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July 23, 2010

Income mobility

When we talk about rich, middle-income and poor households, we discuss them in a static way: We often assume rich stay rich, middle-class people are always middle class and the poor remain poor. But is this a good assumption?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Actually ... it is not. In fact, there has been a lot of research by economists over the years that suggest there is a lot of what we call income mobility -- rich people sliding out of the rich category into the middle income, or poor and middle income going up to rich and poor people going up to middle income, etc.

"We actually now have a new study among these series of studies that looked at household income mobility from 1999 to 2007 and drew the same conclusion. In fact, let me give you some numbers: What this study found is that 60 percent of poor households actually moved up the income ladder over this time period. Forty percent of rich households moved down the income ladder. And when you looked at all households in total, 60 percent of households changed income status sometime during that eight years.

"So really we have a very dynamic economy in terms of people's incomes, and one implication of this is for public policy, because if you are targeting a certain group of households to be helped by public policy, that same group may not be there several years down the road."

Posted by deeshore at July 23, 2010 08:18 AM