The Generation Game: How Parents Influence Our Economic Success

Is Britain a highly mobile society, or are affluence and poverty largely transmitted from one generation to the next? New research published in the latest issue of the Economic Journal suggests that the economic standing of parents is an extremely important determinant of where their children end up in the income distribution. Whether this is due to children inheriting their parents” abilities or because of differences in children’s family backgrounds is not clear. Nonetheless, there are several important findings:

• Today’s income distribution may reflect the inequalities of three or more generations ago.
• If we took two fathers a generation ago, one earning £20,000 and another earning £10,000 (in today”s prices), then the results indicate that the son of the richer father would grow up to earn on average almost £7,000 more than the son of the poorer father.
• Rich people tend to come from high income backgrounds. Over half of the individuals in the top quarter of the earnings distribution today had parents who were also in the top quarter of the earnings distribution. Similarly, poor people tend to come from disadvantaged backgrounds.
• Sons of managerial or professional fathers are almost three times more likely to end up in similar occupations themselves than are the sons of semi-skilled and unskilled manual fathers.
• Men whose fathers had experienced spells of unemployment in the 1960s and 1970s are twice as likely as average to have been unemployed for a year or more between 1981 and 1991.
• Those children from poor and disadvantaged backgrounds who do escape from poverty in adult life tend to be more able children and those with better educational qualifications.

”Our work clearly indicates that people”s attainments in education and the labour market are strongly related to their parents” performance a generation ago” says Howard Reed, one of the authors of the article. The research makes use of the National Child Development Survey, a continuing study which follows the changing circumstances of a sample of children born in March 1958 as they grow up.

”Intergenerational Mobility in Britain” by Lorraine Dearden, Stephen Machin and Howard Reed is published in the January 1997 issue of the Economic Journal. The study was part of a research programme of the Economic and Social Research Council”s Centre for the Microeconomic Analysis of Fiscal Policy at the Institute for Fiscal Studies (IFS). Dearden and Reed are at IFS; Machin is at University College, London and the LSE.