Most U.S. families achieve higher income, research shows
With income inequality growing in the U.S., some might think that the rags-to-riches world portrayed in Horatio Alger's 19th century novels are, like his books, a thing of the past.
That's not entirely true, although today's America may look more like a scene from the 1983 classic film "Trading Places." American workers often climb into the top income brackets -- at least briefly -- demonstrating that American workers still have a fair amount of economic mobility, according to a book published earlier this year from researchers Mark R. Rank, Thomas A. Hirschl and Kirk A. Foster.
More than three-quarters of Americans will find themselves in households with annual incomes of more than $100,000 for at least one year, the authors write in "Chasing the American Dream: Understanding What Shapes our Fortunes," published last month. At that income level, those Americans qualify for a place in the top 20 percent of earners. On top of that, one-third of households will take home annual incomes of $200,000 -- or the top 4 percent -- for one year.
"There is considerably more economic fluidity at the top end of the income distribution than many people might imagine," the authors write.
They add that discussions about the "1 percent" versus the "99 percent" often portray America's income split as "static and unchanging." But their research, which is based on an analysis of the benchmark Panel Study of Income Dynamics data, shows that Americans often move in and out of the top ranks of earners.
"Although $250,000 represents the top 2 percent of the household income distribution in 2009, 20.6 percent of Americans will, for at least one year, reach or exceed that level at some point between the ages of 25 to 60," the book notes.
But fewer Americans are able to sustain that level of high earnings for more than one year. For instance, only 1 percent were able to earn $250,000 for 10 or more consecutive years, according to the research, which suggests the ability to earn upper-bracket incomes for a sustained period might be "a more accurate representation" of what it means to become one of the top 1 percent.
The downside, of course, is that Americans also suffer downward mobility, with almost two-thirds suffering an income loss of more than $50,000 for at least one year, the book notes.
Despite the fluidity that remains at the top, there are serious issues facing American workers, with the authors noting that four-fifths of Americans between the ages of 25 to 60 will live through at least one year of economic insecurity.
The book hits on the country's discourse about economic opportunity, given recent findings that the top 1 percent of Americans now take home 20 percent of all pre-tax income in the country, or double their share in 1980, and the argument of Thomas Piketty's "Capital in the Twenty-First Century," which states that the rate of return on capital has far outpaced that of economic growth.
While economic mobility isn't dead, more workers may find themselves slipping in and out of economic turmoil -- one good year, followed by a lean year. That may explain why more workers today say the American dream is increasingly elusive.