Wells Fargo Securities study: presents as shown in the link below
that income inequality has grown, by their analysis but income mobility
is a key.
In summary, while income inequality has increased dramatically in the United States over the past three decades,
the trends in economic mobility are mixed. The relentless forces of globalization that began in the 1980s have put
downward pressure on economic mobility for those U.S. workers at the bottom of the income distribution.
Rather than redistribute income, the more economically optimal solution to address declining economic
mobility for lower-income workers should comprise reforms to education, better essential nutrition for children
born into poverty, more interactive preschool and child care experiences and improved financial literacy for all income groups.
We examine a report by Wells Fargo, reported by the LA Times:
Link
LA Times says:
The ability to go from poor to rich — or at least to climb out of
poverty — has become much harder to do in the last three decades,
according to an analysis by Wells Fargo Securities.
The percentage of low-income people who moved up the economic ladder slowed sharply from
1980 to 2009, compared with the previous dozen years, the study found.
The drop in economic mobility, combined with recently declining
government aid to the poor, has left many Americans with no way to dig
themselves out of poverty.
"Those at the lower end of the income distribution are currently
stuck between a rock and a hard place," the study said. "They do not
have the economic mobility to improve their finances in the labor
market, and government assistance helping them get by is now drying up."
The picture was brighter for the middle class, whose ability for
upward mobility improved notably from 1980 to 2009. The highest-earning
people in the study — those in the top quintile — had average annual
income of $140,000. For the top 1%, it was $644,000. And the top 0.1%
earned an average $1.1 million a year.
Despite several recessions and bear markets, the middle class
benefited from superior education, which led to higher-paying jobs, and
from profit built up over many years in the stock market, said John
Silvia, Wells Fargo's chief economist, who co-wrote the report with two
colleagues.
The study was limited. It tracked only about 500 households, in part
because of the lack of reliable data on specific households over
extended periods of time. But Wells Fargo economists believe the
sampling is representative of the broad population.
The study was prompted by the intense national debate over income
inequality that in part spawned the Occupy Wall Street movement, with
critics saying wealth is increasingly concentrated in the hands of the
richest Americans to the detriment of everyone else. A report by the
Congressional Budget Office in October said after-tax income for the top
1% of U.S. households ballooned 275% from 1979 to 2007. The gain for the
bottom one-fifth was 18%.
Indeed, a recent report from the Congressional Budget Office (CBO)
makes it clear that from 1979 to 2007, the income gap between top income
earners and everybody else grew ever more lopsided.1 This disparity in
the American economic experience over the past generation is among the
primary catalysts for the various “Occupy” movements across the country.
While opinions about the protests themselves are mixed, there seems to
be some consensus about Americans’ distaste for the growing share of the
pie going to the richest percentile of our population. A recent poll
suggests that six out of ten Americans support policy to address income
equality.2
Conclusions
In summary, while income inequality has increased dramatically in
the United States over the past three decades, the trends in economic
mobility are mixed. The relentless forces of globalization that began in
the 1980s have put downward pressure on economic mobility for those U.S.
workers at the bottom of the income distribution.
U.S. workers at the
middle of the income distribution, however, remain fairly mobile. The
trends in economic mobility at the top of the income distribution
suggest that the large gains witnessed at the upper end of the income
distribution may not have necessarily gone to the same individuals year
in and year out over the past decade.
Rather than redistribute income, the more economically optimal
solution to address declining economic mobility for lower-income workers
should comprise reforms to education, better essential nutrition for
children born into poverty, more interactive preschool and child care
experiences and improved financial literacy for all income groups.
“I am for doing good to the poor, but I differ in opinion of the means.
I think the best way of doing good to the poor, is not making them easy in poverty,
but leading or driving them out of it.”
— Benjamin Franklin, November 1766