How to Manipulate Income Measurements

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Noah Kristula-Green raises some valid points about views of income mobility but he could go further: Year-to-year income measures are only one way to measure economic status and, like every other measure, give an incomplete picture.

Consider a few examples: measured by income alone, a family with a net worth of $1 billion that parks all of its assets in growth categories and heads off for a year long round the world luxury tour is “poor.” So (a lot more commonly) is a divorced mom still driving a paid-off Lexus and living in the 4-bedroom split-level on which her ex-husband pays the mortgage.

A 60-something blue-collar couple with no savings that is forced to sell their home to pay nursing home bills and realizes a $100,000 capital gain as a result is “rich.” Gross national measures of income, furthermore, don’t take cost of living into account: a family of four living on $60,000 in New York City may have to force its kids to share a bedroom, depend on SCHIP for their health insurance, budget in advance for a trip to the movies, and (rightly) consider itself part of the working poor.

A family with the same income living in Fort Smith, Arkansas could afford a four-bedroom house and trips to Disney World twice a year and (just as rightly) think of itself as upper middle class.

Both sides of the political spectrum misuse income statistics to suit their ideological biases. Liberals, for example, point to the performance of “poor students in rich schools” to argue that money alone would close yawning educational achievement gaps even though many of those students are actually the kids of parents who have divorced or suffered a temporary job loss and are “deprived” mostly in that can’t always have the coolest clothes and toys. And conservatives, as Kristula-Green points out, tend to overstate the importance of data that does, indeed, show people moving up and down in income.

Other measures shed light in ways that year-to-year income doesn’t. For example, accumulated household wealth—somewhat harder to measure exactly—will show that the globe-trotting billionaires are the rich people everyone would say they are and that the 60-something couple forced to sell its home is lower middle class. But these measures aren’t perfect: some “rich” people may consist entirely of an appreciated home near a job they feel they can’t leave.

This doesn’t mean that income measures are useless. They probably shed more light on income inequality than any other single statistic. But, like any other class of data, they only reveal so much.