Why Are Children Less Likely to Earn More Than Their Parents These Day?


Even by my standards, the blog has been pretty chart heavy lately. I’m not sure why, but I think it’s to take my mind off the unfolding disaster of Donald Trump. Muddling around in Excel seems pretty soothing by contrast.

(I mean, Trump just told us he’s not going to bother with intelligence briefings at all because “I’m, like, a smart guy.” And as near as I can tell, the entire political class of the country hasn’t exploded en masse. WTF is going on here?)

Ahem. You see the problem? So let’s go back to charts. Recently a team of economists led by Raj Chetty finished a groundbreaking bit of census research that compared incomes of parents at age 30 to their children at age 30. What they found was that children who reached age 30 in 1970 were 91 percent likely to have higher incomes than their parents. However, children who reached age 30 in 2010 were only 50 percent more likely to have higher incomes than their parents.

Why the decline? To demonstrate the answer, I have two charts for you. Here they are, with explanations below:

The chart on the left shows mean real incomes over the past eight decades. The orange lines indicate a guesstimate of standard deviation as a proxy for income inequality. If I keep that standard deviation constant through the years (at about one-third of income), the number of children we’d statistically project to have higher incomes than their parents goes down from 91 percent to 74 percent. The decline is due to the fact that incomes are growing more slowly than they used to.

The chart on the right is identical, except it uses the figures that Chetty’s team came up with based on real-life parents and children. The number of children who actually have higher incomes than their parents declined from 91 percent to 50 percent.

In other words, although some of the effect is due to slow income growth, much more of it is due to something else. And that something else is growing income inequality. Here is Chetty’s chart (note that he uses birth years rather than age-30 years):

The dotted green line shows what reality would be like if income inequality hadn’t gone up. The dotted pink line shows what reality would be like if incomes had continued to grow at their postwar rate. They both make a difference, but income inequality makes a bigger difference.

Now then, since Chetty has a perfectly good chart, why did I bother producing a different one? And not just different, but arguably more confusing than Chetty’s. It’s because I was a little skeptical of Chetty’s results and wanted to work out some things for myself. Gotta do something to keep from thinking about Donald Trump, after all.

But when I was done, my statistical guesses matched Chetty’s empirical figures pretty closely. So I shrugged, and then, having done all this work, I figured I might as well share it. Maybe it just makes things more confusing or maybe it helps. Who knows? But I have to do something to keep from jumping off a ledge, don’t I?

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WE'LL BE BLUNT.

We have a considerable $390,000 gap in our online fundraising budget that we have to close by June 30. There is no wiggle room, we've already cut everything we can, and we urgently need more readers to pitch in—especially from this specific blurb you're reading right now.

We'll also be quite transparent and level-headed with you about this.

In "News Never Pays," our fearless CEO, Monika Bauerlein, connects the dots on several concerning media trends that, taken together, expose the fallacy behind the tragic state of journalism right now: That the marketplace will take care of providing the free and independent press citizens in a democracy need, and the Next New Thing to invest millions in will fix the problem. Bottom line: Journalism that serves the people needs the support of the people. That's the Next New Thing.

And it's what MoJo and our community of readers have been doing for 47 years now.

But staying afloat is harder than ever.

In "This Is Not a Crisis. It's The New Normal," we explain, as matter-of-factly as we can, what exactly our finances look like, why this moment is particularly urgent, and how we can best communicate that without screaming OMG PLEASE HELP over and over. We also touch on our history and how our nonprofit model makes Mother Jones different than most of the news out there: Letting us go deep, focus on underreported beats, and bring unique perspectives to the day's news.

You're here for reporting like that, not fundraising, but one cannot exist without the other, and it's vitally important that we hit our intimidating $390,000 number in online donations by June 30.

And we hope you might consider pitching in before moving on to whatever it is you're about to do next. It's going to be a nail-biter, and we really need to see donations from this specific ask coming in strong if we're going to get there.

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