Cross-posted from District Measured
written by Steven Giachetti
It has long been a tenet of American society that income disparity is more acceptable provided that there is a reasonable chance that someone who starts poor can make their way up the economic ladder to at least middle class status through education and work. This is the premise of the American dream and of a society based on the principle of meritocracy. In this post we use DC taxpayer data to analyze income mobility, the extent to which an individual’s income changes over time. This data allows us to determine the probability of an individual moving up the rungs of the economic ladder. The analysis also determines how far up one is likely to move up the economic ladder, starting at the bottom.
We focus initially on singles since income mobility is easier to define for a single individual than for married couples, where income is defined on an aggregate basis. For a married couple, upward mobility could be the result of various outcomes- both spouses moving up the ladder simultaneously, one spouse moving up the ladder and the other remaining steady, or some other combination.
We examined mobility for singles by looking at where individuals stood on the economic ladder in 2002 and compared this to where they ended up in 2012. The percentage of filers who changed positions on the ladder measures the probability of moving on the ladder.
Here’s how to interpret the results shown in the matrix below:
Reading across starting from the top row, 39 percent of individuals who were in the bottom 20 percent of the income distribution in 2002 remained in the bottom twenty percent in 2012, 28 percent moved up one rung of the ladder to the second quintile (20th to 40th percentile), 15 percent to the third quintile and so on for the other quintiles. Similarly for the second row, 18 percent of individuals who were in the second quintile in 2002 fell down the ladder ending up in the lowest quintile in 2012, 35 percent remained in the same quintile and so on. Shaded boxes in yellow denote no change in income status, blue shading denotes upward mobility and red denotes downwards mobility.
Income Mobility: Chances of Moving on the Economic Ladder by Income Range, 2002-2012
Source: DC Income Tax Data 2002-2012, DISTRICTMEASURED.COM
Highlights
- Thirty nine percent of singles who started poor (in the lowest quintile) remained poor after a decade.
- The median age for filers stuck at the bottom was 49 years. Given that these individuals are well into their career paths, the chances of their income prospects improving in the next ten years are likely to be small.
- Twenty eight percent who started at the bottom moved up one rung of the ladder, and 33 percent from the lowest quintile made it to middle class status or higher (40th percentile and higher).
- For those starting in the second quintile in 2002, the chance of moving up to middle class status one decade later was 47 percent.
- The likelihood of remaining in the middle class in 2012 for those already in the middle class in 2002 was greater than 25 percent.
Read the rest of the article HERE.
