ER - the Rational Response to a world going crazy

[Danny]

JG has thrown down his gauntlet and is now challenging SG. This could escalate to light sabres.

 

[Gone4Good]

Gary Solon, Professor of Economics at the University of Michigan is one of the people often cited in these class mobility reports.  Interestingly, his research seems to say the exact opposite of what is reported.  Here is a quote:

"To summarize, previous estimates of trends in intergenerational mobility have
yielded widely divergent results, mainly because of the imprecision resulting from sparse samples. By making more efficient use of the available data from the Panel Study of Income Dynamics, we are able to obtain more reliable evidence. Our estimates are still too imprecise to rule out modest trends in either direction. For the most part, though, our results suggest that intergenerational income mobility in the United States has not changed dramatically over the last two decades.

And the full report for anyone who cares:

http://www-personal.umich.edu/~gsolon/workingpapers/trends.pdf

 

[ESRBob]

Dan Tien -- love the picture man! Are we taking bets?

I haven't got a clue about class mobility in US or Canada (we ERs would no doubt show up in the stats as downwardly mobile if they are using tax returns data), but I do know that I have travelled widely in Canada and been blown away by the quality of the education there among 'average' people. Sales clerks, cashiers, restaurant servers etc. seem to have much better education than their U.S. counterparts. At the top, I'd say it evens out.

 

[sgeeeee]

That's because I'm so unfailingly polite and courteous and wouldn't dream of causing hurt feelings, even if I do encounter a babbling idiot from time to time.  I've always been polite to you haven't I? 

JG

Careful John. I might have to bring up TH's IQ.

 

[sgeeeee]

A technical paper on inter-generational income mobility (warning - if you aren't used to reading this type of stuff, it will surely put you to sleep):

http://www.chicagofed.org/publications/workingpapers/papers/Wp2001-18.pdf

A popularized article about the study (warning - this is a very irreverent article and will undoubtably offend many of you):

http://www.fguide.org/Bulletin/mythmob.htm

From my read of a lot of this literature as well as some of the raw data and analysis from US Bureau of Labor Statistics, the fact that inter-generational income mobility is low in the US is not really debated by the experts. What is debated is how low it is and whether it has gotten higher or lower in recent years. If you study this stuff enough, you will find another fact sure to bother many: the countries with really high inter-generational income mobility tend to be the most socialistic (Denmark, Sweeden, Finland, . . .).

Of course, like guns, evolution vs creationism, illegal aliens, abortion, . . . most people will believe what they want and simply seek out sources of information to back them up.

 

[laurence]

Of course, like guns, evolution vs creationism, illegal aliens, abortion, . . . most people will believe what they want and simply seek out sources of information to back them up.

So true. Even people who recognize others doing this are blind to their own bias.

I would expect there would be divergent results wrt class mobility between urban and rural areas. You have to see and know opportunity exists before you can strive for it. Cities put you in contact with so many different cultures and classes.

 

[shiny]

You have to see and know opportunity exists before you can strive for it. Cities put you in contact with so many different cultures and classes.

I think that is exactly right. People have to know about the opportunity plus have so modicum of confidence that they could achieve if they try. Some people live in places (families?) that seem defeated before they even start.

 

[justin]

If you study this stuff enough, you will find another fact sure to bother many: the countries with really high inter-generational income mobility tend to be the most socialistic (Denmark, Sweeden, Finland, . . .).

That fact doesn't bother me at all. It is a logical conclusion of a socialist system.

I think the high inter-generational income mobility seen in socialist countries is result of their socialism. Socialism redistributes wealth from the rich to the not so rich. If you increase the flow of money from rich to poor, it is a logical conclusion that the poor will get richer and the rich will get poorer, hence high intergenerational income mobility. If you don't redistribute wealth (or, like the US, keep wealth redistribution to a minimum relative to other industrialized countries), then you aren't taking the rich's money to give to the poor. The poor must work themselves up the socioeconomic ladder. Likewise, the rich must fail of their own accord to drop down the social ladder.

Whether your goal as a country is to provide the most incentive to produce (keep taxes low and keep welfare to a minimum) or instead to make everyone as equal as possible (high levels of wealth transfer - ie - high taxes and high welfare benefits) is the big political debate.

 

[SteveR]

Whether your goal as a country is to provide the most incentive to produce (keep taxes low and keep welfare to a minimum) or instead to make everyone as equal as possible (high levels of wealth transfer - ie - high taxes and high welfare benefits) is the big political debate. 

Seem like the Soviet Union tried this for a while. We all know how that turned out.

 

[Gone4Good]

From my read of a lot of this literature as well as some of the raw data and analysis from US Bureau of Labor Statistics, the fact that inter-generational income mobility is low in the US is not really debated by the experts.  What is debated is how low it is and whether it has gotten higher or lower in recent years.  If you study this stuff enough, you will find another fact sure to bother many:  the countries with really high inter-generational income mobility tend to be the most socialistic (Denmark, Sweeden, Finland, . . .).

Of course, like guns, evolution vs creationism, illegal aliens, abortion, . . . most people will believe what they want and simply seek out sources of information to back them up.   

Academic studies are all well and good but I tend to rely on what I see with my own two eyes. I know plenty of people who have made the jump from middle class to top 1% earners (at least 15 without even breaking a sweat). Some are/were rural civil servants who started successful construction businesses and others are kids who left rural America to became hot shot Wall Street traders.

I admit I don't know anyone who was raised by a crack addict, and I would think that would set you back some. But I also know that there are a lot of people (many of whom grow up to be professors who publish research papers) who have a fundamental disagreement with the underlying "fairness" of a capitalist system, and often times the US system in particular. It seems that a lot of these papers suffer from some of the same bias that you allude to earlier.

My experience is certainly not scientific, but its hard for me to buy that income mobility in the US is really that stifling when I know so many people who have done it.

 

[Martha]

Our own eyes often deceive us. I would be very hesitant at dismissing well designed and executed science based on anecdotal "evidence."

 

[sgeeeee]

. . . My experience is certainly not scientific, . . .

Of course it's not.  How could the experience of a single person be expected to be a scientific sampling that would be representative of the entire nation.  There is quite a bit of data out there though if you want to form a scientific opinion instead of one based on a handful of people you know personally.  You can find detailed comparisons of the rates in the US with other countries.   A lot of people have studied the problem in detail.  

 

[laurence]

For every friend I have who has moved up compared to their parents, I have two that have moved down. The one common thread among those who have moved up is the parents instilled a value of education in their kids, even though they lacked one (in a formal sense) themselves. They worked hard, got them into college, you know the rest.

Yadda, yadda, not scientific, purely anectodal <insert legal disclaimer here>.

 

[justin]

The US has ample affluence at most levels of the socioeconomic ladder relative to most other countries. Maybe that affluence causes complacency in the lower rungs of society. Maybe there is no incentive to work hard to climb the social ladder. I'm pretty happy being where I am on the social ladder (the middle) and have made a conscious decision to refrain from further ladder-climbing, although it would be rather easy to move up a few more rungs given my educational background and professional training. That's too much work. I'd just pay tons more in taxes and have less free time for personal pursuits and family, so I'll just stick with my current lot in life.

I think there are many others out there just like me. They may not view their choices as explicitly as I do.

 

[Gone4Good]

Of course it's not.  How could the experience of a single person be expected to be a scientific sampling that would be representative of the entire nation.  There is quite a bit of data out there though if you want to form a scientific opinion instead of one based on a handful of people you know personally.  You can find detailed comparisons of the rates in the US with other countries.   A lot of people have studied the problem in detail.  

But the studies you reference miss the central point. The question is not how many people move from one economic class to another but how many people CAN. These are not even close to being the same thing. And studying one tells you nothing of the other. The central assumption in all of these studies is that "everyone wants to be rich." Well that's true if we're talking about the lottery - but we're not. The more relevant question is how upwardly mobile is society for those who are willing to sacrifice to be rich (insert successful if you want). And by sacrifice I mean not only working inhuman hours but also engaging in less satisfying work. There are plenty of people who "want" to be rich but would die before they ever worked a 100 hour week - or moved to an urban location with greater job opportunities. I would posit that every person on this board is going to die less wealthy than they could because they would rather do something else than accumulate money - how does that show up in these studies?

A middle class kid of reasonable intelligence who makes it his singular goal to have a six figure income probably has a better than 75% chance of success. The formula is simple - study hard for good grades, go to college and study hard for good grades, take internships in law, medicine, investment finance, or other high paying fields, work your ass off after graduation, avoid pissing people off, work your ass off some more, and in 10-years or so collect your $100,000+ salary.

Again, the studies that say "the son of a fireman is more likely to be a fireman himself" is completely irrelevant. The important question for society is whether that son of a fireman has the opportunity to be something different and whether he has the ability to move up the economic ladder if he is willing to make the request sacrifices. Your studies say nothing of this but my experience says unequivocally yes!

J.B. - son of a Brooklyn police officer, from a family of police officers and firemen. Recently promoted to Managing Director at Lehman, estimated salary ~$2 MM

I got a dozen more just like that. Do you want to hear the one about the guy from a low income family in rural Tennessee who is now a sell side research analyst making about $700,000? Or maybe the one about the daughter of an electrician who now owns 10's of millions of dollars in rental apartments in Albany New York. Or the correctional officer who, through working nights and weekends, has built his construction business into a $300,000 / year plus franchise? Or . . .

The point of those income mobility studies is to demoralize people by saying the "American Dream" is dead. The point of my examples is to say that conclusion is just plain wrong!

 

[Gone4Good]

The US has ample affluence at most levels of the socioeconomic ladder relative to most other countries.  Maybe that affluence causes complacency in the lower rungs of society.  Maybe there is no incentive to work hard to climb the social ladder.  I'm pretty happy being where I am on the social ladder (the middle) and have made a conscious decision to refrain from further ladder-climbing, although it would be rather easy to move up a few more rungs given my educational background and professional training.  That's too much work.  I'd just pay tons more in taxes and have less free time for personal pursuits and family, so I'll just stick with my current lot in life. 

I think there are many others out there just like me.  They may not view their choices as explicitly as I do. 

Justin - I think you made most of my point in far fewer words than I did in the preceding post. In concur!

 

[sgeeeee]

. . .
The point of those income mobility studies is to demoralize people by saying the "American Dream" is dead.  . .

I don't think there is any indication this is true. The sociologists I've met certainly aren't that cynical and that isn't consistent with the research goals stated in their papers. I agree that they can only measure results, not potential. I'm sure most researchers would be extatic if they could figure out a way to measure the potential for upward mobility. Although if you have high potential without high mobility, what does that mean? If more upward mobility is a good thing but we don't embrace it, does that mean we are lazy or stupid? Of if more upward mobility is a bad thing, then why do we need the potential?

 

[Gone4Good]

Although if you have high potential without high mobility, what does that mean?  If more upward mobility is a good thing but we don't embrace it, does that mean we are lazy or stupid? 

Maybe a little of both and maybe something else entirely. Nobody on this board is stupid but there is a limit to which they are willing to subordinate their lives to the pursuit of money. Although this decision limits their "upward mobility" I doubt anyone here would want it any other way.

 

[unclemick]

Hmmm

One of my daydreams in ER was to live on four figures with a seven figure portfolio. Mr Market gave us the seven figure number(just barely).

But the screaming and yelling started when I tryed to get lower than a 12k/yr budget.

In ER - downward mobility can be fun - WHEN IT's a 'voluntary' experiment.

Heh heh heh heh heh heh - of course there was less than 'total' agrement - hence we currently spend more.

 

[laurence]

So riddle me this: success has come easy to me (o.k., my last name is not Dell or Gates, but at this point I'm pretty happy to be where I am at my age), and I don't feel like I've had to kill myself to get here. Is it just dumb luck? What makes success easy for some and impossible for others? At my work, I'm surrounded by people of similar education and background, yet they flounder, glad to make 50k at 40+ years of age. Even if we accept that social classes in the U.S. have come to resemble a caste system (better luck next life!), there is plenty of difference within classes.

 

[sgeeeee]

So riddle me this: success has come easy to me (o.k., my last name is not Dell or Gates, but at this point I'm pretty happy to be where I am at my age), and I don't feel like I've had to kill myself to get here.  Is it just dumb luck?  What makes success easy for some and impossible for others?  At my work, I'm surrounded by people of similar education and background, yet they flounder, glad to make 50k at 40+ years of age.  Even if we accept that social classes in the U.S. have come to resemble a caste system (better luck next life!), there is plenty of difference within classes.

What do you think the answer to your own question is?

By the way, whatever you answer, it will only lead to another question.

 

[laurence]

What do you think the answer to your own question is?

By the way, whatever you answer, it will only lead to another question.

I climbed all the way up this mountain to the ancient temple for this?

 

[sgeeeee]

I climbed all the way up this mountain to the ancient temple for this? 

The curse of too much education. No answer goes unquestioned.

 

[Mr._johngalt]

Hmmm

One of my daydreams in ER was to live on four figures with a seven figure portfolio. Mr Market gave us the seven figure number(just barely).

But the screaming and yelling started when I tryed to get lower than a 12k/yr budget.

In ER - downward mobility can be fun - WHEN IT's a 'voluntary' experiment.

Heh heh heh heh heh heh - of course there was less than 'total' agrement - hence we currently spend more.

Further involuntary "downward mobility" is in my bag of ER tricks if needed.
I have all of the details worked out but will only do it if absolutely
necessary. DW is on board with this (this was always part of her charm).
Previous wife needed the biggest house, luxury cars, fur coats,
diamonds, etc. Don't get me wrong. I think that is all just fine, as long
as someone else is paying

JG

 

[Mr._johngalt]

Maybe a little of both and maybe something else entirely.  Nobody on this board is stupid but there is a limit to which they are willing to subordinate their lives to the pursuit of money.  Although this decision limits their "upward mobility" I doubt anyone here would want it any other way.

I was close to the peak of my earning power and "status" when I
jumped ship (both times). In 1993, I was Pres. of my own company
which I shut down (we did not "go broke" as () once implied). And then, in 1998 I was CFO of one company and VP of it's parent, with all of the pay, rights,
perks and bennies (plus it was a very low stress job). Once again, I just up and
quit. Business was good, the money/perks were good, no serious
health issues, no scandals, turmoil. tumult, etc. I just wanted the TIME.
Everything that stood in my way got dropped like a hot rock.

JG