How Much Income Mobility is There in Britain?

Using the first four waves of the British Household Panel Survey (1991–4) and a variety of methods, we show that there is much mobility in household net income from one year to the next in Britain. However most income changes from one year to the next are not very large, and when incomes are longitudinally averaged so that transitory variations are smoothed out, substantial ‘permanent’ income differences are revealed. There is some evidence of greater mobility for those in the tails of the income distribution relative to the middle, and for elderly persons compared to non‐elderly persons