Intergenerational Mobility

See also: Social Mobility

Inter-generational mobility is a measure of the changes in social status which occurs from the parents' to the children's generation. It can effect anyone in the population, as one’s economic standing can increase or decrease from the position they were born into. Our society is constantly changing, and because of this various opportunities can cause one to advance or digress in their economic standing. One’s talents can cause them to surpass the economic position into which they were born.

Many see intergenerational mobility as a way of measuring the equality present in the economic opportunities of a society. It takes a realistic approach of how much of your future economic standing is determined by your childhood experience and how much is determined by an individual’s talents and capabilities. Inter-generational mobility can best be determined by analyzing where children from the least or most affluent families end up in terms of incomes and earnings as adults. Their income as adults is then compared to what their parents earned. [Blanden, Jo, Paul Gregg, and Stephen Machin. Intergenerational Mobility in Europe and North America. Department of Economics, University College London, Centre for Economic Performance, London School of Economics, University of Bistrol, London School of Economics. London, 2005. 1-20.]

Inter-generational mobility is generally measured in terms of intergenerational elasticity, or a statistical correlation between parent’s and children’s economic standings. The higher the intergenerational elasticity, the less social mobility a society offers. In other words, the higher the intergenerational elasticity, the more of a role childhood upbringing plays when compared to individual talents and capabilities. [Blanden, Jo, Paul Gregg, and Stephen Machin. Intergenerational Mobility in Europe and North America. Department of Economics, University College London, Centre for Economic Performance, London School of Economics, University of Bristol, London School of Economics. London, 2005. 1-20.]

Intergenerational mobility is a pressing current issue. The New York Times and the Wall Street Journal published a series of front-page articles on this issue in May 2005. [Mazumder, Bhaahkar. "Trends in Intergenerational Mobility." Industrial Relations 46.1 (2007): 1-6.] America is seen as a ‘land of opportunity’ where anyone can succeed despite their background. Recent studies conducted on intergenerational mobility have shown this title to be a misnomer. According to data collected from 1992-2000, there are varying levels of intergenerational mobility across different nations. According to the study, Britain and the United States have the lowest levels of intergenerational mobility, or the highest levels of intergenerational persistence. The Nordic countries (Norway, Sweden, Denmark and Finland) and Canada tend to have high rates of social mobility. Norway itself proved to be the most mobile. Germany was also included in this study and was found to be in the middle of the scale.

Effects on Intergenerational Mobility

There are many debates surrounding the effects on intergenerational mobility.
*Educational FactorChanges in intergenerational mobility are at times attributed to educational opportunities. Over the years, mobility in the Nordic countries has increased. One possible reason for this equality in opportunity is the implementation of policies of school reform which lessen the financial strain of schooling on families, therefore making one’s economic background play less of a role in determining their educational attainments. This in turn makes one’s economic background play less of a role in their future economic earnings.

However, the findings are inconclusive. A study by Pekkala and Lucas shows how mobility sharply increased for individuals born around 1950 compared to those born around 1930. A possible reason suggested for this trend was the growth of secondary schooling. [Mazumder, Bhaahkar. "Trends in Intergenerational Mobility." Industrial Relations 46.1 (2007): 1-6.] Yet, this study simply discovered a correlation or association between education and mobility. Such a study does not determine causation.

Head-Start Assets

Shapiro uses the term head-start assets to refer to the assets that children can inherit from their parents that give them a “head-start” in life when compared to individuals who do not have these head-start assets. A good example of a head-start asset would be an inheritance that a child receives from his or her parents which gives them the amount of money required to put a down payment on a home. “This is a quick way of identifying families that might potentially receive large enough financial assistance to transform biographies, improve their class standing, and attain advantages for at least one child”. [Shapiro, Thomas M. "The Hidden Cost of Being African American". New York: Oxford University Press, 60-71.] In order to examine the trends in head-start assets and inheritances between whites and African-Americans Shapiro used data from the Panel Study on Income Dynamics from the year 1984 to 1999. When examining head-start assets along racial lines, whites are 2.4 times more likely than blacks to have parents with substantial wealth resources that can be used to give them an advantage in life. Data also reveal that among white families who received an inheritance the amount received averages at $76,000, while the average inheritance received by African-Americans was $31,000. Even when African-Americans are lucky enough to receive some sort of a head-start endowment they are receiving, on average, less than half of what the average white person gets. A lower-income individual fortunate enough to receive a substantial inheritance from their parents at some point in their life will also have the opportunity to escape the debt trap that many low-income families experience in the United States today. Because people who live on low yearly income must resort to credit to finance a great deal of their purchases they often fall short on payments and fall into a perpetual cycle of constant debt that may last their entire lives. A substantial inheritance would enable such an individual to clear their debt and allow them to chance to possibly focus the investment of their earnings on cultivating the growth of human capital in their children.

One such advantage that an individual who receives these head-start assets can enjoy is in the form of enhanced cultural capital. “Cultural capital refers to an understanding of what gives a person advantages or disadvantages in school, business, and social situations” (Shapiro 66). Those individuals fortunate enough to inherit a substantial amount of money and propel themselves into a class above the one in which they are currently a member gain the associated higher levels of cultural capital that go along with belonging to a higher social class. For instance, an inheritance that allows a family to move from a neighborhood with a poorer public school to one with a more well-endowed school and reap the benefits in cultural capital from the greater range of extracurricular activities that are offered. The structured extracurricular activities that are absent in schools with low funding and present in schools with high funding provide students with structure in their lives and also the opportunity to interact with other adults and learn important social skills that may benefit them later in life. Those children without access to such programs lack the opportunity to develop certain forms of social and cultural capital that would have otherwise helped them to advance their status in their future. Low-income families who do not receive these head-start assets do not have the opportunity to develop the cultural capital that is necessary to advance oneself to a higher status later in life.

Relating back to intergenerational mobility, it is easy to discern that this type of pattern that is becoming more and more evident in recent decades has the overall effect of further solidifying one’s class and status position throughout life. Individuals who come from wealthy families will continue to get head-start assets while those from poorer families will continue not to. The effect of this is an overall decrease in intergenerational mobility, especially for low-income African-Americans who, on average, have much worse prospects concerning head-start assets and inheritance.

Effects of Government Spending on Intergenerational Mobility

The standard model for examining intergenerational mobility says that if you were to hold a child's genetic endowments at a constant level, investments in his or her development of human capital increases his or her future income. This is an easy concept to understand if you imagine two children of equal ability, one of whom is cultivated with a high quality education from a young age and the other who does not receive that same educational opportunity. Since genetic predisposition to succeed is held constant it is clear that the child who receives the higher quality education will have a greater chance to succeed as they mature.

Since many parents in low-income families lack the wealth to give their children these opportunities, another source for these investments in their children's human capital is government spending. A study by Mayer and Lopoo uses data from the Panel Study of Income Dynamics and the U.S. Census of Governments to compare the relationship between government spending from state to state within the United States and intergenerational mobility for the residents in those states. [Mayer, Susan E. and Lopoo, Leonard M. "Government Spending and Intergenerational Mobility." Journal of Public Economics; February 2008.] Their results show that in states that have the highest government spending for programs which have an obvious uplifting effect on low-income families and their children, such as Welfare programs or increased spending on education, the highest levels of intergenerational mobility are found. They found, overall, that an 84% increase in government spending across all of the states led to a 34.6% decline in intergenerational elasticity. As one would expect, the effects of increased levels of government spending and assistance on the future income of children is far greater in those children who come from low-income families as opposed to the children who are raised in a high-income family.

This study on the relationship between government spending and intergenerational mobility are not meant to suggest that blind increases in government spending are the solution to increasing intergenerational mobility in the United States and narrowing the economic inequality gap that exists. This study does reveal that raising some forms of government spending that are especially beneficial to low-income families can substitute for the absence of income that those families have: income that they might elect to invest in the future of their child and the development of their human capital.

Industrialization Factor

There is an ongoing debate as to whether intergenerational mobility is affected by industrialization. In a study of Indonesia and Bangladesh, there was an increase in mobility as the countries were industrialized; giving the appearance that industrialization increases mobility. However, this theory does not seem to be sound as there seemed to be no evidence of sharper increases in mobility in greater industrialized sections of the country. [Mazumder, Bhaahkar. "Trends in Intergenerational Mobility." Industrial Relations 46.1 (2007): 1-6.]

Currently, what causes the amount of social mobility in a society is being analyzed. As stated, education and industrialization seem to be the major theories; however, they seem to be more of a matter of correlation than causation. Empirical evidence of their causation is still unknown. If we would be able to understand its causes, we would be able to modify our society so that America is truly a “land of equal opportunity”.

ocial Mobility

In regards to social mobility, most attention focuses on intergenerational mobility in regards to educational goals and occupational attainments. This concept disregards the effects of race, age, sex, gender, etc. The two main determining factors of intergenerational mobility are: 1) the amount of opportunities in society and 2) the rates at which one can increase economically and associate with change in the occupational structure. However, we must note that the cause of this type of mobility has not always been the norm. Factors like the effects of family backgrounds, and structural mobility have influenced the current determinants of intergenerational mobility.

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