Inequality matters… but so do the details.

A lot of public attention has been paid recently to economic inequality, from the Occupy Movement’s “We are the 99%” to more recent debates over hiking the minimum wage. Sometimes lost in this discussion are important questions such as which inequalities matter most and how they vary throughout an individual’s lifetime. Sociologist Mark Rank and a co-author looked beyond the static distribution of income into the mobility of individuals throughout their lives within the income distribution. Their results suggest that income distribution is more complex than the oversimplified picture of “one-percenters,” as if they were a relatively fixed collection of fat cats, and the rest of us “have nots.”

It turns out that 12 percent of the population will find themselves in the top 1 percent of the income distribution for at least one year. What’s more, 39 percent of Americans will spend a year in the top 5 percent of the income distribution, 56 percent will find themselves in the top 10 percent, and a whopping 73 percent will spend a year
in the top 20 percent of the income distribution.

According to Rank, the upshot is that in considering policy we need to be aware of this relative fluidity.

But perhaps the focus on the distribution of income, and by extension income dynamics, is less relevant than the distribution of wealth and opportunities for mobility within that distribution. The former is illustrated by Catherine Rampell in a recent Economix blog post, revealing an even more lopsided picture than that portrayed by the income distribution. Of course dynamic and not static pictures are perhaps even more relevant here than in the case of income, which is likely to be the more volatile of the two within a lifetime. It would be enlightening to view the data regarding these lifetime wealth dynamics to get a more complete picture.

In any event, this represents yet another example of the wisdom of resisting the urge to oversimplify when examining data and evaluating policy.

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