How To Earn More Money Than It Used To

A while back I wrote about how there wasgreater inequality in wealth than there was in income

. Now a new report from the Pew Economic Mobility Project shows that across the income distribution, every income class is earning more than it used to, even if the raises are uneven. But when it comes to the wealth distribution, the rich are getting richer and the poor are getting poorer.

The report is based on data from the Panel Study of Income Dynamics, or P.S.I.D., a longitudinal data set that has followed some rotary kiln sellers families from 1968 to the present. First Pew looked at the earnings of todays adults compared to those of their parents generation, and found that the typical American in each income quintile earned more than his counterpart from a generation earlier.

Pew Economic Mobility ProjectNotes: 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.

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 percent in inflation-adjusted terms. Thats 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.

In other words, compared to the last generation, wealth has been become more concentrated in the hands (and bank accounts and houses) of the richest Americans. Exactly why is debatable. The global markets for labor and capital have changed, of course. And the lower tax rate on capital gains which disproportionately helps richer people, who have more capital to invest has helped the richest amass ever higher net worths.

In case youre interested, here are some more details on how these numbers were calculated, from the reports appendix:

Note that most of data on wealth of the childrens generation are from before the housing bubble burst. If anything, then, these data may overstate the wealth of the childrens generation.

by: jocelyn

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