Rising income inequality exacerbates downward economic mobility

April 30, 2019
AUTHORS: Liz Hipple, Elisabeth Jacobs

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The top panel shows that between 1950 and 1980, when economic growth was shared equitably across income quintiles (see the green bars), children born to middle-income households were likely to experience upward mobility even if they slipped down the income ladder a bit. In other words, those children born in 1950 were likely to have a higher income than their parents even if their relative position on the income distribution was a little lower than their parents’ place on the ladder.

The story is different between 1980 and 2010, as shown in the bottom panel. Children born to middle-income households in 1980 would be unlikely to have a higher income than their parents even if those children managed to hold on to middle-income status as adults. The reason: The income gains from growth between 1980 and 2010 were highly concentrated at the top of the income distribution while those in the middle saw less, and those in the bottom two income groups actually lost ground (see the red bars). Children born in 1980 needed to move up the income distribution substantially just to have the same inflation-adjusted income as their parents had.

What happened in 1980's? Ronald Reagan

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