Is There Income Mobility in America?

We often hear that the rich are getting richer and the poor are getting poorer. While a surface-level examination of U.S. households by quintile from 1967 to 2009 would seem to support this claim, Professor Sean Mulholland uses other data to show that this measure overlooks two vital pieces of information that should concern those who care about the welfare of the poor.

First, the share of total income does not tell us anything about whether income increased or decreased when adjusted for inflation. From 1967 to 2009, the real mean household income of the top quintile increased by 71 percent, meaning the rich became much richer. Over the same period, the real mean household income in the bottom quintile increased by 25 percent. This means the poor became richer as well. This measure shows that Americans in the lowest quintile could afford more goods and services in 2009 than in 1967.

Second, these measures do not tell us what happened to particular households. Household income can change from year to year, but these measures do not track that. If we look at the households in the bottom quintile in 1987 and follow those households until 1996, we find that about 45 percent of them have moved up to a higher quintile. If we look at the next 10-year period, we find that 40 percent of households move up. Professor Mulholland also discusses income mobility from the top quintile down and across generations. He argues that these facts suggest that more improvements have been made for the poor in the past 40 years than many people believe. “To continue these improvements,” he says, “we should seek ways to expand opportunities for income growth and, with it, greater absolute mobility for those across the income distribution.”

Sources:

1. Data on household income shares by quintile come from here: http://www.census.gov/hhes/www/income/data/historical/household/. U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements, Table H-2.  Share of Aggregate Income Received by Each Fifth and Top 5 Percent of Households, All Races: 1967 to 2009

2. Data on mean household income levels by quintile come from U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplements, Table H-3.  Mean Household Income Received by Each Fifth and Top 5 Percent, All Races:  1967 to 2009. These data can be found here: http://www.census.gov/hhes/www/income/data/historical/household/.

3. Data on relative household income mobility by quintile comes from: U.S. Treasury Department, (2008). Income Mobility of the United States from 1996 to 2005, Washington, D.C. It can be found here:
http://www.treasury.gov/resource-center/tax-policy/Documents/incomemobilitystudy03-08revise.pdf.

4. Data on generational income mobility comes from: Isaacs, Julia B. (2007). Economic Mobility of Families Across Generations. The Brookings Institutions. It can be found here: http://www.brookings.edu/~/media/research/files/papers/2007/11/generations%20isaacs/11_generations_isaacs.pdf

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