Dynamic Aspects of Earning Mobility (original) (raw)

Institute for Research on Poverty Discussion Papers Structure of Earnings In

1993

We examine the increasing variance of earnings among males with similar education and age levels over the 1970s and 1980s by focusing on changes in the covariance structure of earnings. Using data from the Michigan Panel Study of Income Dynamics from 1969-1987 for white males, we find that about half of the increase arose from an increase in the variance of the permanent component of earnings and half from an increase in the variance of the transitory component, where the transitory component reflected shocks that died out within three years. We thus find that increases in transitory shocks are as important as increases in the dispersion of permanent earnings in explaining recent increases in earnings inequality. Indeed, the increase in transitory shocks was especially great in the 1980s. Our investigation of earnings mobility indicates that long-term mobility fell in the 1970s but only short-term mobility fell in the 1980s, the latter reflecting the increase in short-term covarianc...

The Sources of Life Chances: Does Demography, Education, Class Category, Occupation or Short-Term Earnings Explain 20-Year Long-Term Earnings?

In sociological studies of economic stratification and intergenerational mobility, occupation has long been presumed to reflect lifetime earnings better than do short-term earnings. However, few studies have actually tested this critical assumption. In this study, we investigate the cross-sectional determinants of 20-year accumulated earnings using data that match respondents in the Survey of Income and Program Participation to their longitudinal earnings records based on administrative tax information from 1990 to 2009. Fit statistics of regression models are estimated to assess the predictive power of various proxy variables including occupation, education, and short-term earnings on cumulative earnings over the 20-year time period. Contrary to the popular assumption in sociology, our results find that cross-sectional earnings have greater predictive power on long-term earnings than occupation-based class classifications including 3-digit detailed occupations for both men and women. The model based on educational attainment including field of study has slightly better fit than models based on 1-digit occupation or the EGP class scheme. We discuss the theoretical implications of these findings for the sociology of stratification and intergenerational mobility.

Income Mobility in the United States

The Park Place Economist, 2016

This study makes use of the National Longitudinal Survey of Youth (NLSY) in order to examine the relationship between the standard of living one experiences as a youth and their income as an adult. Human capital theory, as well as previous empirical research in economics suggests that as standard of living as a youth increases, future income as an adult should increase as well. The 1979 cohort as well as the 1997 cohort of the NLSY were studied in order to provide insight into how the relationship in question has changed over time. I hypothesize that as standard of living as a youth increases, so too will income as an adult. Furthermore I hypothesize that the level of income mobility will be greater for the 1979 cohort than the 1997 cohort.

An empirical analysis of income dynamics among men in the PSID: 1968-1989

1997

This study uses data from the Panel Survey of Income Dynamics (PSID) to address a number of questions about life cycle earnings mobility. It develops a dynamic reduced form model of earnings and marital status that is nonstationary over the life cycle. The study reaches several firm conclusions about life cycle earnings mobility. Incorporating non-Gaussian shocks makes it possible to account for transitions between low and higher earnings states, a heretofore unresolved problem. The non-Gaussian distribution substantially increases the lifetime return to post-secondary education, and substantially reduces differences in lifetime wages attributable to race. In a given year, the majority of variance in earnings not accounted for by race, education and age is due to transitory shocks, but over a lifetime the majority is due to unobserved individual heterogeneity. Consequently, low earnings at early ages are strong predictors of low earnings later in life, even conditioning on observed individual characteristics.

Uncovering the American Dream: Inequality and Mobility in Social Security Earnings Data since 1937

2007

This paper uses Social Security Administration longitudinal earnings data since 1937 to analyze the evolution of inequality and mobility in the United States. Earnings inequality follows a U-shape pattern, decreasing sharply from 1938 to 1953 and increasing afterwards. We find that short-term and long-term mobility among all workers has been quite stable since 1951. Therefore, the pattern of annual earnings inequality is very close to the pattern of inequality of longer term earnings. In particular, uncapped earnings data available since 1978 show that mobility at the top of the earnings distribution has also been very stable and has not mitigated the dramatic increase in annual earnings concentration since 1978. However, the stability in earnings mobility among all workers masks substantial heterogeneity across demographic groups. The decrease of the gender gap in earnings started in the late 1960s and was present for all cohorts in the labor force at the time although stronger for young women. It has been taking place throughout the distribution, including the very top, and has contributed greatly to reducing long-term inequality and increasing long-term mobility among all workers. This is the driving force behind the relative stability of overall mobility measures which mask declines in mobility among men. In contrast, overall inequality and mobility patterns are not significantly influenced by the changing size and structure of immigration nor by changes in the black/white earnings gaps. 1 Edlund and Kopczuk (2007) argue that an increase in intergenerational mobility at the top of the distribution explains this pattern. 2 The SSA Master Earnings File (MEF) contains employee-level information for the full population since 1951 and employee-employer level (W-2) information since 1978. Starting in 1978, our data can be thought of as 1% research extracts from the MEF. Prior to 1978, it contains some information not available in the MEF and pre-1951 information is not part of the MEF. 3 The only study we found was Leimer (2003). The existence of the pre-1951 electronic micro data seems to be unknown to academic researchers. Social Security Administration (1937-1952) provided detailed annual statistical reports on reported earnings before the data were put in electronic format. 4 However, in those matched data studies, the SSA data before 1978 was always top-coded at the Social Security cap making it impossible to study the top half of the distribution. To our knowledge, the quarterly earnings information is not stored in the administrative SSA database and it seems to have been retained only in the 1% sample since 1957 and in the 0.1% sample since 1951 that we are using in this study. 5 Leonesio and Del Bene (2006) have recently used SSA data since 1951 to analyze lifetime inequality. They use, however, top-coded earnings data. Congressional Budget Office (2007) also use (uncapped) SSA data since 1981 and focus on short-term mobility and earnings instability.