Income inequality now and later

There’s deep concern about the apparently widening gap, called income inequality, between those households with very high incomes and those with lower incomes. But NC State University economist Mike Walden points out that people tend to make false assumptions about the concept.

“There is an assumption: The assumption is that the people that we are looking at, let’s say, 10 years ago in terms of their incomes are in the same place as they are now, 10 years later. That is to say, we are assuming that there is no movement of people between the income levels. And studies show that that’s not the case.

“For example, there was actually a federal government Treasury Department study that compared households and their incomes in 1996 and then where they were, those same households, 10 years later.

?Very very interesting results. They found that 60 percent of the households who were at the lowest level of income in 1996 had actually moved up the income ladder 10 years later, including 15 percent of those who are now above the average income. Likewise, they found that 30 percent of the people in 1996 who had the highest income had moved down the income ladder a decade later.

“So certainly this is not to say that income inequality is not an issue — it is — but I do think we need to remember that there is a lot of income mobility in the U.S. that in some sense makes that issue less concerning over a long period of time.”