“Rather than talking about the 1% and the 99% as if they were forever fixed, it would make much more sense to talk about the fact that Americans are likely to be exposed to both prosperity and poverty during their lives & to shape our policies accordingly.” - Mark R. Rank, “From Rags to Riches to Rags” New York Times, April 18, 2014

Churn rate is a measure of the number of individuals moving out of a collective group over a specific period of time. Relative household income in the US is subject to lots of churn. For instance, the top 400 US taxpayers changes a lot from year to year: over 70 % (2,909) made the list only one year during the period of 1999-2009.  Here are more examples:

  • 12%of US population will reach the top 1 % of income earners at least once.
  • 39 % of Americans will spend time in the top 5 % of earners
  • 56 % will make it to the top 10 %
  • 73 % will spend at least a year in the top 20 %
  • 50% who earned over $1 million a year did so just one year over and  15 % managed just two years (1999-2007)
  • 54 % of Americans will experience poverty or near poverty at least once between the ages of 25 and 60

In the US, persistence within an income category is the exception, not the rule.  On the premise that you can't fix a problem you don't understand, we need to keep this essential fact in mind when attempting to solve the problem of inequality.

References:

http://taxfoundation.org/article/income-mobility-and-persistence-millionaires-1999-2007

Auten, Gerald, Geoffrey Gee, and Nicholas Turner. 2013. "Income Inequality, Mobility, and Turnover at the Top in the US, 1987-2010." American Economic Review, 103(3): 168-72.

Rank,Mark R.  “From Rags to Riches to Rags” New York Times, April 18, 2014