Friday, December 16, 2016

Will you do better than your parents?

Credit: FiveThirtyEigh
From Ben Casselman at FiveThirtyEight: 
In 1970, according to the research, conducted by Stanford economist Raj Chetty and several co-authors, roughly nine out of every 10 American 30-year-olds earned more than their parents did at the same age, after adjusting for inflation. In 2014, only half of 30-year-olds could say the same.1 The slowdown in mobility shows up in all 50 states and is true across the income spectrum. The biggest declines were among the children of middle-class families.
I have to say that this is literally true for myself, in that my father, when he was 30, was working as an engineer already, and I was in the middle of my graduate school/postdoctoral training. That said, it will be interesting (he said quietly, hopefully) to see what our respective inflation-adjusted earnings will be at 50.

I also wonder if this is true for chemists. For example, how are entry-level or mid-career Ph.D. chemists doing, compared to their cohorts 10, 20 or 30 years ago? I don't think we have good data on this, even as I remind us that the median ACS member (in 2014) has lost ground against inflation for over a decade.

9 comments:

  1. Here's a version of a graph i've seen shared around the alt-right. It is sometimes labeled with Asian development 10-75%ile, US middle class 75-95%ile, global elite 95-100%ile. It seems to be based on work by Milanovic and Lakner but i haven't really explored it.

    So I guess the question is are we an american middle class profession or a global elite?

    http://cdn.theatlantic.com/assets/media/img/posts/2015/04/GlobalIncomeGrowthFNL-2/942aad882.png

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    1. Worth pointing out (and I am not an economist) that there is some academic-level discussion about this graph, and what it shows: http://blogs.worldbank.org/developmenttalk/rebuttal-elephant-graph-discussion-or-elephants-are-tough-animals

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    2. (Also, thank you for bringing up the 'elephant graph', which I've been meaning to talk about. Of course, I delayed long enough that we're in the part of the news cycle where other economists have had time to examine it.)

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  2. Historically, in a developed economy is making less than your parents abnormal? The middle class in the US grew from the unique circumstance of having destroyed the other major economies of the world in the 40s paving the way for decreased competition and eager markets for mass produced goods in the 50s and 60s. Once Japan and Europe rebuilt we lost this advantage. My guess is if one could look back 1000 years in old world economies that whether one makes more than one's parents is a coin toss.

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    1. I don't think any economy is supposed to run "backward", under normal circumstances with constant inflation, productivity increases, natural resource consumption and neutral to positive GDP. If you're not treading water, or a similar number of you aren't, what was the point of any of it?

      But yes, economics always seem hampered by few data points, historical/cultural factors, and constant technological changes. One would think you would need to keep at least one variable constant to get answers.

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    2. A fair point, and I'm no expert in economics to be sure. I wonder if the issue isn't that this study looked at 1 part of the global economy? That is, i assume that including countries like the PRC and India overall most people in the global economy still expect to do better than their parents.

      I don't know that we should expect the economy to constantly increase. I get that economics isn't a closed system but surely there's some terminal value to the sum of all goods and services on the planet? I do like the following from JM: "Early in what became the Great Depression, John Maynard Keynes was asked if anything similar had ever happened. "Yes," he replied, "it was called the Dark Ages, and it lasted 400 years." So maybe a decline in standard of livign from one generation to the next over 40 or 50 years isn't so bad...

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    3. JM Keynes....

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    4. I'd like to think we could do better than "better than the Dark Ages."

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    5. 'I'd like to think we could do better than "better than the Dark Ages." '

      Well, so would I, but a priori there's no reason similar couldn't happen again.

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