Income mobility indicates a quite dynamic economy and is indicated
by the movement between all income quintiles. Example:
It makes no sense to draw sweeping conclusions such as "the income of the bottom 20 percent of families fell"
in a 15-year period when most of the people originally in that category have long since improved their standard
of living enough to have moved up from the bracket entirely.
A high mobility gives a different picture of the
income distribution.
About 86 percent of those in the bottom quintile in 1979 had managed
to raise their incomes by 1988 enough to have moved up to a higher
quintile.
The data show that these were not all grouped at the bottom at
the second quintile. While 20.7 percent were in the second quintile,
25.0 percent had made it into the middle fifth, and another 25.3 percent
into the second highest quintile. The 14.7 percent in the top quintile
was actually higher than the 14.2 percent still stuck in the bottom
fifth. In other words, a member of the bottom income bracket in 1979
would have a better chance of moving to the top income bracket by 1988
than remaining in the bottom bracket.
In the second quintile, 71 percent had
exited between 1979 and 1988. Though 29.0 percent still remained in the
second quintile in 1988, 29.6 percent had moved up to the third
quintile, 19.5 percent to the fourth, and 11.1 percent to the top
quintile. Only 10.9 percent had moved down to the lowest quintile.
Of those in the middle quintile in
1979, 32.3 percent had moved to the fourth quintile and 15.0 percent to
the fifth quintile by 1988. Over this period, 47.3 percent had moved up,
while 19.7 percent had moved down. The net effect of income mobility in
the middle range clearly reflected net overall improvement.
Currently there are two models of the American economy, one static,
and the other dynamic.
The first portrays the United States as a caste
system and misapplies the characteristics of a permanent income strata
to those only temporarily moving through income brackets.
The alternative view portrays a much more complex and interesting social
reality in which the composition of income classes are in constant flux.
According to this latter point of view, simplistic generalizations about
actual persons and families (or "the rich" and "the poor") cannot be
drawn from data on a conceptual artifice which does not exist as such in
reality.
The empirical data support the view of
the market economy as a dynamic and open society which provides
opportunity to those who participate.
There is no evidence of stagnation, with the turnover rate in the most stable quintile -- the
top fifth -- exceeding 35 percent.
The turnover rates in the bottom four
quintiles were at least 60 percent over the period, with most of this
reflecting upward progress. Analysis which assumes or suggests stable
composition of family or household income quintiles rests on invalid
assumptions. It makes no sense to draw sweeping conclusions such as "the
income of the bottom 20 percent of families fell" in a 15-year period
when most of the people originally in that category have long since
improved their standard of living enough to have moved up from the
bracket entirely.
The empirical data support the view of the market economy as a dynamic and open society which provides opportunity to those who participate.