Earnings in the U.S.: A Game of Chutes and Ladders

Over 40 years, 70% of the population made it into the top 20% of earners, says a study. But far fewer stayed there.

By Jo Craven McGinty of The WSJ. Excerpts:

"Making it to the top may be the American dream. But getting there may be easier than staying there.

Over roughly 40 years, 70% of the population made it into the top 20% of earners for at least one year, according to researchers at Cornell University and Washington University in St. Louis. But only about 21% remained there for 10 consecutive years, and even fewer clung to the top rung for a solid decade.

“A small group of people persist at the high and low levels,” said Thomas A. Hirschl, a Cornell sociologist and one of the researchers who studied the phenomenon. “But a big crowd of people move in and out.”

"by age 60, more than half the population occupied the top 10% for at least one year, and 11% made it to the top 1% for that length of time."

"But only 0.6% remained at the highest level for 10 consecutive years, and less than 7% remained in the top 10% for that long.

On the lower rungs of the ladder, 79% of the population experienced at least one year of economic insecurity, when, for example, the head of a household was unemployed, and half the population experienced at least one year of poverty or near poverty."

"In 2016 . . . the income cutoff for the top 1% was $480,804. The top 50% earned 88.4% of total adjusted gross income. And the bottom 50% earned 11.6%."

"Earlier studies examining PSID data, from 1967 through 1976 and from 1977 through 1986, found that around 50% of earners fell out of the top quintile, while around 45% moved up from the lowest quintile.

Similarly, the most recent Treasury report, published in 2008, examined the returns of 117.1 million taxpayers who filed individual or joint returns in 1996 and 2005 and found that more than half moved to a different income quintile between the two periods, a degree of mobility that was unchanged from the prior decade."