The Census Bureau just released a new report titled "Dynamics of Economic Well-Being: Fluctuations in the U.S. Income Distribution, 2004-2007." It's what they call in the trade a longitudinal study, which captures changes for the same individuals over a period of time. Highlights: "Approximately 12.3 million U.S. households (11.5 percent) experienced changes in their annual income between 2004 and 2007 that resulted in their moving either up or down two or more quintiles in the income distribution....Of these 12.3 million households, 5.0 million households that started in the top and fourth quintiles experienced a decline of two or more quintiles between 2004 and 2007."
The household income quintile breaks for 2007 were at $21,648 (below is the bottom quintile); $39,246, $60,576 (between $39,000 and $60,000 is the middle quintile), and $92,899 (everything above that is the top quintile.) There's a certain bluntness to these categories – someone whose income rose to to $22,000 a year from $20,000 jumps up a quintile, while someone whose income falls to $93,000 from $1 million stays in the same quintile.
Some will look at the report and focus on those households that stayed in the same quintile over the three-year period. But the more interesting point is the amount of income mobility. And this is just over a three-year period that was largely one of economic growth. Imagine if you look at it over a fifty year period that includes many economic upturns and downturns. It's something to remember the next time you hear a politician talk about wanting to tax "the rich." Usually what the politician is talking about is someone who made more than a certain amount of money in a single calendar year. But that person may not be "rich," they just may have had a good year, to be followed by some less good years. Or the person may happen to be in their peak earning years after years of education or building up a business, and trying to save for a retirement on a more moderate income.
There's been some handwringing lately about a decline in income mobility in America, and, if it were true, it might be worth wringing one's hands about (though some people probably like stability). A similar study conducted between 1996 and 1999 found 52.0 percent of households remained in the same quintile, while this most recent study of 2004 to 2007 found 55.4 percent of households remained in the same quintile. The census bureau says that difference is statistically significant. Anyway, no argument-enders in this study, but worth mentioning for those who follow the income inequality debate, and the redistribution debate it is intertwined with.