Moving Up and Down the Income Ladder

April 24, 2014

Twelve percent of the U.S. population will find themselves in the top 1 percent of income earners during their lifetimes, says Mark Rank, professor of social welfare at Washington University.

In a study alongside Cornell University professor Thomas A. Hirschl, Rank examined 44 years of data on individuals ages 25 to 60, looking to determine whether top income groups -- the top 20 percent up to the top 1 percent -- were static or fluid. Their findings challenge the notion that class structure in the United States is rigid and unchanging:

  • Twelve percent of the U.S. population will move into the top 1 percent of the income distribution for at least one year.
  • Thirty-nine percent of Americans will spend at least one year in the top 5 percent, 56 percent of Americans in the top 10 percent, and 73 percent of Americans will spend at least one year in the top 20 percent of the income distribution.
  • Only 0.6 percent of the U.S. population will spend 10 consecutive years in the top 1 percent of the income distribution.

In short, Rank and Hirschl found that the public perception of a "static" 1 percent -- and a static 99 percent -- is at odds with reality. And, they found that income movement goes both ways -- not only will most Americans experience at least one year of affluence, but 54 percent of Americans will also experience poverty or near poverty at least once.

Other studies confirm these results. An IRS study of the top 400 American taxpayers between 1992 and 2009 found that only 2 percent of those on the list were on it for at least 10 years.

This information, Rank says, challenges much of the perception that exists today about income inequality, and it indicates that the United States is still a place of great opportunity -- where a majority of people will experience wealth and poverty during their lifetimes. Our national conversation should focus on this reality, not talk about the top 1 percent and the 99 percent as if they are fixed, static income tiers.

Source: Mark R. Rank, "From Rags to Riches to Rags," New York Times, April 18, 2014.

 

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