Twenty Years of Rising Inequality in U.S. Lifetime Labour Income Values

In this paper we study the evolution of lifetime labour income inequality by constructing presentvalue life cycle measures that incorporate both earnings and employment risk. We find that, even thoughlifetime income inequality is 40% less than earnings inequality, the total increase in lifetime incomeinequality 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 incomeinequality increasing in spurts particularly in the latter half of the 1990s. Finally, we find the changesin lifetime income inequality are primarily driven by changes in earnings mobility and changes in theearnings distribution itself, changes in employment risk and the composition of the sample, such as theshift toward attaining more education and the ageing population, do not play a large role