Monday, June 15, 2009

Movin' Up and Down The Income Quintiles

How much income mobility exists in America? Research consistently affirms that there is substantial upward income mobility in the United States, with the lowest income earners typically showing the strongest results. A Treasury Department study of the 1996–2005 period used IRS income tax data to discern considerable mobility: more than 55% of taxpayers moved to a different income quintile. More than half the people in the lowest fifth of earners moved to a higher quintile over this period (29% to the second, 14% to the third, 10% to the fourth, and 5% to the highest).

Moreover, there is a great deal of movement in and out of the top income groups. The Treasury data show that 57% "of households in the top 1% in 2005 were not there nine years earlier." The rich sometimes get richer, but they get poorer as well. The study also reveals that income mobility has increased, not decreased, during the past twenty years. For example, 47.3% of those in the lowest income quintile in 1987 saw their incomes increase by at least 100% by 1996. That number jumped to 53.5% from 1996 to 2005.

~From "
The Politics of Envy" in The Hoover Digest, by Jeffrey Jones and Daniel Heil (HT: NCPA)

MP: A common misperception is that the top or bottom income quintiles, or the top or bottom X% by income, are static, closed, private clubs with very little turnover - once you get into a top or bottom quintile, or a certain income percent, you stay there for life, making it difficult for people to move to a different group. But reality is very different - people move up and down the income quintiles and percentage groups throughout their careers and lives. The top or bottom 1/5/10%, just like the top or bottom quintiles, are never the same people from year to year, there is constant turnover as we move up and down the quintiles.

As Thomas Sowell reminds us:

Comparing the top income bracket with the bottom income bracket over a period of years tells you nothing about what is happening to the actual flesh-and-blood human beings who are moving between brackets during those years. Following trends among income brackets over the years creates the illusion of following people over time. But the only way to follow people is to follow people.


At 6/15/2009 10:21 AM, Blogger Hot Sam said...

This comment has been removed by the author.

At 6/15/2009 12:21 PM, Blogger juandos said...

Cost of a bowl of soup at homeless shelter - $0.00 dollars

Having Michelle Obama Serve you your soup - $0.00 dollars

Snapping a picture of a homeless person who is receiving government funded meal while taking a picture of the first lady using his $500 Black Berry cell phone $$$$ Priceless

At 6/15/2009 1:31 PM, Blogger Unknown said...

The people in the upper quintile are not likely to stay there anyway because of the nature of their compensation I would think. You've got movie stars, sports figures, and a few business types. Typically those people aren't high earners for very long. For tax purposes wouldn't an executive want to get a big payout and limit their income tax exposure to a shorter period of time? Most of the truly wealthy people don't pay a lot of tax on earned income because they limit their income and focus more on investment income than the people in the lower quintiles. Once you make your money and jump to that upper quintile you are best served to get out of it as fast as you can and just pay the lower (for now) capital gains taxes on your investments.

At 5/23/2012 10:30 AM, Blogger DENICE said...

I do agree with you stats, salary is flexible here, i am a technician & work for in Key Environmental Inc Pittsburgh. I felt the same.


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