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April 22, 2014

Income Instability: An Astonishing 12 Percent of All Americans Will Achieve At Least One Year of Earnings in the Top 1% in Their Lives

The left likes talking about the "richest 1%" as if they are an easily-defined, permanently-existing superclass. They're not.

Professor Mark R. Rank of Washington University, co-author of Chasing the American Dream: Understanding What Shapes Our Fortunes, tells a different story in a review of his own and others’ research in last Sunday’s New York Times. Far from having the 21st-century equivalent of an Edwardian class system, the United States is characterized by a great deal of variation in income: More than half of all adult Americans will be at or near the poverty line at some point over the course of their lives; 73 percent will also find themselves in the top 20 percent, and 39 percent will make it into the top 5 percent for at least one year. Perhaps most remarkable, 12 percent of Americans will be in the top 1 percent for at least one year of their working lives.

The top 1 percent, as I have noted here before, is such an unstable group that it makes no sense to write, as so many progressives do, about what has happened to its income over the past ten year or twenty years, because it does not contain the same group of people from year to year. Citing tax scholar Robert Carroll’s examination of IRS records, Professor Rank notes that the turnover among the super-rich (the top 400 taxpayers in any given year) is 98 percent over a decade — that is, just 2 percent of that elusive group remain there for ten years in a row. Among those earning more than $1 million a year, most earned that much for only one year of the nine-year period studied, and only 6 percent earned that much for the entire period.

The New York Times article by Professor Rank was published this Sunday. In addition to the eye-popping stats recapitulated by Williamson, he notes

Yet while many Americans will experience some level of affluence during their lives, a much smaller percentage of them will do so for an extended period of time. Although 12 percent of the population will experience a year in which they find themselves in the top 1 percent of the income distribution, a mere 0.6 percent will do so in 10 consecutive years.

Note that's a little different from Williamson's "six percent" in all ten years, which was taken from a different study, and applies to millionaires. Rank's figure of 0.6 percent applies to the category of "top one percent," which is different from "millionaire."

Likewise, data analyzed by the I.R.S. showed similar findings with respect to the top 400 taxpayers between 1992 and 2009. While 73 percent of people who made the list did so once during this period, only 2 percent of them were on the list for 10 or more years. These analyses further demonstrate the sizable amount of turnover and movement within the top levels of the income distribution.

...

Ultimately, this information casts serious doubt on the notion of a rigid class structure in the United States based upon income. It suggests that the United States is indeed a land of opportunity, that the American dream is still possible — but that it is also a land of widespread poverty. And rather than being a place of static, income-based social tiers, America is a place where a large majority of people will experience either wealth or poverty — or both — during their lifetimes.

But, Income Inequality!


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posted by Ace at 05:31 PM

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