1  Why researchers are interested in intergenerational mobility

Researchers are interested in understanding how intergenerational mobility affects equality of opportunity, skills development, economic efficiency, productivity and living standards. Low intergenerational mobility can imply that, because of their backgrounds, people are unable to fully develop and use their skills and abilities.[2] As well as signalling low equality of opportunity, this would constitute an inefficient use of a country's human capital (Harding, Jencks, Lopoo and Mayer, 2003, p. 30; OECD, 2008b, p. 3).

Conversely, some policies that facilitate skill development and productivity could feasibly lower observed rates of intergenerational mobility and vice versa (Breen, 1997, p. 442). For instance, increased government expenditure on secondary education and universities in many countries during the 1950s and 1960s increased average educational levels and levels of human capital. However, in some countries this increase in educational expenditure disproportionately benefited children from better-off families. This was because they were most likely to take advantage of these improved educational opportunities (Blanden and Machin, 2004, p. 247; Corak, 2006, pp. 15, 16). Similarly, a country’s economy benefits when parents invest time, emotional commitment and money in their children. Many parents are also supportive if their children aspire to have a similar career to themselves, or if their children want to work in a family business (d'Addio, 2007, p. 11; Roemer, 2004, p. 55).

Nevertheless, policies that aim to improve the aspirations, preferences and skills of those from disadvantaged home environments can sometimes enhance intergenerational mobility and arguably economic growth (d'Addio, 2007, p. 11). In addition, reducing barriers to entering the workforce and particular occupations and to starting a business and employment could promote both economic growth and intergenerational mobility (Cabinet Office Strategy Unit, 2008a, p. 49).

Studying intergenerational economic mobility in New Zealand can shed light on the opportunity New Zealanders have to advance themselves, relative to the economic position of their parents, compared to people in other developed countries. The level of intergenerational mobility is an important measure of the economic openness of a society and of the level of opportunity. However, generational mobility is by no means the only measure of these goals (Corak, 2006, p. 12; d'Addio, 2007, p. 12). Policies to increase intergenerational mobility may sometimes also adversely affect the achievement of other policy objectives, such as individual freedom, making specifying an ideal level difficult (Roemer, 2004, p. 51).

While the number of overseas studies of intergenerational income and occupational mobility has grown (Corak, 2006), the literature on this topic for New Zealand is limited. Although a recent comparative study of intergenerational income mobility briefly included New Zealand men, because the authors did not have information on the incomes of fathers, they imputed their incomes using occupation data (Andrews and Leigh, 2008, p. 7). Similarly, while an unpublished comparative study of intergenerational occupational mobility included New Zealand, the sample size was small and few technical details are available (Blanden, 2008, p. 32). Factors limiting intergenerational mobility and whether mobility varies between New Zealand population groups have also not been explored. The extent to which obstacles to intergenerational mobility identified in other countries, such as Britain and the United States, apply to New Zealand is therefore not clear.

This paper seeks to remedy some of these gaps in our knowledge by applying methods used widely overseas to two different New Zealand datasets. Because our research is preliminary, and in some respects experimental, we also identify areas for future research.