2.3  Explaining variations in intergenerational mobility

Explanations of why intergenerational mobility varies between countries are often nationally focused, or about a relatively small number of countries, and sometimes do not hold when applied to a larger group of countries. Figure 1 shows differences in rates of intergenerational income mobility between the Nordic and continental European countries, suggesting that public policy differences between these countries may be important. However, the scattered distribution of the point estimates for English-speaking countries indicates that a wide range of factors may influence intergenerational mobility in developed countries. These are likely to include: the quality of a country's education and training system; the rate of economic growth and of job creation; the physical and emotional environment children experience; and the opportunities people have to improve and to use their capabilities (Blanden, 2008, pp. 19-25; Cabinet Office Strategy Unit, 2008a, pp. 4, 63; Grawe, 2004, pp. 73-75). Genetic inheritance of ability also affects the level of intergenerational mobility, but this effect is not likely to systematically vary between countries (Causa and Johansson, 2009, p. 9).

Research into factors affecting rates of intergenerational mobility has often focused on cross-national variations in educational achievement, cognitive skills, and workforce training (OECD, 2008a). Some researchers, for example, have suggested that a key reason why intergenerational mobility in the Nordic countries is high is the widespread availability of high-quality childcare and after-school care. These policies have contributed to levels of academic achievement and cognitive and non-cognitive skills being comparatively high, particularly among those at the bottom of the ability range. The provision of childcare has also improved people’s economic circumstances by making it easier for women to work (Bratsberg, et al., 2007, p. C91; Esping-Andersen, 2004b, p. 133; OECD, 2000, pp. 14-15; 2008b, p. 13). However, France also has higher early childhood education expenditure than most countries. While France’s investment in early childhood education seems to have boosted student achievement (Esping-Andersen, 2007, p. 20; OECD, 2006, p. 105), other barriers appear to limit intergenerational mobility.

While some researchers have found that early investments in people's skills are most effective (Carneiro and Heckman, 2003, pp. 90, 129, 194; Esping-Andersen, 2004a), there is also evidence that retraining unemployed and low-income workers can increase people’s skills and incomes (Krueger, 2003, pp. 23, 48). Furthermore, high participation rates in upper secondary school education and being able to borrow to fund tertiary education both seem to increase intergenerational mobility (Corak, Gustafsson and Osterberg, 2004, p. 284; OECD, 2010, p. 193). In contrast, early streaming of children into different educational paths seems to limit intergenerational mobility in some continental European countries (Grawe, 2004, p. 73; Pekkarinen, Uusitalo and Pekkala, 2006, pp. 10-11). Parental income is often a key determinant of educational choice in these countries, and children who do not pursue an academic stream frequently find their later educational options are limited (Mocetti, 2007, p. 13). The quality of a country’s teachers also affects student performance and intergenerational mobility (Causa and Johansson, 2009, pp. 28-30; OECD, 2010, p. 190).

For education expenditure to promote intergenerational mobility these outlays have to benefit people from lower income families relatively more than those from higher income families. This has not always happened (OECD, 2007b, pp. 12, 21). For instance, cohort study data clearly shows that increased expenditure on secondary schools and universities in Britain during the 1960s and 1970s disproportionately benefited children from better-off families. However, since the mid-1980s the greatest growth in student numbers in Britain has been among those from less well-off families (Blanden, Gregg and Machin, 2005, p. 11; Blanden and Machin, 2004, p. 238, 2007, pp. 15, 19).

Although factors relating to educational achievement have some explanatory power, they often poorly explain rates of intergenerational income mobility. In Italy, for instance, differences in educational achievement by children seem to account for only about one-third of the effects of parents' incomes on the incomes of their children. While education is an important channel for intergenerational mobility in Italy, two-thirds of the effects of parents' income on the incomes of their children occur through channels other than the education system. Italian researchers have suggested that entry barriers into a wide range of occupations and the strong role played by social and family ties in gaining employment may be constraining intergenerational mobility (Mocetti, 2007, pp. 15-18; Piraino, 2007, pp. 18-22). Researchers have raised similar concerns about France. Intergenerational income effects in Canada also appear to be partly attributable to labour market contacts gained through a person’s father, with 40% of young men having been employed by an employer for whom their father has also worked (Corak and Piraino, 2010, pp. 26-28). In addition, having parents who received a benefit seems to have a negative effect on a person’s labour market outcomes and income as an adult (d'Addio, 2007, pp. 34-36). In Britain, there has been growing interest in how policies that make establishing a business and employing people easier may promote intergenerational mobility, particularly for groups with high rates of unemployment (Cabinet Office Strategy Unit, 2008b, p. 49).

Some researchers have found that black people in the United States have lower intergenerational income mobility than white people (Hertz, 2005, p. 165). However, this seems to explain only a small part of the difference in intergenerational mobility rates between the United States and other countries (Jäntti, et al., 2006, pp. 2, 25). Explanations for low intergenerational income mobility in the United States have tended to focus on high returns from education, together with poor average educational performance by students from low-income families (Raaum, et al., 2007, p. 27) and the negative effects of exposure to violence. A high rate of absolute child poverty together with parental characteristics, such as a higher teenage birth-rate than in other developed countries, may also be important (Corak, 2001, p. 7; Corak, Curtis and Phipps, 2010, pp. 19-24). However, exceptionally able children in the United States seem to be more upwardly mobile than similar children in other countries (Grawe, 2004, p. 79).

Researchers have theorised that women are more mobile than men in most countries because married women with children have often reduced their labour market participation. Parental income has affected the educational qualifications of both men and women (Raaum, et al., 2007, p. 30) but has not had the expected effect on the incomes of women (Chadwick and Solon, 2002; Ermisch, et al., 2006, p. 674). Indeed, rates of intergenerational income mobility for married women born between the late 1950s and early 1960s in the Nordic countries, Britain and the United States, when based on their own earnings, are approximately uniform (Raaum, et al., 2007, pp. 21-22). High intergenerational income mobility for married women in the United States and in Britain, relative to single women and to single and married men, seems to reflect low labour market participation by married women with children. This may have occurred because in these two countries the tax system, childcare costs and social expectations have encouraged more married women with children to completely leave the labour market than in Scandinavia. As a result, some married women have either not been using or have only partly been using their labour market earnings potential compared to other adults. In the United States and Britain this effect seems to have been biggest among women from affluent backgrounds with high-income husbands (Raaum, et al., 2007, pp. 23, 30, 35-37).

Recent research in Sweden, using a dataset that includes a large number of adopted children, suggests that pre-birth factors are more important than post-birth factors for educational achievement. In contrast, for long-run earnings and income, adopted father's earnings seemed to be more important than birth father's earnings (Björklund, Jäntti and Solon, 2007, pp. 1015, 1026). There was also evidence for interactive effects between pre-birth environment and genetic effects (Björklund, et al., 2007, p. 999) suggesting that disaggregating these effects is very complex.