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.