U.S. Income Inequality and Income Mobility in the 1980s and 1990s

Abstract

Income inequality has been increasing in the United States over the past 25 years. Many argue that rising inequality is not a serious issue because income or social mobility reduces inequality and increases well-being. These observers point to studies showing considerable upward mobility. This study examines income mobility and its relation to income inequality. The results show that while there is considerable income mobility, it is generally not far - rags to riches success stories are fairly rare. Furthermore, income mobility has a disequalizing effect on annual income inequality, but has a small equalizing effect on inequality of longer-term incomes.