In the United States, family economic circumstances play an outsize role in determining children's economic prospects later in life and are a significant factor in limiting intergenerational economic mobility, a report from the Pew Charitable Trusts and the Russell Sage Foundation finds.
Based on an analysis by Stanford University researchers, the report, Economic Mobility in the United States (18 pages, PDF), found that approximately half of a family's economic advantages are passed on to the next generation. The estimated average intergenerational elasticity (IGE) — a measure of the strength of the relationship between parents' income and that of their children — of 0.52 for men and 0.47 for women are among the lowest for economic mobility yet produced. The study also found that the persistence of advantage is greater among higher-income families and among those with incomes between the fiftieth and ninetieth percentiles, and that two-thirds of parental income differences persist into the next generation. According to the report, the expected family income of children raised in families at the ninetieth income percentile is about three times higher than for those raised in families at the tenth percentile.
“The report documents that public policies must do more to level the playing field so that children from low-income families have greater opportunities to compete in the twenty-first century economy,” said Russell Sage Foundation president Sheldon Danziger. “Over recent decades, the rising income and wealth of affluent parents have allowed them to increase investments in their children, from day care through college. At the same time, wages have stagnated for most workers, and low-income families have struggled to pay for routine expenses.”