There’s rightly been a lot of concern in the UK and US about wage stagnation, inequality and falling social mobility (and their potential populist political consequences
). So Russ Robert’s new post
, which claims that most studies on the topic are deeply misleading and that in fact most of the gains from economic growth go to the poorest, is both contrarian and fascinating.
Roberts’ key argument is that studies such as Piketty and Saez’s
make the crucial error of comparing the group of people who happen to be in the bottom (or top) quintile at one point in time with the group of people who happen to be in that quintile some time later. But in fact, argues Roberts, these people are not
the same people: instead we follow the individuals
from, say, the bottom quartile at one point in time and ask how they
are doing some time later, all the traditional conclusions are reversed.
Roberts looks at panel data that follows individuals from 1987 to 2007 and finds, among other things:
- Those born in the bottom quintile have a median income 100% higher than their parents 20 years later.
- The comparable figure for those born in the top quintile is 0%!
- The individuals in the top 1% in 1987 saw an average *drop* in income of 29% in 2007
This doesn’t invalidate many important narratives (e.g. relative social mobility is still very low), but it repays careful thought. If we want a fairer and more equal world, we need to start with an accurate analysis - and Roberts’ post suggests it’s more complicated than it first appears.