Mobility in and out of the top one percent

From Mark R. Rank:

…Thomas A. Hirschl of Cornell and I looked at 44 years of longitudinal data regarding individuals from ages 25 to 60 to see what percentage of the American population would experience these different levels of affluence during their lives. The results were striking.

It turns out that 12 percent of the population will find themselves in the top 1 percent of the income distribution for at least one year. What’s more, 39 percent of Americans will spend a year in the top 5 percent of the income distribution, 56 percent will find themselves in the top 10 percent, and a whopping 73 percent will spend a year in the top 20 percent of the income distribution.

Yet while many Americans will experience some level of affluence during their lives, a much smaller percentage of them will do so for an extended period of time. Although 12 percent of the population will experience a year in which they find themselves in the top 1 percent of the income distribution, a mere 0.6 percent will do so in 10 consecutive years.

It is clear that the image of a static 1 and 99 percent is largely incorrect. The majority of Americans will experience at least one year of affluence at some point during their working careers. (This is just as true at the bottom of the income distribution scale, where 54 percent of Americans will experience poverty or near poverty at least once between the ages of 25 and 60).

A further example of such fluidity can be found in an analysis by the tax-policy expert Robert Carroll. Using data from the Internal Revenue Service, Mr. Carroll showed that between 1999 and 2007, half of those who earned over $1 million a year did so just once during this period, while only 6 percent reported millionaire status across all nine years.

There is more here, via Greg Mankiw.

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