Another view of economic mobility

We’ve heard quite a bit in recent years about stagnant economic mobility in the United States. In the latest Commentary, Bruce D. Meyer of the University of Chicago and James X. Sullivan of Notre Dame offer another view.

The article is not yet posted online, but here are some key points. Meyer and Sullivan “found strong evidence of improvement in the material well-being of poor families.” They say their research differs from the official economic analyses, largely because the official numbers exaggerate inflation and fail to account for the impact of food stamps, the Earned Income Tax Credit, and and other existing anti-poverty programs.

All our results indicate a notable rise in the material well-being of the poor during the past three decades. Using our preferred measures of income and consumption (and addressing bias in previous methods of calculating inflation), we’ve shown a sharp decline in poverty. We’ve also shown that there have been noticeable improvements in the quality of living units and cars for poor families.

The official measure of pretax money income for America’s poorest 10 percent indicates only modest gains over the past three decades. We see virtually no change between 1980 and 1993. The 10th percentile for the official measure then rose by 19 percent between 1993 and 1999, but it fell in real terms in the most recent decade. But, after making the same adjustments made to the middle-class results, we can see that the income of the 10th percentile has actually risen by 40 percent.

The consumption numbers indicate significantly improved well-being for those near the bottom over most of our time period. … Between 1980 and 2009, consumption among the 10th percentile rose by 54 percent in real terms, while after-tax income plus noncash benefits grew by 44 percent. The changes in consumption have often differed from the changes in income, particularly in recent years. During the 2000s, consumption at the 10th percentile grew by 18 percent, while after-tax income plus non-cash benefits grew by less than 4 percent.