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Income Mobility 1996-2005

October 11th, 2011 · 1 Comment · Economics

Just ran across this 2007 report from the Treasury Department. Combine it with this from the Red Cross and World Bank data, and we get a picture of how Americans migrate (from a global perspective) between modes of lowly relative prosperity to the heights of lavish comfort.

Key extracts below. (Emphasis mine)

  • There was considerable income mobility of individuals in the U.S. economy during the 1996 through 2005 period as over half of taxpayers moved to a different income quintile over this period.
  • Roughly half of taxpayers who began in the bottom income quintile in 1996 moved up to a higher income group by 2005.
  • Among those with the very highest incomes in 1996 – the top 1/100 of 1 percent – only 25 percent remained in this group in 2005. Moreover, the median real income of these taxpayers declined over this period.
  • The degree of mobility among income groups is unchanged from the prior decade (1987 through 1996). Economic growth resulted in rising incomes for most taxpayers over the period from 1996 to 2005. Median incomes of all taxpayers increased by 24 percent after adjusting for inflation.
  • The real incomes of two-thirds of all taxpayers increased over this period.
  • In addition, the median incomes of those initially in the lower income groups increased more than the median incomes of those initially in the higher income groups


1 response so far ↓

  • 1 Steve Roth // Nov 18, 2011 at 3:10 pm

    “While this study does not examine these results in detail, the likely causes include the typical life cycle of income and “mean reversion” in which the incomes of taxpayers whose incomes were temporarily high in 1996 revert to a level closer to their long-run average.21

    21 The results of Auten and Gee (2007) illustrate the effects of the life cycle of incomes. Taxpayers age 45 to 54 had the highest incomes of any age group in 1987, but the median inflation-adjusted income of these taxpayers declined by 1996. By comparison, taxpayers age 25 to 34 had the lowest incomes in 1987, but the most rapid increases in incomes between 1987 and 1996.”

    This life-cycle issue is why the only valid measure anyone has come up with for measuring opportunity, mobility, convection, meritocracy, whatever you want to call it, is to look at generational mobility — what are the odds that a boy will make more (or less) than his dad?

    And every single study shows that by that measure, the U.S. sucks relative to other prosperous countries. Land of opportunity, like in the 50s and 60s? I’d like to get us back to that.

    Caveat on that last bit: I haven’t dug up any time series to see whether the intergenerational mobility measure has improved or declined over the decades, here or elsewhere. Do you think there was more or less convection in the U.S. back then? Relative to (northern) Europe? Je ne sais pas.

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