High Income Status Is Typically Short-lived

WSJ highlights a good study out of economic teams at Washington University and Cornell.

https://www.wsj.com/articles/earnings-in-the-u-s-a-game-of-chutes-and-ladders-11560511801

The social scientist duo reviews the PSID data which provides an economic longitudinal view of thousands of nonimmigrant American families.

https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0116370&mod=article_inline

The PSID is one of the longest running economics studies on American households.

Main conclusion published by WSJ this week is, people who are high income don’t remain high income for long.

The rationale for why high income status is temporary, is not discussed by the research staff. Notwithstanding, implications on racial disparities are discussed.

This is another well based, landmark study, that affirms other useful studies referenced previously. Will be referencing it likely for years to come.

Reflecting on these collectively, it becomes rather obvious what commonly causes these temporary spikes in income among most American families.

Inheritances, contribute significantly.

Will You Perpetuate Wealth Concentration?

The merits and achievement of nonimmigrant American individuals within their lives matters less than what “inherited demographic characteristics” their parents gave to them, such as race, birth year, and parental education.

Most Are Not Smart Enough for College

Research teams at places such as Federal Reserve, and NYU professor Ed Wolff dive deeply into the disparities in inheritances.

https://www.nber.org/papers/w16840.pdf

These disparities have cross cutting impacts, on health and wealth, but also on measurable levels of innovation.

Mentoring Works (until it doesn’t)

Could it be that all these highly intellectual world renowned economic experts are wrong?? Is it really possible that less than half of our economic outcomes is attributed to our own personal accomplishments?

Because if they are each correct, then we have yet another team of really smart people who are pointing to the need for new policy and programs for scalable economic development.

In addition to inheritances, among nonimmigrant American families, there are also stark disparities in access to other one time big payouts.

After innovation, who is more likely to secure a lucrative licensing deal and take their company public?

Lonnie Johnson’s path is admirable.

But upon closer inspection, even he had hardship in getting paid for his invention.

https://www.ajc.com/business/super-soaker-creator-awarded-from-hasbro/GW1s2IDgrqQKg2p9zsY1LO/

Meanwhile, other inventors seem to experience less hardship.

How It Comes Together – Oscar Health

These one-time windfall profits disproportionately favor certain people over others. Who is predisposed to these one-time windfall profits?

Per the findings affirmed by this PSID data and others, policy and programs are needed to provide economic opportunity to people in non-immigrant American families who are persistently predisposed to economic disadvantage.

“The household median net worth was $247,500 for whites; $8 for US blacks (the lowest of all five cities); $12,000 for Caribbean blacks; $3,020 for Puerto Ricans; and $0 for Dominicans (that’s not a typo either.) The sample size for Cape Verdeans was too small to calculate net worth, the report said”
https://www.bostonglobe.com/metro/2017/12/11/that-was-typo-the-median-net-worth-black-bostonians-really/ze5kxC1jJelx24M3pugFFN/story.html

“For white households, the median net worth was an estimated $107,000. ▪ For Black-American households, the median net worth was $3,700. ▪ For Black-Caribbean households, the median net worth was $12,000. Meanwhile, households identifying as Cuban had a median net worth of $22,000”
https://www.miamiherald.com/news/business/article226732184.html

The 2015 PSID review says….

“it would be misguided to presume that top-level income attainment is solely a function of hard work, diligence, and equality of opportunity. A more nuanced interpretation includes the proposition that access to top–level income is influenced by historic patterns of race and class inequality.”

Hard work and diligence won’t help most people, because opportunities aren’t disbursed equally on merits, skills, or abilities.

So don’t be misguided. But don’t give up either.

Identify best practices, proven to close historical and persistent gaps obstructing access to opportunity.

Study the people in places that attract high income workers.

States Attracting Highest Paying Employers and Top Talent

Strive for maximum productivity wealth metrics at the youngest ages possible, and optimal health metrics.

Being Married and Pregnant at 20 Years Old

Choose to embark in
a long-term career in economic development, using a conceptual framework of one of the oldest professions in the world, farming.

Edible Seeds: To Eat or Plant

If “hard work” is an ineffective growth strategy for people from economically disadvantaged families, then consider strongly the option of merely identifying where financial capital flows, and go there.

Close Disparities, or Just Go with the Flow?

Commit to be a part of the solution:

Invest everything into talent who exceed social expectations.

Using the Adversity Index, on Standardized Testing Exams

Can’t change racial discrimination, nor one’s social disadvantage. Still, possibly, the economists conclusions of gloom and doom can be proven wrong.

Author: pH14 Plan Staff

pH14 Plan is an economic development model for all U.S. households' participation. You can support this research by subscribing for more access, or contact us to make a gift.

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