Who Is a Top Earner and For How Long? Top Income Mobility in Switzerland Isabel Z. Martínez University of St.Gallen First WID.world Conference Paris December 15 2017
Top Income Shares in Switzerland Top 1% labor and total income shares Income Share in Percent 12% 10% 8% 6% Total income (tax units) Labor income (employees and self employed) 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Year Soruce: Föllmi and Martínez (2016) Top Income Mobility in Switzerland Isabel Z. Martínez 1/26
Introduction Top income shares only give a cross-sectional view of inequality What are the dynamics of the income distribution? How did life-time inequality change? Who are the top earners? gender, nationality, occupation, type of employment (Swiss) Tax data contains limited information about the taxpayers Top Income Mobility in Switzerland Isabel Z. Martínez 2/26
Contribution Document the income mobility of top earners from 1981 2010 using social security data Provide a gender perspective on top earners Shed light on the role of foreigners and self-employed Top Income Mobility in Switzerland Isabel Z. Martínez 3/26
Outline 1 Introduction 2 Data 3 Results Who are the Top Earners? Top Income Mobility Income Inequality 4 Conclusion and Outlook Top Income Mobility in Switzerland Isabel Z. Martínez 4/26
Data: Matched Social Security - Census Data 2010 Census matched to social security annual earnings records in the years 1981 2010 Sample: everyone who is present in 2010 and generated at least one SS entry between 1981 2010 Individual earnings histories from employment and self-employment Characteristics: gender, age, country of birth, type of employment (employee vs self-employed), firm id, limited industry information, marital status history Missing SS Records in 1989, 1998, 2007 Top Income Mobility in Switzerland Isabel Z. Martínez 5/26
Data Coverage Sample: only individuals present in CH in 2010 Number of observations (in mio) 1 2 3 4 5 0.59... 0.66.... 0.74.... 0.78.... 0.85.... 0.88.... 0.92 1980 1985 1990 1995 2000 2005 2010 AHV (sample, age 20-62) Total population age 20-62 Top Income Mobility in Switzerland Isabel Z. Martínez 6/26
Sample Selection Only those in the labor force (positive income or unemployment benefits) Percentiles are always based on the distribution of this population, even when looking at subgroups like women, foreign born, self-employed etc. Sample grows older over time since only individuals present over a long time span can be studied Coverage by age Age distribution Top Income Mobility in Switzerland Isabel Z. Martínez 7/26
Outline 1 Introduction 2 Data 3 Results Who are the Top Earners? Top Income Mobility Income Inequality 4 Conclusion and Outlook Top Income Mobility in Switzerland Isabel Z. Martínez 8/26
Share of Women among Top Earners Share of women in different income groups 0.1.2.3.4.5 1980 1985 1990 1995 2000 2005 2010 Top... 10% 5% 1% 0.1% Total Top Income Mobility in Switzerland Isabel Z. Martínez 9/26
Share of Self-Employed among Top Earners Share of self-employed in different income groups 0.1.2.3.4.5 1980 1985 1990 1995 2000 2005 2010 Top... 10% 5% 1% 0.1% Total women Top Income Mobility in Switzerland Isabel Z. Martínez 10/26
Share of Foreign-Born among Top Earners Share of foreign-born in different income groups 0.1.2.3.4.5 1980 1985 1990 1995 2000 2005 2010 Top... 10% 5% 1% 0.1% Total women Top Income Mobility in Switzerland Isabel Z. Martínez 11/26
Age-Profile of the Top 1% 0.2.4.6.8 1 35-44 year olds 45-54 year olds 55-64 year olds 1980 1985 1990 1995 2000 2005 2010 Top Income Mobility in Switzerland Isabel Z. Martínez 12/26
Age-Profile of the Top 0.1% 0.2.4.6.8 1 35-44 year olds 45-54 year olds 55-64 year olds 1980 1985 1990 1995 2000 2005 2010 Top Income Mobility in Switzerland Isabel Z. Martínez 13/26
Age-Profile of the Top 0.01% 0.2.4.6.8 1 35-44 year olds 45-54 year olds 65+ 55-64 year olds 1980 1985 1990 1995 2000 2005 2010 Top Income Mobility in Switzerland Isabel Z. Martínez 14/26
Outline 1 Introduction 2 Data 3 Results Who are the Top Earners? Top Income Mobility Income Inequality 4 Conclusion and Outlook Top Income Mobility in Switzerland Isabel Z. Martínez 15/26
Repeated Presence among Top 1% Share remaining in Top 1% 0 % 20 % 40 % 60 % 80 % 100 % 1980 1990 2000 2010 In Top 1% after... 1 year 4 years 9 years 14 years Note: Analysis unconditional on being among the top 1% every year. Top Income Mobility in Switzerland Isabel Z. Martínez 16/26
Constant Presence among Top 1% Share remaining in Top 1% 0 % 20 % 40 % 60 % 80 % 100 % 1.4% 6.3% 12.1% 25.6% 47.0% 76.9% 1980 1990 2000 2010 Total consecutive years among Top 1% 2 5 10 15 20 30 Note: Analysis conditional on being among the top 1% every year. Top Income Mobility in Switzerland Isabel Z. Martínez 17/26
Constant vs Repeated Presence among Top 1% 0 % 20 % 40 % 60 % 80 % 1980 1990 2000 2010 Presence among Top 1% 5 years, c 15 years, c 5 years, uc 15 years, uc Top Income Mobility in Switzerland Isabel Z. Martínez 18/26
Persistence of Men and Women among the Top 1% 0 % 20 % 40 % 60 % 80 % 1980 1990 2000 2010 Total consecutive years among Top 1% 5, m 10, m 15, m 5, f 10, f 15, f Top Income Mobility in Switzerland Isabel Z. Martínez 19/26
Persistence of Different Subgroups among the Top 1% Share remaining in Top 1% 0 % 20 % 40 % 60 % 80 % 1980 1990 2000 2010 Presence among Top 1% for 5 consecutive years women foreign-born employee self-employed Top Income Mobility in Switzerland Isabel Z. Martínez 20/26
5-year Continuous Presence among the Top 1% by Age 0 % 20 % 40 % 60 % 80 % 100 % 1980 1990 2000 2010 5 consecutive years among Top 1% by age group 25-34 35-44 45-54 55-64 65+ Top Income Mobility in Switzerland Isabel Z. Martínez 21/26
10-year Continuous Presence among the Top 1% by Age 0 % 20 % 40 % 1980 1990 2000 2010 10 consecutive years among Top 1% by age group 25-34 35-44 45-54 55-64 65+ Top Income Mobility in Switzerland Isabel Z. Martínez 22/26
Outline 1 Introduction 2 Data 3 Results Who are the Top Earners? Top Income Mobility Income Inequality 4 Conclusion and Outlook Top Income Mobility in Switzerland Isabel Z. Martínez 23/26
Top-Percentile to Median Income Ratios Percentile-to-Median Ratio 4 5 10 15 20 30 40 60 1980 1990 2000 2010 P99/P50, annual P999/P50, annual P9999/P50, annual P99/P50, 5-yr avg. P999/P50, 5-yr avg. P9999/P50, 5-yr avg. Top Income Mobility in Switzerland Isabel Z. Martínez 24/26
Gini of Annual and Multi-year Earnings Mobility did not counteract the overall increase in inequality Gini.34.36.38.4.42.44 1980 1990 2000 2010 Annual earnings 3-year earnings 5-year earnings Top Income Mobility in Switzerland Isabel Z. Martínez 25/26
Conclusion and Outlook Women are still strongly underrepresented among Swiss top earners: 1 out of 12 top 1% earners was female in 2010 Top income mobility rose in the 1980s and 1990s but has remained stable afterwards The rise in top income mobility happened for men Income mobility did not increase enough to counteract rising income inequality International comparisons difficult, no unified framework determine a set of measures agree on data requirements (survey vs. registers) a (top) income mobility database? Dynamic view of inequality complementary to cross-sectional inequality analysis Top Income Mobility in Switzerland Isabel Z. Martínez 26/26
Thank you. Comments and questions welcome: isabel.martinez@unisg.ch Top Income Mobility in Switzerland Isabel Z. Martínez 27/26
Appendix Top Income Mobility in Switzerland Isabel Z. Martínez 28/26
Share covered by age and year Share covered in AHV-Sample 0 % 20 % 40 % 60 % 80 % 100 % 20 30 40 50 60 70 80 90 100 age 1981 1991 2001 2010 back Top Income Mobility in Switzerland Isabel Z. Martínez 29/26
Age distribution of the sample Age 20 30 40 50 60 70 1980 1990 2000 2010 Percentile of the age distribution p1 p25 p50 p75 p99 back Top Income Mobility in Switzerland Isabel Z. Martínez 30/26
Share of Self-Employed Women among Top Earners Share of self-employed women in different income groups 0.02.04.06.08.1 1980 1985 1990 1995 2000 2005 2010 Top... 10% 5% 1% 0.1% Total back Top Income Mobility in Switzerland Isabel Z. Martínez 31/26
Share of Foreign-Born Women among Top Earners Share of foreign-born women in different income groups 0.02.04.06.08.1 1980 1985 1990 1995 2000 2005 2010 Top... 10% 5% 1% 0.1% Total back Top Income Mobility in Switzerland Isabel Z. Martínez 32/26
References I Föllmi, Reto and Isabel Martínez, Volatile Top Income Shares in Switzerland? Reassessing the Evolution Between 1981 and 2010, The Review of Economics and Statistics, 2016. forthcoming. Top Income Mobility in Switzerland Isabel Z. Martínez 33/26