U.S. Intragenerational Economic Mobility From 1984 to 2004: Trends and Implications

BY GREGORY ACS AND SETH ZIMMERMANU.S.INTRAGENERATIONALECONOMIC MOBILITYFROM 1984 TO 2004:TRENDSANDIMPLICATIONS All Economic Mobility Project materials are reviewed by members of thePrincipals’ Group and guided with input of the project’s Advisory Board (see back cover).The views expressed in this report represent those of the authors and not necessarilyof all individuals acknowledged above.© October 2008ACKNOWLEDGEMENTSThis report is a product of the Economic Mobility Projectand authored byGregory AcsandSeth ZimmermanGregory Acs is a principal research associate inthe Urban Institute’s Income and Benefits Policy Center.Seth Zimmerman, formerly a research associate inthe Urban Institute’s Income and Benefits Policy Center,is currently a graduate student in economics at Yale University.The authors would like to acknowledge the helpful commentsand suggestions of Austin Nichols, Gene Steuerle, andSheila Zedlewski of the Urban Institute, Isabel Sawhill ofthe Brookings Institution, and Ianna Kachoris, John Morton,and Scott Winship of the Economic Mobility Projectof the Pew Charitable Trusts.Editorial assistance was provided by Ellen Wert and design expertiseby Carole Goodman of Freedom By Design. The authors also thankall of the Economic Mobility Project principals andadvisory board members for many thoughtful discussions. BY GREGORY ACS AND SETH ZIMMERMANU.S.INTRAGENERATIONALECONOMIC MOBILITYFROM 1984 TO 2004:TRENDSANDIMPLICATIONSMEASURINGTRENDS INMOBILITY: ISSUES ANDMETHODOLOGYTRENDS ININTRAGENERATIONALMOBILITYWHO IS IN THEBOTTOMQUINTILE?FACTORS THATCONTRIBUTE TOECONOMICMOBILITYDISCUSSIONENDNOTESRESOURCES3489121415C O N T E N T S By 2004, the richest 20 percent of households earned over half the total householdincome in the United States, and their share of income continues to grow.1Meanwhile,the share of income earned by the poorest 20 percent of U.S. households stands at3.4 percent of total household income, down 15 percent over two decades. Indeed,despite strong economic growth during the mid- to late-1980s and again duringthe mid- to late-1990s, income inequality by most every measure is higher todaythan in 1984.2High and rising income inequality engenders concerns about inequality inopportunity—for example, lower-income households may not have access to thesame quality education or health care as higher-income households—and unequalopportunities may exacerbate and perpetuate income inequality.Income inequality, however, even rising inequality, is not inherently a problem.Inequality in income to some extent reflects inequality in ability and effort; assuch, it is a central component of the reward and incentive structure that driveseconomic growth. In addition, annual measurement has shown that the people atthe bottomof the income distribution in one year may be higher up the next year,and people at the top may fall to the bottom.In no small part, economic mobility,the rate at which individuals change positions in the income distribution over time,mitigates inequality.The crucial question is what has happened to economic mobility. Increasingly,Americans feel that they cannot get ahead, and that it is even hard to keep up.3A recent public opinion poll revealed that over half of all Americans believe theyhave not moved forward, and nearly one-third say they have fallen back.ECONOMIC MOBILITY PROJECT:An Initiative of The Pew Charitable Trusts2U.S. Intragenerational Economic Mobility from 1984 to 2004: Trends and ImplicationsU.S.INTRAGENERATIONALECONOMIC MOBILITYFROM 1984 TO 2004:TRENDSANDIMPLICATIONS Further, only 41 percent say they are better off now than they were five yearsago—the lowest level in nearly 50 years. Meanwhile, the share of those saying theyare worse off than they were five years ago reached 31 percent, the highest it hasbeen in almost half a century.4Clearly the steady drumbeat of bad economic news—fromthe housing crisisto the credit crisis, fromgrowing unemployment to the rapid rise in fuel and foodprices—has weighed heavily on the real and perceived well-being of Americans.Yet the question remains: has it gotten harder for Americans to get ahead andstay ahead?To address that question, we examine trends in U.S. intragenerational incomemobility over the past two decades.5Specifically, we focus on how the economicpositions of 25- to 44-year-olds change over a decade relative to one another, aswell as in absolute terms (whether they are doing better or worse at the end ofthe decade than they were at the start). In addition, we compare intragenerationalmobility rates over two periods, 1984 to 1994 and 1994 to 2004.We find that mobility rates have not changed very much between these two timeperiods. This finding is somewhat surprising given the changes in the economy in the1980s and 1990s, such as the ongoing shift frommanufacturing to service-sectorjobs, rising immigrant populations, and extended periods of growth. Further, althoughit is promising news that, at least through 2004, mobility rates