The chart above (click to enlarge) is based on data from the Panel Study of Income Dynamics that follows the same households over time, and was reported in a recent study by economists at the Minneapolis Federal Reserve Bank titled "Facts on the Distributions of Earnings, Income, and Wealth in the United States: 2007 Update."
The results in the chart above on earnings mobility are from Tables 28 and 29 in the Minneapolis Fed study and answer the question: For U.S. households that were in a given earnings quintile (20 percent group) in 2001, what percentage of those households moved to a different quintile by 2007? Here are some conclusions about the earnings mobility for those U.S. households that had positive earnings in both years:
1. For American households that were in the lowest earnings quintile (bottom 20 percent) in 2001, only 56% of those households remained in that quintile in 2007, and 44 percent had moved to a higher quintile by 2007. Five percent of low-income households in 2001 had moved to one of the top two quintiles in just six years.
2. For those households that were in the highest earnings quintile (top 20 percent) in 2001, 34 percent had moved to a lower quintile by 2007, and 5 percent of those households had moved all the way to the bottom quintile.
3. For those households in the middle earnings quintile (middle 20 percent) in 2001, about one-third moved to a higher quintile by 2007, more than one-fourth moved to a lower quintile, and only 42 percent remained in the same quintile.
4. More than half of the households in the second, third, and fourth quintiles in 2001 moved to a different earnings quintiles by 2007 (see bottom row in chart).
For the full post and conclusions, see my post today at the Enterprise Blog