Before they reach the age of 60, 85 percent of Americans will experience economic insecurity at some point. On the other hand, nearly 77 percent of Americans will have lived in a household earning more than $100,000 for at least one year, and 21 percent will have enjoyed living in households earning $250,000 for at least one year. New work using income data from 5,000 American households who have been followed since 1968 finds that Americans are subject to wide swings in economic fortune and misfortune.

The Panel Study of Income Dynamics (PSID) has been tracking the income ups and downs of selected households and that of their children seeking to discern how their economic fortunes change over time. Working on his upcoming book, Chasing the American Dream, Understanding the Dynamics that Shape Our Fortunes, Washington University sociologist Mark Rank has delved deep into these data. He revealed some of the results of his research at the recent Weidenbaum Center Media Retreat.

The Risk of Economic Insecurity

Rank restricts his analysis to people who are between the ages of 25 and 60, their prime working years. Since they are not yet 25 years old, children brought up under welfare programs are excluded. Let's look first at Rank's data on economic misfortune. He finds that by age 60, just under 45 percent of American adults will have relied for at least a year on one or more of the following, food stamps, Temporary Assistance to Needy Families (TANF), Medicaid, or Social Security's Supplemental Security Income. Not surprisingly, use of such programs rises faster earlier in life since income and job stability tend to be lower when a person starts out. By age 30, just over 27 percent of Americans will have accessed one of the welfare programs. By age 40, nearly 38 percent will have done so. The good news is that by age 60, only a bit over 7 percent of American adults will have used safety programs for 10 or more years.

Rank also looks at the cumulative percentage of American adults experiencing poverty and near poverty defined as being below 150 percent of the official poverty level. Rank is interested in this measure because not every American who qualifies for a welfare program chooses to use it, e.g., about 50 percent of people who qualify for food stamps don't use them. He finds that by age 60, just over 54 percent of American adults will have experienced at least one year of poverty or near poverty. Again, Rank's poverty/near poverty measure rises fastest in the early earning years where he finds that nearly 36 percent of Americans have experienced it for at least one year by age 30. I note parenthetically this includes me. By age 60, slightly more than 10 percent of adults will have lived in poverty/near poverty for 10 or more years. However, by age 60 only a bit over 5 percent will have been poor for 10 consecutive years.

Rank next measures income insecurity by looking at the cumulative percentage of adults who have experienced a household income drop of 50 percent or more. Nearly 65 percent will have done so by age 60. Rank says that the overall average size of the drop in household incomes is about $40,000. This measure is problematic to say the least since it incorporates income reductions that result from one parent deciding to drop out of the rat race to rear children, or household income cuts due to divorce, or returning to college, or changing jobs. For example, I quit my government job to go work at a magazine for less than half my pay in my late 20s and quit my magazine job in my 30s to work for a newspaper in Costa Rica for considerably less than half my pay. This income instability may be endemic to journalism since it appeared that most of my colleagues at the Weidenbaum retreat had made similar career decisions.

The final measure for income insecurity is the cumulative percentage of adults who have experienced head of household unemployment. Who is the head of a household is whoever the subjects in the PSID survey say it is. About 67 percent of adults by age 60 will have experienced this. By age 60 only 5 percent of adults will have lived in households that experienced 10 or more years of joblessness. In addition, only 5 percent of American adults are unemployed consecutively for five or more years.

Adding up all his measures, Rank reports that more than 85 percent of adults by age 60 will have had a bout with income insecurity, and nearly 20 percent will be mired in it for more than 10 years. Most people will not be surprised to learn that more than 63 percent of Americans will have been income insecure for at least a year before age 30. After all that's when people are still finding their footing in the job market. After hearing this statistic, one Media Retreat participant quipped, "The single best anti-poverty program is your mom's couch." Or, in my case, the couches of many of my friends.

The Risk of Economic Good Fortune

So what about the upside? In this case, Rank slices the data into the cumulative percentages of American adults who experience household affluence. By age 60, nearly 77 percent of Americans will have lived in a household earning more than $100,000 for at least one year. (All income statistics are in 2009 dollars.) More than 33 percent will have enjoyed this level of household income for 10 or more years, and 22 percent would have done so for 10 or more consecutive years. Rank also looks at cumulative percentages of Americans living in households with annual incomes over $150,000, $200,000, and $250,000.

By age 60, nearly 51 percent will have lived in a household earning $150,000 for at least one year; more than 32 percent at $200,000 for a year; and nearly 21 percent at $250,000 for at least one year. Keep in mind that $250,000 represents the top 2 percent of income in the United States. Interestingly, only 3.4 percent of Americans by age 60 will have lived in household earning $200,000 for 10 or more years, and only 1.6 percent will have done so over 10 or more consecutive years.

Rags to Riches and Vice Versa

Most Americans are believers in the notion that grit and determination will enable nearly anyone to improve their economic situation. But is it true? Rank cites research that looks at intergenerational economic mobility patterns comparing the U.S. experience with five other countries. For example, how likely is it that a man reared in a family whose father's earnings are in the bottom 20 percent of the income distribution will reach the top 20 percent? (The data look at fathers and sons because most other countries have not collected data on daughters' incomes for a long enough period for analysis.) In the U.S. less than 8 percent of such men make it to the top 20 percent of the income distribution while more than 42 percent remain in the bottom quintile with their fathers. Nearly twice as many Danes as Americans rise to from the bottom to the top quintile, whereas only a quarter of Danish sons of men in the bottom remain there. In Britain, more than 12 percent rise to the top while a little over 30 percent remain in the bottom.

On the other hand, in all six of the countries cited by Rank, it's easier to stay in the top income quintile if your dad was also there. In the U.S. 36 percent of men whose fathers were in the top 20 percent are also there, and just about 10 fall into the bottom 20 percent. In Denmark, a bit more than 36 percent of sons remain in the top quintile, but more than 15 percent fall into the bottom 20 percent.

So it seems that children often "inherit" economic advantages and disadvantages from their parents. Calculating the so-called intergenerational elasticity number indicates the extent to which parents' positions in the income distribution explains their adult children's relative incomes. A March 2012 Congressional Budget Office study, The U.S. Income Distribution and Mobility: Trends and International Comparisons [PDF], reports that the U.S. intergenerational elasticity of 0.5 suggests "that if the income of a child's parents was 30 percent higher than the average income of families in the parents' generation, then the child's income will be 15 percent above the average for his/her generation. In other words, in the United States, about 50 percent of the (dis)advantage of growing up in a (low) high income family may be inherited."

As far as intergenerational income mobility is concerned, the U.S. measure is higher than that of most other rich countries. The influence of a father's income on adult sons' relative earnings is lower than 20 percent in Canada, Denmark, Norway, and Finland, and 30 percent in Germany and Sweden. Intergenerational income mobility comparable to the U.S. is found in France and Britain.

Is it just parental money that accounts for this difference in income mobility between the generations? A 2006 study [PDF] done for the left-leaning Center for American Progress by former American University economist Tom Hertz looked a number of household characteristics that might account for 0.5 intergenerational elasticity figure. Taking into account a large variety of parental variables including race, educational levels, tendency toward fatalism, and religion, Hertz reduces the estimated effect of parental income itself to 0.20. "In other words, about three-fifths of the simple intergenerational elasticity is due to the influence of factors other than parental income," concludes Hertz.

While most studies in income mobility focus on the fates of those who are at top and the bottom of the income distribution, one should keep in mind that middle-class Americans experience considerable income mobility as well. A 2007 Treasury Department study looking at shifts in income mobility between 1996 and 2005 found that over half of taxpayers moved to a different income quintile over this period. For example, nearly 50 percent of the people in the second quintile moved up to one of the higher three quintiles during that period. And 42 percent of the middle quintile moved up to the two higher ones, while 25 fell into the two lower quintiles.

Overall, Rank's income data from 1968 to 2009 reveal a lot of churn in the economic fortunes of Americans. How much does this bother Americans? A 2009 Pew Center poll [PDF] found that 71 percent of Americans believe that it was more important to ensure that everyone has a fair chance of improving their economic standing, while only 21 percent think it was more important to reduce inequality. Do Americans have a fair chance to improve their economic lot?

Rank reports data that looks at the distribution of parents' incomes in the late 1970s compared to the earnings of their adult children in the late 1990s and early 2000s. The percent of adult children exceeding their parents' household incomes is broken down by income quintiles. Rank finds that 82 percent of kids whose parents were in the bottom 20 percent of the income distribution make more than their parents. The figures for each higher quintile are 74 percent, 68 percent, 67 percent, and 43 percent. Combined, it turns out that 67 percent of kids are making more than their parents did. In absolute terms, most children did improve their economic lot compared to their parents. The rising tide (when it is rising) of the American economy does indeed lift most boats.

Disclosure: I would like to thank the folks at Washington University's Weidenbaum Center for paying my travel expenses for their excellent media retreat.

Science Correspondent Ronald Bailey is the author of Liberation Biology (Prometheus).