- The Washington Times - Thursday, November 2, 2000

Vice President Gore wants to go to war. Not in Somalia. And certainly not in the Middle East. The war he wants to wage is a domestic class struggle against the "richest 1 percent." He continually denounces George W. Bush's tax cut plan because the lion's share of its tax relief goes to the "richest 1 percent" of all Americans. He also charges that the Bush tax cut squanders federal revenues that could better be spent on education, elderly health care, and even national defense spending that benefits the middle class and lower classes. Mr. Gore's evident intent here is to spark class warfare.

So far those masses have largely ignored his rallying call. For starters, a lot of people are increasingly skeptical of the "fuzzy math" Mr. Gore uses to define income classes or their share of federal largesse. But there is a much deeper concern that keeps the other 99 percent of the electorate from rallying against the top 1 percent. Put simply, everyone wants to get rich. And a whole lot of Americans think they'll get their chance. So they are loathe to attack the privileges or positions they themselves hope to attain.

Mr. Gore's team doesn't share this optimistic vision of income mobility. They are quick to trot out statistics documenting increasing inequality. The latest Census Bureau data, for example, show that the richest 5 percent of all households got 21.5 percent of U.S. income in 1999, up from 18.9 percent 10 years ago. But these annual census statistics on the distribution of income shed virtually no light on the fundamental issue of equal opportunity. At best, the annual census surveys tell us how much more income people at the top of the income ladder have compared to the people at the bottom. What we really want to know, however, is whether the same people are at the top rung each year. And since there is always a bottom rung, the key issue there too is whether the same people inhabit it year after year.

The more people move up and down the income ladder, the less important are the differences in the size of the rungs. And the less willing will the masses be to engage in class warfare. To assess the extent of income mobility in America, you have to track the same individuals year after year. The Census Bureau doesn't do that. But other sources do. The Social Security Administration keeps a lifetime earnings history for nearly everyone. A few other data sources the National Longitudinal Surveys, the High School and Beyond surveys provide similar tracking capabilities.

These longitudinal observations are often mishandled. As Princeton economist Paul Krugman recently pointed out, the fact that an undergraduate moves out of a college bookstore job into a corporate suite doesn't shed much light on equality of opportunity. In fact, most people's incomes do increase over time, owing to age, experience and inflation. That's not the kind of mobility that counts.

The kind of mobility that counts is among people of similar age. Do the kids who go to college always rise to the top? Are the individuals with the higher incomes right after graduation still on the top rung 10 or 20 years later?

Anyone who has been to a 10 year school reunion knows the end results are often surprising. The data from national surveys confirm that such surprises are commonplace: Individuals do move up and down the income ladder with startling frequency. Even when income ladders defined are for narrow (5-year) age cohorts. A Social Security-based study documented that more than 70 percent of male workers move significant distances up or down the income ladder in a span of only 15 years. Mr. Krugman thinks that such mobility simply reflects movements between part-time and full-time jobs. But he's wrong. Even when only full-time workers are tracked, the same pattern of pervasive mobility dominates. Moreover, that kind of pervasive mobility continues throughout the average worker's life.

Most academics fail to understand such mobility because they work in rigidly hierarchical university systems where promotion must be granted by one's seniors. The evidence is overwhelming, however, that such immobility is the exception, not the rule. The Social Security earnings histories show that less than 50 percent of the people on the top or bottom rung in any year are still on the same rung 10-15 years later. On the bottom rung, the "stagnation" rate is only 35 percent. Another study, using the National Longitudinal Survey of Youth, showed that rates of income mobility may actually be increasing. That would be a far more potent commentary on equality of opportunity than the observed widening of income gaps.

Studies of specific wage and income groups generate similarly strong findings. People worry that workers trapped in minimum wage jobs won't be able to support a family. But how many workers are actually trapped in such jobs? Longitudinal data reveal that 60 percent of the young people who start out at minimum wages no longer work for such low wages two years later. Only 15 percent of such workers have any minimum-wage jobs three years later. Doesn't that kind of income mobility reveal more about equality of opportunity than do comparisons of CEO salaries to minimum wages?

So what about that "richest 1 percent" that Mr. Gore inveighs against? The mobility studies tell us it is unlikely that the same people will be in the top 1 percent every year. Since the Bush tax cut plan stretches over 10 years, this means a great many more than 1 percent of all Americans are likely to get the biggest benefits of that plan. Maybe not you. Maybe not me. But knowing we've at least got a chance to reside at the top dampens the class-warfare spirit.

Bradley Schiller, professor of economics at American University's School of Public Affairs, has just published "The Economics of Poverty and Discrimination" (Prentice-Hall, 2000) and "The Economy Today" (McGraw-Hill, 2000).



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