Ups and Down

QUICK SUMMARY

This June 2009 report assessed the extent to which the American economy promotes upward economic mobility and prevents downward economic mobility. The Economic Mobility Project released a new fact sheet in January 2012 focusing on Americans' prospects for recovery after an income loss. The findings shed light on the impact the Great Recession could have on family incomes and mobility into the future.

In January 2012, the Economic Mobility Project released a new fact sheet highlighting key findings from this report. Focusing on Americans' prospects for recovery after an income loss, the findings shed light on the impact the Great Recession could have on family incomes and mobility into the future.

Focusing on the household incomes of working-age adults (those aged 26 to 59), this 2009 report assessed how income drops, gains, and recovery have varied from 1967 through 2004. The analyses included both short- and longer-term fluctuations in income, examining how people are able to recover from income declines, how long their recovery takes, and differences across demographic groups in both.

The report found that the economy does promote upward mobility over two- and ten-year periods just as well as it has in the past; Americans are not  more likely to experience income drops than before, and they recover from those drops at similar rates. However, Americans who experience a ten-year income decline of more than 25 percent only have a fifty-fifty chance of recovering in the subsequent ten years. They also have a tough time keeping up with their peers; in the ten years after the loss, their incomes are 39 percent lower than the incomes of all adults. The evidence implies that in the current downturn, more people will experience large short-term income losses than large gains. While most will eventually recover, some will fall permanently behind.

Americans are no more likely to experience income drops than they have been in the past, and they recover from those drops at similar rates. Nevertheless, for many Americans—today as before—an income drop is a significant and permanent financial setback, and the current recession—like previous ones—will prove to be an unfortunate turning point for millions of families.