Carpe Diem

Add the highest level of income mobility in the country to the long list of benefits resulting from shale oil in the Bakken

Credit: New York Times

Credit: New York Times

Jimmy P. points to a new study on income mobility (“the most detailed portrait yet of income mobility in the United States”) featured in today’s New York Times, which uncovers significant geographic differences in the chances that a child raised in the bottom income quintile by family income will rise into the top income quintile.

According to the study:

The core sample of children used to calculate these local intergenerational mobility measures consists of children who were born in 1980 or 1981 and are U.S. citizens as of 2013. We used family measures of pre-tax income both for parents and children (when adults). We measure children’s household income in 2010-2011, when they are approximately 30 years old. We measure their parents’ household income between 1996 and 2000.

From the NY Times article:

These comparisons provide some of the most powerful evidence so far about the factors that seem to drive people’s chances of rising beyond the station of their birth, including education, family structure and the economic layout of metropolitan areas.

And here’s maybe one other very important factor for intergenerational upward income mobility in America: proximity to shale oil fields like the Bakken Formation in North Dakota.

In the map above from the NY Times article, the dark blue areas are those geographic regions with the greatest levels of upward income mobility, and it shouldn’t be a surprise that western North Dakota leads the country with the highest level of upward income mobility and the greatest chances that a child who was in the bottom fifth by family income in the 1980s has now risen to the top income quintile in 2010-2011.  Here are some results of the study:

1. Almost one out of every three children from Williston, North Dakota, at the epicenter of the Bakken oil field, whose parents were in the bottom income quintile had risen into the top income quintile by 2010-2011, at age 30. The 33.1% chance for Williston children to rise from the bottom 20% to the top 20% is the highest in the nation for any geographic area. The high level of income mobility in Williston is reflected in the fact that the surrounding Williams County area of North Dakota has the lowest county jobless rate in the country at only 0.70% for May.

2. Following Williston is Dickinson, North Dakota, where the chance of a child raised in the bottom income quintile rising to the top 20% is 31.4%, which is the second highest level of upward income mobility in the country by geographic area.

3. Other geographic areas in the Bakken oil region like the Lemmon area, Ekalaka area and Bowman area lead the country with the highest chances of moving from the bottom to the top income quintile at around 30%.

MP: We can now add the highest level of upward income mobility in the country to the long list of significant economic benefits that the shale oil boom is bringing to North Dakota, especially to the western part of the state where the Bakken Formation is bringing wealth, prosperity, jobs and upward income mobility to America’s “economic miracle state.”

49 thoughts on “Add the highest level of income mobility in the country to the long list of benefits resulting from shale oil in the Bakken

  1. Excellent and interesting result.

    An interesting question fro a sharp economist like present company:

    Is that people moving into the top 20% relative to the *national* income distribution, or the top 20% relative to the income distribution *in their state*? There is a wide state-to-state variation in average income and its distribution, so doing well in some states is less impressive than doing well in others.

    Also, my impression is that oil shale does not reach that dramatically into Nebraska or Utah, but the chances for improvement there are dramatic. The magic word “education” comes to mind. Ditto for eastern North Dakota and Minnesota.

    It might be of interest to explore the red state belt (also red in the modern political sense) and why it does so abysmally.

    • George,

      Looks like the poor south and the Indian reservations are the ones that suffer the worst? Also the Great Lake States [rust belt]. Education or very large Minority populations without any job skills. Keep in mind that the average family of four earning the poverty level of $ 24,000 per year when you add in all the various Government assistance plans the value received climbs to over $ 65,000 per year. Interesting is it not . . so maybe income numbers do not reflect reality?

  2. Look what happens when you harvest natural resources and then through industrial activity add value and make profits – incomes of the people go up – OPEN OUR FEDERAL LANDS TO MINING AND OIL/GAS then factories will be built and value added activity will restore our economy. The end of the E=GREEN economic austerity model has arrived.

  3. If income distribution is narrow relative to the generational variation in incomes, you will get a high measure of income mobility. Conversely if income distribution is relatively wide. There may be no difference in the generational variation in incomes.

    So, which measure matters?

    • neither is a very complete picture.

      i am also wondering about the methodology of this study.

      a lot of people move, often for work.

      if i grew up in Connecticut and them moved west, where does this study count me?

  4. Yes! When I first saw this pix in the paper (NY Times) two things stuck out before I even read the articel. (1) The Blue area is basically west of I-35 — the energy productivity increase of the last decade for wind, gas, coal, oil. Not just N. Dakota, but also around El Paso/Calsbad, the farm-belt. (2) The SE U.S. — why all that red when this area has prospered quite well since the ’90′s.

  5. Note the data is for 2011, when the Eagle Ford and Permian basin where not as big. I wonder if the counties south of San Antonio would now show up? I do not that a good bit of the Permian basin is in the second tier from the top. Note that both places again have good paying jobs for truck drivers and the like.

  6. However, because the price of oil is over $100 a barrel (compared to $10 a barrel in the late ’90s), one region’s gain is another region’s loss. It’s a net loss for the country, because more resources need to be expended for the same barrel of oil. Nonetheless, it was inevitable, because of Peak Oil.

    • one region’s gain is another region’s loss

      So your claim is that regions not North Dakota would be better off if no oil had been found in North Dakota? Or do you really not understand that oil found and extracted in North Dakota is a gain for everyone?

      • Or do you really not understand that oil found and extracted in North Dakota is a gain for everyone?

        No, he really doesn’t.

  7. It’s a net loss for the country, because more resources need to be expended for the same barrel of oil. Nonetheless, it was inevitable, because of Peak Oil.

    Ignoring the fact that countries don’t suffer losses, people do, if what you say is true and oil production is now a net loss, then the best possible course of action would be for everyone involved in the oil business to quit doing what their doing, step away from all oil production, and turn the lights out, right?

    You are such a clown!

    • Ron, your response proves you’re the clown.

      The “best possible course of action” is to produce enough oil to meet demand, and given there’s a constraint on oil production, prices need to rise, to avoid shortages.

      And, the summation of all individuals in a country is the aggregate. Some will gain more in producer surplus than lose in consumer surplus (i.e. a net gain), and some will lose consumer surplus (a loss).

      • uh, no peak, it proves that you, once more, have no idea what you are talking about.

        if oil had not been found in bakken etc, imagine what the price would be then.

        when you find more oil, price drops.

        what, you think they are producing above market rate oil and bringing on new supply which drives prices up?

        this whole supply demand thing really seems to confuse you.

        • eh, Morgan, you see, the problem is that you’re obviously using partial equilibrium models.

          If you were using general nonsense models, then you’d come around Peak’s point of view very quickly.

          Smoking a little crack and embracing aggregates uber alas would speed things along as well.

    • Or some regions will gain in real income and some regions will lose in real income.

      The map not only implies upward mobility, in some regions, it implies downward mobility, in some regions, too.

      • Predictable nonsense. What do either of your responses have to do with “It’s a net loss for the country”?

        You might want to seriously consider learning some actual economics. Oil, just like labor, responds to the laws of supply and demand. Producer and consumer surplus are meaningless terms as you have no idea what their value is.

        • The same people who want to legalize drugs disagree with things I didn’t say.

          And, they believe the U.S. economy is better off with oil at $100 a barrel than at $10 a barrel.

          • The same people who want to legalize drugs disagree with things I didn’t say.

            “It’s a net loss for the country, because more resources need to be expended for the same barrel of oil. Nonetheless, it was inevitable, because of Peak Oil.”

            Is that what you didn’t say?

            And, they believe the U.S. economy is better off with oil at $100 a barrel than at $10 a barrel.

            Well of course we do. There IS no $10 oil, so consumers are better off with $100 oil than with no oil.

          • “And, they believe the U.S. economy is better off with oil at $100 a barrel than at $10 a barrel.”

            that is not the same thing as saying that the bakken makes some regions worse off.

            more partial comprehension from peak.

            sure, $20 oil would be great for the country and quite bad for north dakota, but as that was not an option in this case and given that oil prices would, overall, be higher today absent the shale boom, your argument falls on it’s face.

            saying that a net positive for the whole country is a negative for much of it because it’s not as good as fantasy land is a preposterous argument.

            i may write a humor book of your ideas peak.

            “peakonomics”

            demand curves for labor slope up.

            mandating higher wages magically result in more income overall and do not reduce investment and future growth.

            price controls work.

            adding supply to oil harms consumers through higher prices.

            prosperity can be printed.

            i think we may actually have enough content to do a book.

            any econ 101 student that cannot debunk all of it is not allowed to go on to higher courses.

          • We would also all be better off if we had world peace, if disease were eradicated and we all possessed magical machines that generated without any effort on our part every single thing we wanted to consume.

            What’s your point?

  8. Losing a barrel of “cheap” oil, through depletion, and gaining a barrel of “expensive” oil is not a net gain, at least over the past five years.

    • even this attempt to shift your argument is a flawed premise.

      we did not “lose” a barrel of cheap oil. we used it. someone bought it and used it for somehting they valued more than the cost. that was a net gain.

      what, you think we just misplaced it somewhere? did you look in the couch cushions?

      peakonomics rides again.

      you seem to place no value on anyhting apart from current consumption.

      and again, you miss the glaring fact that oil would be EVEN MORE expensive absent the shale oil.

      you seem utterly determined to defend some strange prejudices by ignoring most of any given market.

    • “Losing”? Who lost a barrel of cheap oil? Do you mean used a barrel of cheap oil?

      And, yes, using a barrel of oil is a net gain. Even over the last five years.

    • You assume zero sum. If it was zero sum, wouldn’t ND be taking away from the poor in [fill in country here]? You assume that oil would be cheaper if ND didn’t increase supply. You assume that $100 now is exactly $100 in 1990. You assume a dollar is an a tangible unit of measure, not a unit measure of our collective belief which changes constantly.

      Creating capital from resources create value and wealth. Making money through an approved way, like paying another guy for a share of Face book created nothing. Facebook creates nothing from your trade. You create nothing. The other guy creates nothing. The fountain of “wealth” from the financial sector creates nothing, it is a fee taken away from transfer of wealth.

      Drilling oil creates. Oil drilling allows everyone else to create or transfer.

      You think that anyone who gets wealthier steals from poorer people. One would think that having more wealthy people would allow the government to tax and give more to poor people. Wouldn’t you like that?

  9. Born more than a decade before the referened sample, I’m lucky enough to have climbed from the bottom 20% to the top 20%. Most important was moving to a part of the country with greater opportunities. Education helped, but was not the primary factor.

  10. Methinks-Morganovich-Ron-Ken: You should be selling health care plans on exchanges.

    Just tell everyone raising the cost of production and raising prices for the same services will be a net gain for everyone.

    Tell them you won’t “lose” anything.

    If they disagree with you, give them a drug.

    • Just tell everyone raising the cost of production and raising prices for the same services will be a net gain for everyone.

      No need to tell anyone. *Almost* everyone already understand supply and demand and the role of price.

      Could you please give us another peakonomics principle for the book?

      • How about – “There is no inflation because I buy things on sale at the grocery store.” – are you still using that one? I haven’t seen it in a long time.

        • It’s pathetic how you, and the other members of your circus, attempt to twist my statements into entire different meanings rather than actually responding to them. Obviously, economics is beyond your capacity to understand.

          • Did I misquote your inflation statement? If so, I apologize. Please provide the correct one. We want the book to be accurate, after all.

          • I want this thread done as the Hayek/what’s-his-face debates were done. I am laughing my ass off. Peak has neglected elasticity and inelasticity as part of his thesis.
            And the red in the south east only means not much mobility which might not translate to someone’s loss only that they do as well as their parents rather than moving from the bottom quint to the top.

          • peak-

            we are not twisting your statements.

            they do not need to be twisted. they are just wrong.

            oil is more expensive (in real terms) that some points in the past and less expensive than others.

            depending on where you chose to set a baseline, this can be seen as a benefit or a drag.

            but the absolutely clear fact is this:

            the bakken is a net benefit to all americans.

            oil is cheaper than it would be without it. jobs and income are more plentiful and higher.

            the bakken is a benefit to everyone. to claim otherwise is to pretend that we live in fantasy land and that somehow the price of oil would be lower without new discoveries.

            for a guy who routinely accuses other of using partial equilibrium models (a term you consistently misuse and do not appear to understand) you sure seem loathe to actually look at the whole picture around issues.

          • “It’s pathetic how you, and the other members of your circus, attempt to twist my statements into entire different meanings rather than actually responding to them. Obviously, economics is beyond your capacity to understand.”

            ahh, the persecution fantasy, the last refuge of a guy with no data or basic argument.

          • Duelles, it looks like the four clowns, I mentioned, fooled you. I guess, it’s true, about a sucker born every minute.

            The supply of oil is almost fixed, i.e. inelastic, because of Peak Oil. So, a small increase in demand raises price more than quantity. So? What’s your point?

            Also, perhaps, you didn’t notice downward income mobility of the “middle class.” Higher oil prices is like a regressive tax. Moreover, there’s a negative effect on oil or fuel intensive industries.

          • Morganovich, even after you say you don’t twist my statements, you twist them again.

            If you want to believe Peak Oil, over the past five or 10 years, has been a net positive for this country, that’s your problem (you’ll learn about supply shocks when you take econ 101, and I don’t want to hear about your partial understanding of a partial equilibrium model again, since you don’t have a clue about general equilibrium models.)

    • Keep up the good work, Peak! You’ve successfully proved you don’t understand even the basics of economics, like supply and demand curves.

  11. (1) The alignment of the Bakken fields — the dots I have seen — with the improvement area needs a bit better demonstration. My impression of the area does not match that well the blue areas on the map.

    (2) The number of people living in western North Dakota — having driven through once — is not very large, so while I can be happy for these people, on the national level this change is just not very impressive, certainly not enough to justify this argument.

    • george-

      how do you figure?

      if oil is found in bakken and that drives the price of oil down for all americans, increasing real buying power and also creates jobs for thousands of people, how does that not “justify the argument”.

      that seems like an excellent justification to exploit such resources.

      i do not see how one could argue otherwise.

  12. The original article proposed that the substantial improvement in particular geographic areas (the blue ones) was due to shale oil extraction, presumptively in more or less the same areas to have a geographically differenced effect. I am asking how good the correlation is, in that there are also substantial blue areas in which I do not recall that there is shale oil.

    With respect to the southeast, this map shows a very particular scaling test, namely it asks the extend to which people vaulted into the (it appears national) top income group from much lower down. Effects that created a broad general increase in wealth, but that only moved peoplein an area up into say the second quintile nationally, might lead to bright red areas in which most people were still much better off. The graph speaks to a very particular question, namely whether some people become wealthier relative to other people not whether people become wealthier at all, and is narrower in its coverage than might usefully be discussed.

    A hypothetical economic change that made absolutely everyone better off by the same amount, say, doubled absolutely everyone’s real income, might be very positive, but would have absolutely no effect on this graph, in that it would move no one out of their current income quintile.

  13. I don’t see how this statistic can be a meaningful measure of upward income mobility. IMO, the movement of lowest quintile persons to any higher quintile – and the movement of fourth quintile persons to any higher quintile – would be far more indicative of overall income mobility. Focusing on just the very small number of persons who rise from bottom to top just seems incomplete. Few Americans could reasonably expect to make such a leap, and few do. To measure whether the U.S. – or any single state – is truly a land of opportunity, then one should include in the measurement all upward movements.

    A person who was born in the lowest quintile and moves up to the next quintile has experienced upward income mobility. The measure shown above ignores such persons.

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