Income inequality is very rigid

A Brookings Institute paper about income inequality has been making the rounds, and for good reason. In the paper, the authors draw upon tax data to determine how persistent income inequality is year to year. That is, do folks move up and down the income ladder year to year or do they basically stay where they are? The authors find the latter:

Although the increase in inequality over the last two decades has been extensively documented in the economics and policy literature, the authors find that this inequality largely constituted an increase in permanent inequality. Using a large panel of income data from U.S. federal tax returns for the period 1987-2009, the authors show that for men’s labor earnings, the increase in inequality was entirely permanent (100 percent), while for total household income, roughly three-quarters of the increase in inequality was permanent. They estimate that the permanent variance for men’s earnings roughly doubled in the 20 years between 1987 and 2009, while the permanent variance of total household income increased by about 50 percent over the same period.

There are a variety of important takeaways from this study. Ezra Klein goes over a few of them at Wonkblog. One point not yet raised is that this study smashes through one of the more sophisticated arguments from the right-wing about the issue of income inequality. The dumber sorts on the right tend to just pretend inequality does not exist or they tell some sort of totally irrelevant story about how their great-grandfather was poor before he wasn’t. But some of the smarter sorts have been saying that the inequality statistics do not mean anything because there is a great deal of mobility from year to year. So while it is the case that, in any given year, the income distribution is pretty unequal, folks move up and down that distribution throughout their working years, meaning that inequality in lifetime earnings is much less dispersed.

But we now know with very reliable data that this simply is not true: folks generally live their adult lives at the same spot on that distribution. So our income distribution is simultaneously very unequal and very rigid. With that established, the sophisticated right-wing will have a hard time mounting much of a case about inequality anymore. There is no way to deny that it exists, that it is rigid, and that it generally transmits itself across generations (i.e. very low intergenerational social mobility). So what else is there? All the right seems to have remaining in its arsenal is the argument that such rigid inequality is not relevant to justice anyways. They wont say that of course, even though many believe it.