Much of America’s promise is predicated on the existence of economic mobility—the idea that people are not limited or defined by where they start, but can move up the economic ladder based on their efforts and accomplishments. Family income mobility—changes in individual families’ real incomes over time— is one indicator of the degree to which the eventual economic wellbeing of any family is tethered to its starting point. In the United States, family income inequality has risen from year to year since the mid-1970s, raising questions about whether long-term income is also increasingly unequally distributed; changes over time in mobility, which can offset or amplify the cross-sectional increase in inequality, determine the degree to which the inequality of longer-term income has risen in parallel.
Using data from the Panel Study of Income Dynamics and a number of mobility concepts and measures drawn from the literature, we examine mobility levels and trends for U.S. working-age families, overall and by race, during the time span 1967–2004. By most measures, we find that mobility is lower in more recent periods (the 1990s into the early 2000s) than in earlier periods (the 1970s). Most notably, mobility of families starting near the bottom has worsened over time. However, in recent years, the down-trend in mobility is more or less pronounced (or even non-existent) depending on the measure, although a decrease in the frequency with which panel data on family incomes are gathered makes it difficult to draw firm conclusions. Measured relative to the overall distribution or in absolute terms, black families exhibit substantially less mobility than whites in all periods; their mobility decreased between the 1970s and the 1990s, but no more than that of white families, although they lost ground in terms of relative income.
Taken together, this evidence suggests that over the 1967-to-2004 time span, a low-income family’s probability of moving up decreased, families’ later year incomes increasingly depended on their starting place, and the distribution of families’ lifetime incomes became less equal.
JEL Classifications: D31, D63, I32, J15
Keywords: income mobility, income distribution, income inequality