Earnings Mobility and Long-Run Inequality: An Analysis Using Matched CPS Data

In this article we use matched cross sections from the Current Population Survey (CPS) to examine patterns of short-term earnings mobility for the period 1967-91, which we then employ to assess the impact of rising annual individual earnings inequality on inequality over a longer span, First, we find that less-educated individuals and blacks have more instability in their earnings than those who are more highly educated and non-black. Second, short-term mobility levels have not undergone major changes over the time span we examine. Third, our results suggest that long-run inequality (calculated over five years) rose in the latter half of the 1980s. Fourth, important differences exist across demographic groups in long-run inequality trends, with long-term inequality increasing most in the 1980s for less-educated males.