Income Inequality, Income Mobility, and strongEconomic Policystrong U.S..pdf

Order Code RL34434 Income Inequality, Income Mobility, and Economic Policy: U.S. Trends in the 1980s and 1990s April 4, 2008 Thomas L. Hungerford Specialist in Public Finance Government and Finance Division Income Inequality, Income Mobility, and Economic Policy: U.S. Trends in the 1980s and 1990s Summary Income inequality has been increasing in the United States over the past 25 years. Several factors have been identified as possibly contributing to increasing income inequality. Some researchers have suggested the decline in unionization and a falling real minimum wage as the primary causes. Others have argued that rising returns to education and skill-biased technological change are the important factors explaining rising inequality. Most analysts agree that the likely explanation for rising income inequality is due to skill-biased technological changes combined with a change in institutions and norms, of which a falling minimum wage and declining unionization are a part. Since most people are concerned with upward mobility, and given the central importance of income mobility to the debate over income inequality, this report examines the relation between income mobility and inequality. Income mobility studies are an important complement to income inequality studies — income inequality does not address the issue of whether or not the poor are getting poorer, whereas income mobility does. While there appears to be considerable relative income mobility (about 60% of individuals change income quintiles over 10 years), it is not far — about 60% of those individuals who chan