The myth of the permanent underclass

[troutman]

Well, Mitt used to live in a basement apartment and survived on tuna fish. The old rags to riches story.

[JD]

Originally Posted by Rathji

My income has increased about 50000% during that same time period.

I must be rich.

I tried to calculate my percentage increase since 1990 in Excel and all I get is #DIV/0!

I wonder if that's good?

Then I tried entering in what my allowance from my parents was in 1990 and I got 230,669%. Now THAT'S pretty good! I have really moved up the charts!

[MarchHare]

A much better way to conduct this study is to compare how individuals' income levels as middle-aged adults compares to their parents' at the same phase of their lives. IIRC, there's an extremely strong direct correlation between the financial success (or lack thereof) of parents and their children. That is, if you're born into a poor family, you're statistically very likely to end up as a poor adult; if you're born into a wealthy family, you're statistically very likely to end up as a wealthy adult.

[crazy_eoj]

Originally Posted by Rathji

My income has increased about 50000% during that same time period.

I must be rich.

Sample of 1 versus sample of 1,000,000.

The study is not statistically insignificant.

Also of note was that the study didn't include full time students or people under the age of 20.

[malcolmk14]

There's a book on educational mobility in Canada that I've read a bit of, if anyone's really interested in this topic. One of the themes is that parental education has a far greater influence on decisions regarding post-secondary than parental income does. Policy about access to post-secondary education has almost always focused historically on the relationship between parental income and access, but that's only one of many issues that determine who goes to post-secondary.

Who Goes? Who Stays? What Matters: Accessing and Persisting in Post-secondary education in Canada.

Finnie, Mueller, Sweetman, and Usher - Kingston and Montreal school of public policy

[Rathji]

Income levels rising, without consideration for cost of living changes or inflation is about as meaningless a stat you can conjecture.

[opendoor]

Originally Posted by crazy_eoj

Well, of course we know they had to take the data from Statistics Canada so whether they tied an age to an income level is not indicated. Do you know that they have this information in the data?

I mean, the bottom line here is that 9/10 people in the bottom income bracket (lowest 20%) had moved OUT of that bracket in that period. Are you alleging that 90% of the 'poor' are students?

No, I'm saying that the vast majority of that lower group was young people who were barely working. They could be students, people who traveled after high school or university, first year apprentices, young mothers, etc. Other than people who start their career right out of high school, most people are going to have years of very low income. I know several lawyers and all of them had years in their early 20s where they made $5-10K while they were working part time. Them being in the top 20% of earners now isn't an example of mobility.

Of considerable note is that the average income in that bottom 20% has moved up over 600% in the short period of the study. That in itself is fantastic news.

No, the average income among the people who were in the bottom 20% in year 1 of the study has grown by that amount. So a person who was a student in 1990 making $5K a year but who is now a Chartered Accountant making $200K is going to be part of that growth figure. The actual income of the bottom 20% of earners has barely gone up at all (I believe it's still under $10K). That's because with every person in their early 20s whose income increases there's another group of people coming out of high school to replace them in that quintile.

I have no problem with the argument that Canada offers very good opportunities for mobility between income percentiles and children working themselves out of poverty, but this study is terrible.

[opendoor]

Originally Posted by crazy_eoj

Also of note was that the study didn't include full time students or people under the age of 20.

Only on their very recent 5 year samples. On their longer one (which is what most articles are based on and where the 87% figure came from) they weren't able to determine who were students so they were all included:

Unfortunately, the Longitudinal Administrative Databank does not allow us to directly identify tax-filers who are post-secondary students.

[FlamesAddiction]

Trust fund babies are some of the biggest rags to riches stories out there.

[Flame Of Liberty]

I like how Cowperson never posts in threads he starts anymore.

It's almost like he's throwing retrievers a bone.

[Tinordi]

Originally Posted by Cowperson

An interesting study into income mobility in Canada

Over the span of a decade, 83% of Canada’s lowest income earners moved up the income ladder, according to a Fraser Institute report released Tuesday.

“Lower-income Canadians are not permanently stuck with a low income — that’s a myth,” Mr. Lammam said. “Where you are today is not where you’re going to be five, 10 or 20 years down the road.”

The 60-page report is based on Statistics Canada income data for more than one million Canadians, today aged 39 through 64, whose tax returns were linked with Social Insurance Numbers to track their earnings over the course of five, 10 and 19 years. And the findings, Mr. Lammam said, are remarkable: In the 19-year period between 1990 and 2009, one in five Canadians in the lowest of five income groups eventually moved up to the highest-income camp, and nine out of 10 people in the lowest-income group rose out of the bottom.

“The results are extremely encouraging, especially when we’re bombarded with myths of stagnating Canadian incomes or that the rich are getting richer and the poor are getting poorer,” he said, adding that more than a third of top earners in 1990 slipped to a lower income category by 2009. “This study blows those myths out of the water.”

http://news.nationalpost.com/2012/11...study-reveals/

Cowperson

That Fraser Institute 'study' is not worth the paper it's printed on. Fundamentally flawed logic.

http://fullcomment.nationalpost.com/...ags-to-riches/

As just a starting point on the over simplification of the issue of poverty.

The Fraser Institute study hinges on the false premise that because someone starts their career in the salary basement, they are necessarily “poor,” in the sense of the word that is commonly understood. By that assumption, a 22-year-old commerce-degree holder from a first-rate university who’s doing a Bay Street internship while sleeping on a friend’s sofa is exactly the same as a high-school drop-out from the wrong side of the tracks who will spend the rest of her career working the cash at a supermarket. Almost all of us set out from the same set of starters blocks, but we’re not all running the same race.

There’s no doubt that some poor people do manage to lift themselves out of poverty. One of my radio listeners wrote to tell me about being born in Montreal’s Griffintown to a family of six kids. She put herself through night school working for $80 a week at Dominion Textile and today is a highly successful career woman. That is a great story of grit and determination. Probably also luck and mentoring. But it’s not a common one. And to pretend it’s the story of most Canadians ignores issues of poverty, race, status, gender, education and countless other variables that factor into lifetime economic outcomes.

[opendoor]

If anything, I'd argue the results of the study demonstrate a justification for left wing social and economic policy regarding education and progressive tax rates which is presumably the opposite of what the Fraser Institute was intending. If many of the people in higher income brackets were at one time making very little money, they presumably benefited from such things as relatively cheap education, universal health care, etc. Given that, it's only fair to expect them to pay back when they are in the higher income position so the next wave of low income people can exist in an environment that will foster their ability to improve their standing.

[peter12]

Originally Posted by opendoor

If anything, I'd argue the results of the study demonstrate a justification for left wing social and economic policy regarding education and progressive tax rates which is presumably the opposite of what the Fraser Institute was intending. If many of the people in higher income brackets were at one time making very little money, they presumably benefited from such things as relatively cheap education, universal health care, etc. Given that, it's only fair to expect them to pay back when they are in the higher income position so the next wave of low income people can exist in an environment that will foster their ability to improve their standing.

The general justification for the welfare state lies in a vibrant free-market that can pay for these policies. Legislators have to strike a fine balance between providing enough freedom to capitalists to create wealth, while also taxing them fairly in order to distribute some resources for the disadvantaged.

[GP_Matt]

What I am gathering from this post is that 9 out of 10 people in the bottom quintile are students, starting their careers or legitimate rags to moderate success stories. That means that only one tenth of the bottom quintile are people who are poor and will remain poor. That would mean that only two percent of Canadians are legitimately on the bottom rung.

[Rathji]

Except, then if that if your reasoning, they would be replaced at a rate that would roughly equal their exodus, due to more people coming into that age range/situation.

I still don't think the numbers add up they way they are portraying them though.

[Rathji]

Originally Posted by peter12

The general justification for the welfare state lies in a vibrant free-market that can pay for these policies. Legislators have to strike a fine balance between providing enough freedom to capitalists to create wealth, while also taxing them fairly in order to distribute some resources for the disadvantaged.

So wouldn't this study then reinforce that this balance had been achieved, at least in part?

[peter12]

Originally Posted by Rathji

So wouldn't this study then reinforce that this balance had been achieved, at least in part?

Oh yes, absolutely. I mean, everyone has to remember that the current social contract that we live in was justified in such a way as to be as inclusive as possible.

The balance between the rich and the poor has been a problem in political philosophy ever since Plato. Liberalism's secret was to elevate wealth-creating to the point where it was available to everyone.

[Rathji]

Originally Posted by peter12

Oh yes, absolutely. I mean, everyone has to remember that the current social contract that we live in was justified in such a way as to be as inclusive as possible.

The balance between the rich and the poor has been a problem in political philosophy ever since Plato. Liberalism's secret was to elevate wealth-creating to the point where it was available to everyone.

Sounded like you were disagreeing, but I guess not.

[opendoor]

Originally Posted by GP_Matt

What I am gathering from this post is that 9 out of 10 people in the bottom quintile are students, starting their careers or legitimate rags to moderate success stories. That means that only one tenth of the bottom quintile are people who are poor and will remain poor. That would mean that only two percent of Canadians are legitimately on the bottom rung.

No, because the bottom quintile is such a low income that no one can stay in it for any length of time and survive. I actually find the fact that 13% were still in that range 20 years later kind of surprising given how low the income threshold is. Back in 1990 the average income in the bottom 20% was $6K and these days IIRC it's still under $10K. Generally the people in the bottom 20% aren't going to be the working poor, they're going to be people who are in transition periods of their careers or have other means of financial support (students, a stay at home mom, someone mostly living off of savings temporarily, etc.).