Will today's kids be better off then their parents? This question has been buzzed about since polling data shows that today's adults think their kids won't be better off.
Becker and Posner do a nice job spelling out three factors:
1. Per capita income growth. Is the whole society richer? Well yes, each year increasing productivity combined with infrastructure investments make per capita income grow -- except for recessions, but generally growth happens. See the
graph below.
2. Income inequality If the society is wealthier on average, but it is only because there is one super-rich guy and lots of poor people -- then the majority of people are poor. Income inequality is growing because labor, especially unskilled labor, is less valuable in the US than it used to be. The richest 1% of the population, makes 35% of the income.
3. Mobility from poor to rich. A lot of the people who are super-rich today were not born that way, and so there is churn in the ranks. One of the equalizers is education.
Education helps people make up for an impoverished childhood.
In summary, if young people get an education, then they will make more than average, and since the society is getting richer and richer, most of them will be wealthier than their parents when they reach their parents age. Of course, there will be exceptions -- this is statistics.
Disagree!
ReplyDeleteWhere does all this growth in money come from? Isn't it just a result of the system, as there is no new real wealth being discovered or introduced into society? Its like the govt just keeps printing more money out of thin air. I don't see how else it would happen.
Also, just because things grew in the past doesn't mean theyre growing now. I read about the Golden Age of Capitalism in the 70s and growth has never really been as high since for corporations and such. Resources are decreasing, for the society to become sustainable, won't there eventually need to be no growth? I could see an individual person getting richer over their lifetime in a sustainable society, but that's only because old rich people died to free up their income. Do you know what I'm saying?
It isn't really even close. This society is much richer than it was in 1984 when I was 27.
ReplyDeleteSee http://illusionofprosperity.blogspot.com/2007/11/flow-of-funds-fun-v3.html -- about 75% richer.
The biggest reason is productivity increases each year. That is just working smarter with the same resources.