Research desk investigates: How great is American income mobility?
By Dylan Matthews
Just how mobile are people when it comes to coming into or out of a certain annual income bracket? How far up the ladder do the poor typically go and how far down do the wealthiest fall?
The best study (PDF) of this in the U.S. alone comes from the Treasury Department, which tracked tax filers in 1996 and observed which income quintiles they landed in come 2005. The study found that 57.6 percent of filers in the lowest quintile in 1996 had moved to a higher one by 2005. The second and middle quintiles also showed overall upward mobility, while the fourth quintile saw about as many people earning less as earning more, and the highest quintile saw 30.7 percent of filers drop out of it.
International comparisons, however, show that the U.S. still has a long way to go toward matching other developed nations' income mobility. Anna C. d'Addio at the OECD calculated (PDF) "intergenerational earnings elasticity" figures for a number of OECD countries. The measure estimates how much a son's earnings reflect those of his father. A higher bar thus means less mobility, as it means your family's income better predicts your income. Here's d'Addio's chart, as reprinted in another OECD paper (PDF):
The U.S. does not come out the worst here; Italy and Great Britain have sharper class divisions than we do. But most other countries do substantially better. This includes not just Scandinavian social democracies like Denmark, Norway, and Finland (Sweden, curiously, does a bit worse) but Anglophone states such as Canada and Australia, with which the U.S. has much more in common.
Lest you think this is an isolated finding, a number (PDF) of other studies (via Matt Zeitlin) have confirmed that the U.S. displays unusually low levels of income mobility across generations for a developed country.
Household income in the United States - United States - Social Sciences - Economic - Consumption and Wealth