- Work earnings are the main driver of upward income mobility.
- Capital income — from shares, housing, or businesses — more often causes income declines.
- The finding comes from 300,000 Norwegian workers tracked over 26 years.
When your income rises compared to people around you, it is almost always because you are earning more from work. But when your income drops, that is usually because your capital income declined.
Nn a new working paper from the World Inequality Lab, the asymmetry is striking. Roberto Iacono, a professor at NTNU's Department of Social Work, worked with Marco Ranaldi from University College London and Joël Bühler from Universitat de Barcelona to analyze detailed data from Norway's income registers covering nearly 300,000 people over age 26.
The team introduced a new method for tracking how work earnings and capital income drive mobility over a person's working life. The results challenge assumptions about how people move up or down the income ladder.
Key figure
300,000
Norwegian workers tracked across 26 years of income data
The Way Up: Work Does the Heavy Lifting
Income mobility measures how easy or difficult it is for you or your family to move up or down in income compared to others in your community. Norway has high income mobility, meaning people can rise or fall relatively easily.
What is income mobility?
Income mobility is a measure of how freely people move up or down the income scale relative to others in their society. High mobility means your place in the income distribution is not fixed – hard work, career changes, or investment gains can shift your position. Low mobility means your starting point largely determines where you end up.
Your income is the sum of what you earn from work and from capital income
Professor Roberto Iacono at NTNU's Department of Social Work
When people climb the income ladder, work earnings are the engine. A job with good pay determines whether you get ahead. Capital income from shares, housing, or businesses can contribute, but it almost never determines everything on its own.
That pattern flips when incomes decline.
The Way Down: Capital Takes Over
When people's income falls compared to others, capital income is usually the culprit. Although capital drives the decline, it often coincides with drops in employment income too.
The split makes sense when you consider how the two income sources behave differently. Employment income tends to increase gradually throughout life as workers gain experience, switch to better jobs, or build new skills. These processes lift many people over time.
Capital income works differently. It is more unevenly distributed, fluctuates dramatically, and can easily fall when markets decline or investments fail. A few people earn very well from capital, but for most it is uncertain and more often leads to decline than sustained growth.
Who Has What
There are also major differences in who actually holds capital. People with the highest incomes derive a much larger share of their money from capital than the rest of the population. For most people, employment remains by far the most important income source.
This means upward mobility usually results from employment income, either alone or combined with some capital earnings. Lasting progress typically depends on solid income from work, which later makes it possible to save and earn more from capital.
"Labour income systematically lifts individuals up in comparison to others," Iacono said. "Capital income, which is more unstable and concentrated, is more often associated with decreasing income."
The research highlights something important about economic security: most of us have to work if we want to improve our finances compared to people around us. Capital can accelerate gains or cushion falls, but work remains the foundation.
Fact Check: Claim-by-Claim Verification Verified
The recap accurately summarizes the World Inequality Lab working paper's key findings on labor income driving upward mobility and capital income driving downward mobility in Norwegian data.
Commentary
- Paper is a working paper (not peer-reviewed), but recap correctly attributes it and uses appropriate hedging for empirical findings.
- Source article (norwegianscitechnews.com, NTNU-affiliated) directly quotes researchers and links the paper, confirming faithful representation.
Sources used for verification
Academic/Peer-reviewed:
- Capital and Labor Income Mobility - wid.world
Other reliable sources:
- Here's what determines whether your income level rises or falls - norwegianscitechnews.com
- Capital and Labor Income Mobility - World Inequality Database - wid.world
- Roberto Iacono - NTNU - ntnu.edu
Fact-checked by Perplexity Sonar Pro on 2025-12-21
