Kanton ZürichStatistisches Amt

Income Mobility in the Canton ofZurich - a NovelUse of Tax DataDr. Peter Moser

Presentation at the Swiss Statistics Meeting 2013 in Basle

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� Equality of opportunity defines a modern democraticsociety

� Equality of opportunity implies social mobility amongits members, an absence of a rigidly hierachical class system(eg. the feudal system of the Middle Ages)

� The degree of social mobility in a society indicates theactual degree of equality of opportunity

� Two different concepts: intergenerational social mobility

(changes in the status of the members of different generationsof a family group) and intragenerational mobility

� Income mobility (∆ income t1 - t0) is an important aspectof intragenerational social mobility, because income iscentral to the notion of social status

Income Mobility - Why Is It Important?

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� Federal income tax returns from the Canton of Zurich

� each year from 1999 to 2010 individual data for all ordinary tax subjects.

� Variables: taxable income, tax rate used (Singles and families - a proxy for household structure), age of taxpayer (proxy for the positionof the household in the life cycle), wealth

� and crucially : a key variable connecting units of taxation

over time (pseudonymized social security number) …

� … and thus allowing for the generation of the panel data

required to analyze individual (or household) income mobility

� this gives us about half a million of complete cases (out of a total of 1.2 Mio) for a balanced panel during the ten years between 2001 und 2010

The Data: Income Tax Returns

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� Advantages

� lots and lots of cases for

free!

� trustworthy, verified income

data (as compared to surveydata)

� Data includes all sources of

income (e.g. not only wages)

� selective panel mortality

is not at big problem (withthe exception, obviously, of theelderly)

Tax Data: Advantages and Drawbacks

� Drawbacks

� almost no additional

information abouthouseholds (formation, earnings and wealth structureetc.)

� little explanation ofincome mobility is possible

� Tax law defines income,

not social science

� The key variable refers toan individual, the unit ishowever a household

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� life-cycle of absolute income

change expectations over a ten year horizon

� High absolute gains among

young (single) households

� Turning point at about 50, incomes ten years hence areusually lower than incomes now

� Looming retirement implies

lower incomes

� (Nominally) more or lessconstant incomes after

retirement

� Different income trajectory

for multiperson-households!

Absolute Income Mobility in the Life Cycle

Age (2001)

Med

ian

Inco

me

Diff

eren

ce 2

001-

2010

-200

00-1

0000

010

000

2000

030

000

25 30 35 40 45 50 55 60 65 70 75

Type of HouseholdSingleMultiple Persons

Single- > MultipleMultiple- > Single

Total

6

Absolute Income Mobility by Age & Income Class

age (2001)

med

ian

abso

lute

inco

me

diffe

renc

e (r

eal)

20

01-2

010

-600

00-4

0000

-200

000

2000

040

000

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

1. quintile 2001 (-36K)

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

2. quintile 2001 (36-54K)

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

3. quintile 2001 (54-72K)

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

4. quintile 2001 (72-102K)

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

5. quintile 2001 (102+K)

household typesinglemulti-person

single- > multimulti- > single

total

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Relative Mobility: a Quantile-Mobility-Matrix

� Relative (Quantile) income

mobility 2001 to 2010, Downwardsmovement = upward movement

� Diagonal orientation: Past incomerank predicts future ranking rather well

� 28% are staying in the same

decile after ten years

� 72 % of households have some

relative income mobility.

However, about half of them only moveinto an adjacent Decile

� 3% of those in the bottom

decile move to the top decile

� There is income mobility - but asexpected it is also limited, especiallyin the corner deciles (Q1, Q10)

Q1:

0-1

9K

Q2:

19-

35K

Q3:

35-

46K

Q4:

46-

55K

Q5:

55-

64K

Q6:

64-

74K

Q7:

74-

87K

Q8:

87-

107K

Q9:

107

-146

K

Q10

: 146

K+

Q10: 137K+

Q9: 102-137K

Q8: 84-102K

Q7: 72-84K

Q6: 63-72K

Q5: 54-63K

Q4: 46-54K

Q3: 36-46K

Q2: 21-36K

Q1: 0-20K 43

19

10

7

5

4

4

3

3

3

19

29

17

11

8

6

4

3

2

2

10

19

23

16

11

8

6

4

3

1

6

11

18

20

15

11

8

5

3

2

5

7

12

17

19

15

11

7

5

2

4

5

8

11

17

19

16

11

7

3

4

4

5

8

12

16

19

17

11

4

3

3

4

5

8

11

17

22

19

8

3

2

2

3

5

7

10

18

29

20

3

1

1

2

2

3

5

8

18

56

2001

2010

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Relative Mobility by Age & Income

age (2001)

shar

e of

mob

ile h

ouse

hold

s (m

ovin

g ou

t of s

tarti

ng q

uint

ile) i

n %

2040

6080

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

1. quintile 2001 (-36K)

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

2. quintile 2001 (36-54K)

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

3. quintile 2001 (54-72K)

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

4. quintile 2001 (72-102K)

25-2

9

30-3

4

35-3

9

40-4

4

45-4

9

50-5

4

55-5

9

60-6

4

5. quintile 2001 (102+K)

household typessinglemulti-person

single > multimulti > single

total

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Relative Mobility Within Age Groups� income mobility (relative and

absolute) is influenced by thenormal financial life-cycle of a household

� But: How important is it for

total income mobility?

� Mobility between age groups vs. Mobility within age groups

� Mobility within age groups ishigher among the young andlowest among the retired

� But it is not very much lower

than overall mobility

� Total income mobility is

mostly „real“ and not merely an artifact of the financial life-cycle

age (2001)

inco

me

mob

ility

(1-S

pear

man

s R

ho)

0.2

0.4

0.6

0.8

20 25 30 35 40 45 50 55 60 65 70 75

household typessinglemulti-person

single > multimulti > single

total

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Income Mobility Among the Top Earners� Income mobility at the top

matters: Money is power, renewal of

elites essential in a democracy

� 47% of households in the top 1%

(400KFr+) in 2001 are still there ten

years later and 38% of those in thetop 0.1% (1.5MFr+)

� 25 % of households in the top 1%

remain there during every one of

those ten years and 19% of thosein the top 0.1%

� There is renewal - but also persistence at the top; the more (orless) the thinner the income slice.

� Persistence depends on age (nextslide)

.. Top 10% .. Top 1% ... Top 0.1%

Per

cent

age

Sha

re o

f tho

se w

ho a

re 2

001

in th

e re

spec

tive

Inco

me

clas

s

050

100

150

200

100

150

200

250

300

2001 und 2010 among the ..during the whole period among the ..at least once in the period among the ...

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Age and Persistence of Top Incomes

Top Incomes ...

Sha

re a

s %

1020

3040

5060

10% 1%

0.1%

1 Year

10%

1% 0.1%

..2..

10% 1%

0.1%

..3..

10%

1% 0.1%

..4..

10% 1%

0.1%

..5..

10%

1% 0.1%

..6..

10% 1%

0.1%

..7..

10%

1% 0.1%

..8..

10% 1%

0.1%

..9..

10%

1% 0.1%

10 Years

Age classified (2001)18-44-years old 45-64-years old 65+ years old

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� Is there a clear trend? I thinkthis must remain an open

question with only about a decade‘s worth of data

� Mobility at the very top, while volatile, seems to increaseslighty

� Income mobility increases

in periods of strong growth asinnovation opens up newopportunities for people toadvance financially (Internet-boom in 2000, financial boom in 2007)

Is Income Mobility Changing over Time?

Sh

are

of I

nco

me

mo

bile

ho

use

hold

s in

%

30

40

50

60

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Total1. Decile

10. Decile (Top 10%)Top 1%

Top 0.1%

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� Income mobillity in the Canton ofZurich is in the lower middle

range internationally

� Close to Germany, Austria,

France

� Income mobility is slightly lower

than in the US (as studies also based on Tax data show)

� International comparisons are

difficult due to data problems

� Income mobility seems to be

influenced by growth rates

(Booming Spain, Ireland?) egalitarianism (Denmark?)

Comparative Income Mobility

Share of mobile households in %

Dänemark

Irland

Spanien

Belgien

Grossbritannien

Griechenland

OECD-17

Niederlande

Italien

Frankreich

Österreich

Deutschland

Kanton Zürich

Portugal

Luxembourg

Finnland

25 30 35 40 45 50

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

2

9

1

7

3

5

8

4

10

13

11

12

6

14

16

15

2

3

7

1

4

6

5

12

8

14

9

13

15

16

11

10

Income Mobilitytotal 1. Quintile 5. Quintile

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Dr. Peter Moser Statistical Office of the Canton of ZurichSchöntalstrasse 58090 Zurich

Peter Moser: Wie durchlässig ist die Gesellschaft? Einkommensmobilität im Kanton Zürich 2001 bis 2010, statistik.info 2013/08

www.statistik.zh.ch/dam/justiz_innern/statistik/Publikationen/statistik_info/si_2013_08_einkommensmobilitaet.pdf

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