Intergenerational income persistence within families

Abstract

There is substantial evidence of a significant relationship between parents' income and sons' earnings in the UK, and that this relationship has strengthened over time. We extend this by exploring a broader measure of net family income as an outcome. In doing so, we uncover three additional trends in social mobility. Partnership, and the level of earnings from any partner, are increasingly related to family background. The progressive direct tax and benefit system in the UK acts to offset intergenerational income persistence and has a stronger effect for the later cohort. Finally, men from higher-income backgrounds are significantly more likely than those from lower-income backgrounds to be in paid work and hence have higher incomes. Including out-of-work men in the analysis increases the estimates of intergenerational income persistence. This research was carried out as part of CLOSER (Cohort and Longitudinal Studies Enhancement Resources). CLOSER aims to maximise the use, value and impact of the UK's longitudinal studies. Bringing together eight leading studies, the British Library and the UK Data Service, CLOSER works to stimulate interdisciplinary research, develop shared resources, provide training, and share expertise. CLOSER is funded by the Economic and Social Research Council and the Medical Research Council. Its lead research partner is the UCL Institute of Education. The funders took no role in the design, execution, analysis or interpretation of the data or in the writing-up of the findings. The authors would like to thank Alison Park and Anna Vignoles for their helpful comments and suggestions.

The intergenerational elasticity of earnings: exploring the mechanisms

“…Without correcting for measurement error, the estimated IGE is 0.16 and 0.12 for males and females respectively. These estimates are similar to estimates in other studies using the same data (Belfield et al (2017), Gregg et al (2016)),…”

“…use the continuous parental income variables which were imputed by the Institute for Fiscal Studies as part of an effort to harmonize income variables in different cohort studies (Belfield et al (2017)). This procedure can be summarized by three steps.…”

“…A final way to estimate the IGE is to use family income for the children as well as for the parents. Belfield et. al (2017) find an IGE of 0.203 when they use son's gross family income at 42 and parent's net income from the NCDS.…”

Socio‐political fracturing: Inequality, stalled social mobility and electoral outcomes

“…These intergenerational inheritances mean that those from more affluent backgrounds have greater support to succeed, while those from less enabled and underprivileged backgrounds face ever greater challenges to improve their life course outcomes. While the gap between the upper echelons and lower strata of the middle has been growing (Belfield et al., ; Social Mobility Commission, , ), state interventions to ameliorate the structural disadvantages that impede certain population groups from achieving upward social mobility are being scaled back (Mason, ; Savage, ) . Disenchantment with the Conservative government's austerity measures – not only the pernicious universal credit regime which fails to address the economic reasons why individuals become reliant on the welfare state, but also the loss of funding for local authorities, smaller infrastructure and general cuts which cause further hardship – is therefore growing and leading to increased social tensions between groups in the large middle as evidenced by the growing resentments between native‐born and foreign‐born electorates of working age observed in the run‐up to the EU referendum (O’Reilly et al, ).…”

The Persistence of Socio-Emotional Skills: Life Cycle and Intergenerational Evidence

“…Dohmen et al (2011) try to tackle reverse causality due to contemporaneous measurements by using religion as an instrumental variable for the child's attitude, but the first stage indicates a weak instrumental variable problem even if one accepts its validity 5. Rohenkohl (2019) uses income using data from the BHPS and Understanding Society survey, whileGregg et al (2017) andBelfield et al (2017) use data from the National Child Development Study (NCDS) and the British Cohort Study (BCS).…”