America is supposed to be a place where anybody who wants to can move up the economic ladder through his or her own efforts. People generally believe that having poor parents isn’t much of a handicap. But is this assumption true?
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In 1992 Gary Solon of the University of Michigan and David Zimmerman of Williams College began the demolition job when they published separate studies in the American Economic Review. They both found that the true correlation between parents’ and children’s earnings wasn’t 16 to 20 percent but 40 percent or higher. The country hadn’t changed; in Solon’s words, the earlier research had simply been based on “error-ridden data, unrepresentative samples, or both.” In 1997, in his book Parental Priorities and Economic Inequality, U. of C.’s Casey Mulligan upped the ante again: “More than 50 percent of earnings differences among parents are passed on to children.”
This summer, in an article that should have made news but didn’t, Bhashkar Mazumder of the Federal Reserve Bank of Chicago examined the biggest and best set of data yet, and concluded that the U.S. is a “relatively immobile society” in which parents pass along a strong 60 percent of their earnings advantage (or disadvantage) to their children. His research was published in the September issue of the bank’s Chicago Fed Letter and has been submitted to a peer-reviewed economics journal.
The first question Becker, Solon, Zimmerman, Mulligan, Mazumder, and others want to answer is, how fast does this evening-out process work? In theory it could happen in a single generation–or it might not happen at all.
The economists don’t know. Parents give their children eye color, hair color, stature, native intelligence, race, attitudes toward life, familiarity (or lack thereof) with jobs, and education. But they don’t give their children a head start or a delayed start in lifetime earnings in any direct or obvious way. (They might give them stocks or bonds, but that would be income or wealth, not earnings.) What mix or combination of factors explains that 60 percent transmission of earnings?
Art accompanying story in printed newspaper (not available in this archive): photo/Yvette Marie Dostani.
