Greg cites a piece in the NYT by Mark R. Rank. Before I get to that, let me read to you from Rank’s bio page at Washington University.
Mark R. Rank is widely recognized as one of the foremost experts and speakers in the country on issues of poverty, inequality, and social justice. . .
His next book, “One Nation, Underprivileged: Why American Poverty Affects Us All,” provided a new understanding of poverty in America. His life-course research has demonstrated for the first time that a majority of Americans will experience poverty and will use a social safety net program at some point during their lives.
He is currently completing a book with his long-time collaborator, Thomas Hirschl of Cornell University, entitled, “Chasing the American Dream: Understanding the Dynamics that Shape Our Fortunes.” It explores through a multi-methodological approach the nature of the American Dream and the economic viability of achieving the Dream. The book is designed to shed light on the tenuous nature of the American Dream in today’s society, and how to restore its relevance and vitality.
The NYT piece is based on the latter book. In it, Rank writes,
It turns out that 12 percent of the population will find themselves in the top 1 percent of the income distribution for at least one year. What’s more, 39 percent of Americans will spend a year in the top 5 percent of the income distribution, 56 percent will find themselves in the top 10 percent, and a whopping 73 percent will spend a year in the top 20 percent of the income distribution.
…Likewise, data analyzed by the I.R.S. showed similar findings with respect to the top 400 taxpayers between 1992 and 2009. While 73 percent of people who made the list did so once during this period, only 2 percent of them were on the list for 10 or more years. These analyses further demonstrate the sizable amount of turnover and movement within the top levels of the income distribution.
Some comments:
1. Many people experience having an income below the poverty line for a short period of time. However, I am not sure that one can conclude from this that they “experience poverty.” Think of graduate students, or people who experience a spell of unemployment but otherwise are able to hold a job.
My first year after graduate school, when I got married and started working at the Fed, my salary made us eligible for Montgomery County’s low-income housing assistance (we did not make use of that eligibility). Our household income probably did not exceed the median household income until my 8th or 9th year out of grad school.
2. Similarly, many people experience windfalls. We broke into the top 20 percent for exactly one year, the annus mirabilis 1999 when my Internet business got sold.
3. You would think that the perspective of a social work professor on income dynamics would be less valuable than the perspective of, say, Thomas Piketty. Yet it is possible that Rank’s new book might have something to add, because he is working with longitudinal analysis that follows the same people over time, rather than working with a time series of cross-sections and writing down a model that treats households (really, just abstract social classes) as persistently occupying the same place in the income distribution.
4. I have started reading Chasing the American Dream, and I may write a review. It is much closer to what you would expect from a professor of social work than what you would expect from, say, Greg Mankiw. The book treats economic position as being determined by race and social class.
It would be nice to understand what is the deal. For example, I think if my guardian angel came to me and offered to spot me a 1% advantage in Roulette (or Blackjack) I’d go to Vegas and be in the top 1% by the end of the year and stay there for life.
So, is life like that? And if it is like that, do we need to offer a handicap? And does that handicap need to be more than 1%?
“However, I am not sure that one can conclude from this that they ‘experience poverty.’ ”
I think that’s because your concepts of poverty are limited to (1) extreme poverty such as almost never occurs in the US, and (2) poverty as a collection of dysfunctional behaviors, such as are typical of Americans we call poor today.
There is a different kind of poverty that those graduates students and you (and I) have experienced. It is genteel poverty. You had very modest means, but weren’t starving. Your values were middle class and your hopes were high. Were you poor? Only of means. Your were psychically rich. Throughout most of our history, genteel poverty was very common in America. My paternal grandmother was a domestic servant and laundress. She made paper-thin Greek pastry dough by hand and embroidered all her bed linens. It is only since the last half of the prior century that genteel poverty has become so rare that we lack vocabulary for it.
Ken
When California wanted to raise income taxes on top earners, it ask the Stanford Center on Poverty (clearly an expert on the habits of the rich) to provide a report on why the tax increase would not cause the rich to flee California. Their finding, that high income taxpayer only spend a short time as high income taxpayers, so they would not leave the state, seems to have escaped all those who study economic income inequality or find an increase in income inequality (as well as the 1986 tax law changes such as the passive loss rules).