4 ms·

Thomas Sowell makes an interesting point that very few people stay in the same categories of rich or poor in their lifetimes. Young people make up the majority

by collyw 6y ago

Thomas Sowell makes an interesting point that very few people stay in the same categories of rich or poor in their lifetimes. Young people make up the majority of the poor, but after working and gaining experience the vast majority move out of that category. I am pretty sure I am an example of that. Graduated in the dot com bust in 2001 and was unemployed for a year and a half. Apparently my partner and I are now in the top 10% of household earnings for our country. (Household earnings being another very misleading statistic - as people become paid better they move out of shared houses, making things look worse when they are actually getting better).

watwut 6y ago
I dont think that describes accurately the economy. Socioeconomic mobility is declining too, people who were born to rich families become rich and those where were born in poor families become poor. It is not all young people who will earn a lot of money later.
bhupy 6y ago
It’s actually been quantified -> https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0116370 https://journals.plos.org/plosone/article?id=10.1371/journal... Based on the empirical tax analysis, 12% of the population found themselves in the top 1% of the income distribution for at least one year. 39% of Americans spent a year in the top 5% of the income distribution, 56% found themselves in the top 10%, and a whopping 73% spent a year in the top 20% of the income distribution.
- scarmig 6y ago
  Interesting. Is that from windfalls like inheritances or big insurance payouts?
  - bhupy 6y ago
    > inheritances No, because this study analyzes historical tax filings, and inheritances are not counted as taxable income. > big insurance payouts On average, probably not, because big insurance payouts are (by definition) actuarial anomalies. They're tail-risk events.
    - staticman2 6y ago
      I don't see how so many people can be in the top 5% unless selling your house counts as income and you are counting the econonic activity when someone sells the family home to downsize in their senior years. At any rate without an illustration of how the claims about income works in practice I don't know what to make of this article. Most people aren't going to spend a year as high level executives.
      - bhupy 6y ago
        > Most people aren't going to spend a year as high level executives. I think you might be over-estimating what it takes to be in the top 5% Here are the numbers -> https://dqydj.com/income-percentile-calculator/ https://dqydj.com/income-percentile-calculator/ If you earn $170,000, you're in the top 5%. That's absolutely attainable within 5 years of graduating into a high-skill job. That's also attainable within one's lifetime if they end up doing any sort of management or decision-making (as opposed to just manual labor all their lives).
        staticman2 6y ago
        It's my understanding that 170,000 per year is more than most managers will ever make in most parts of the country. However I can maybe see 170,000 making sense if it's based on household income and a household may have two manager class employees making 90,000 a year. That said i'm still having a hard time believing the claim that a large number of households will have top 5% earnings. I'd love to see a blog post or something along those lines contexualizing that journal article.
        bhupy 6y ago
        Sure thing! I typically like to only link to primary source so as to avoid accusations of bias. Here are some articles that summarize the primary source: https://web.archive.org/web/20160327182251/https://taxfoundation.org/sites/default/files/docs/sr180.pdf https://web.archive.org/web/20160327182251/https://taxfounda... https://www.aei.org/carpe-diem/evidence-shows-significant-income-mobility-in-the-us-73-of-americans-were-in-the-top-20-for-at-least-a-year/ https://www.aei.org/carpe-diem/evidence-shows-significant-in...
leetcrew 6y ago
aren't household earnings calculated using the tax definition of household? if I live with three other engineers as roommates, that's not a $400k household; it's four $100k "households", despite the fact that we share the same roof.

by collyw 6y ago

watwut 6y ago

I dont think that describes accurately the economy. Socioeconomic mobility is declining too, people who were born to rich families become rich and those where were born in poor families become poor. It is not all young people who will earn a lot of money later.

bhupy 6y ago

It’s actually been quantified -> https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0116370 https://journals.plos.org/plosone/article?id=10.1371/journal... Based on the empirical tax analysis, 12% of the population found themselves in the top 1% of the income distribution for at least one year. 39% of Americans spent a year in the top 5% of the income distribution, 56% found themselves in the top 10%, and a whopping 73% spent a year in the top 20% of the income distribution.

scarmig 6y ago
Interesting. Is that from windfalls like inheritances or big insurance payouts?
- bhupy 6y ago
  > inheritances No, because this study analyzes historical tax filings, and inheritances are not counted as taxable income. > big insurance payouts On average, probably not, because big insurance payouts are (by definition) actuarial anomalies. They're tail-risk events.
  - staticman2 6y ago
    I don't see how so many people can be in the top 5% unless selling your house counts as income and you are counting the econonic activity when someone sells the family home to downsize in their senior years. At any rate without an illustration of how the claims about income works in practice I don't know what to make of this article. Most people aren't going to spend a year as high level executives.
    - bhupy 6y ago
      > Most people aren't going to spend a year as high level executives. I think you might be over-estimating what it takes to be in the top 5% Here are the numbers -> https://dqydj.com/income-percentile-calculator/ https://dqydj.com/income-percentile-calculator/ If you earn $170,000, you're in the top 5%. That's absolutely attainable within 5 years of graduating into a high-skill job. That's also attainable within one's lifetime if they end up doing any sort of management or decision-making (as opposed to just manual labor all their lives).
      - staticman2 6y ago
        It's my understanding that 170,000 per year is more than most managers will ever make in most parts of the country. However I can maybe see 170,000 making sense if it's based on household income and a household may have two manager class employees making 90,000 a year. That said i'm still having a hard time believing the claim that a large number of households will have top 5% earnings. I'd love to see a blog post or something along those lines contexualizing that journal article.
        bhupy 6y ago
        Sure thing! I typically like to only link to primary source so as to avoid accusations of bias. Here are some articles that summarize the primary source: https://web.archive.org/web/20160327182251/https://taxfoundation.org/sites/default/files/docs/sr180.pdf https://web.archive.org/web/20160327182251/https://taxfounda... https://www.aei.org/carpe-diem/evidence-shows-significant-income-mobility-in-the-us-73-of-americans-were-in-the-top-20-for-at-least-a-year/ https://www.aei.org/carpe-diem/evidence-shows-significant-in...

leetcrew 6y ago

aren't household earnings calculated using the tax definition of household? if I live with three other engineers as roommates, that's not a $400k household; it's four $100k "households", despite the fact that we share the same roof.