Abstract
There is a sizable literature that examines whether intergenerational mobility has declined as inequality has increased. This literature is motivated by a desire to understand whether increasing inequality has made it more difficult to rise from humble origins. An equally important component of economic mobility is the ability to move across the earnings distribution during one’s own working years. We use survey-linked administrative data from the Survey of Income and Program Participation to examine trends in lifetime earnings mobility since 1981. These unique data allow us to produce the first estimates of lifetime earnings mobility from administrative earnings across gender and education subgroups. In contrast to much of the existing literature, we find that lifetime earnings mobility has declined since the early 1980s as inequality has increased. Declines in lifetime earnings mobility are largest for college-educated workers though mobility has declined for men and women and across the distribution of educational attainment. One striking feature is the decline in upward mobility among middle-class workers, even those with a college degree. Across the distribution of educational attainment, the likelihood of moving to the top deciles of the earnings distribution for workers who start their career in the middle of the earnings distribution has declined by approximately 20% since the early 1980s.
Overall income and earnings inequality has risen dramatically since the 1970s, as has withingroup residual wage inequality.1 One of the major concerns surrounding rising inequality is its implications for economic mobility including intergenerational mobility, short-run earnings fluctuations, and mobility over a working lifetime. Each of these measures of movement across the earnings distribution informs our understanding of the consequences of inequality. Trends in intergenerational mobility help us understand whether equality of opportunity, broadly defined, is increasing or decreasing. Short-run earnings fluctuations, on the other hand, are important if credit constraints are binding and more earnings variability is accompanied by an inability to smooth variable earnings. Lifetime earnings mobility intersects with each of these concepts.
In one sense, movement across the earnings distribution over a working life is simply the accumulation of short-run earnings fluctuations. Over a working life, the ability to smooth variable earnings is a function of whether short-run shocks accumulate and cause earnings to rise more slowly, or not at all. Intragenerational mobility also complements our understanding of equality of opportunity from the intergenerational mobility literature. It allows us to understand the extent to which children experience upward mobility in their parents’ earnings as they grow up and also the extent to which the place in the earnings distribution where one starts as a young adult, which is a function of parental earnings, determines where one ends up. While the literature on intergenerational mobility has investigated the relationship between parental income and educational attainment (Chetty et al., 2014), we do not know whether the relative lifetime earnings mobility that one can expect from a college degree has changed over time. More broadly, we do not know whether the returns to schooling have been sufficiently large to offset the increase in distance between ranks in the earnings distribution as inequality has risen, particularly at the top of the earnings distribution.
– Michael D. Carr, Emily E. Wiemers
