Twenty Years of Rising Inequality in U.S. Lifetime Labour Income Values
Abstract
In this paper we study the evolution of lifetime labour income inequality by constructing present
value life cycle measures that incorporate both earnings and employment risk. We find that, even though
lifetime income inequality is 40% less than earnings inequality, the total increase in lifetime income
inequality over the past 20 years is the same as earnings inequality. While the total increase is the same,
the pathways there differ with earnings inequality experiencing a steady increase and lifetime income
inequality increasing in spurts particularly in the latter half of the 1990s. Finally, we find the changes
in lifetime income inequality are primarily driven by changes in earnings mobility and changes in the
earnings distribution itself, changes in employment risk and the composition of the sample, such as the
shift toward attaining more education and the ageing population, do not play a large role.