the news is even more unsettling. Men in their 30s have experienced a sustained slide in their inflation-adjusted incomes, which fell by 12 percent between 1974 and 2004.
And most shocking of all: About 45 percent of middle-income African American children end up falling to the bottom of the income scale over a generation, compared with 16 percent of white children -- meaning that even solidly middle-class African American families lead fragile economic lives.
According to the Pew studies, America has less upward economic mobility than Denmark, Canada or Finland. "In America, more than other countries," says project director John Morton, "the circumstances of your birth have more to say about where you end up than how we tend to think of ourselves."
The second quotes another study to show precisely the opposite.
If you've been listening to Mike Huckabee or John Edwards on the Presidential trail, you may have heard that the U.S. is becoming a nation of rising inequality and shrinking opportunity. We'd refer those campaigns to a new study of income mobility by the Treasury Department that exposes those claims as so much populist hokum.
. . .
The Treasury study examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, 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. This is a stunning show of upward mobility, meaning that more than half of all lower-income Americans in 1996 had moved up the income scale in only 10 years.
Both studies, of course, are likely entirely true and accurate. Statistics don't lie. People making selective use of them, however . . .
Look at the stories carefully, and you'll see that what they're measuring is quite different. The first story is measuring the difference between generations; what do my siblings and I make today compared to our parents. The second story is measuring the same people over a ten-year span. What do I make today compared to what I made ten years ago. (Well, given my youth, not really, but you get the picture.)
The second story is a case where the deck is stacked, statistically speaking. Take people in their mid-twenties, just entering the workforce, and follow their careers for ten years and on average, just on experience alone, they should be getting better-paying jobs as they go along. Certainly if I take what I was earning just after finishing school and compare it to what I'm making now, I've advanced quite considerably up the ladder.
On the other hand, if you take what I make now and compare it to what my father was making at my age, (with him having, I might add, far less education and the debt-load that accompanied it), then my actual progress, if any, looks far less spectacular.
Wage stagnation isn't a myth, it's all about how you look at the data, and what data you're looking at.
