Moving Up? Earnings Mobility in California


Michael Dardia, Elisa Barbour, Akhtar Khan, and Colleen Moore
April, 2002

Recent studies of the increase in income inequality suggest that the low-wage workers of today are relatively worse off than the low-wage workers of yesterday and that income inequality in California has increased more rapidly than in the nation as a whole. What such studies do not tell us is whether today’s low-wage workers are the same individuals as yesterday’s low-wage workers. Most previous research on income inequality focuses on earnings at particular points in time (“cross-sectional” analysis) rather than on long-term patterns of earnings and employment for individual workers (“longitudinal” analysis). In this study, we analyze payroll data for 187,000 California workers from 1988 to 2000, using two forms of longitudinal analysis to measure both absolute mobility and relative mobility of earnings. In both cases we find substantial earnings mobility for individual workers. This differs from cross-sectional studies which suggest that real wages are declining for a large share of California’s workers, especially those at the bottom. We find that real wage gains are greatest for those workers who started out at the lowest wages. In addition, workers who switched industries enjoyed substantially higher earnings growth over the 12-year period than workers who remained in the same industry. Mobility patterns across industries reflect an effort by workers to gain higher-paying employment and do not concur with general employment trends. The findings of significant gains in earnings mobility for individual workers underscore the importance of longitudinal analysis for understanding the patterns of job movement and earnings changes in California.