7 Conclusion
This paper has researched intergenerational economic mobility in New Zealand using income data from the Dunedin Multidisciplinary Health and Development Study and occupation data from the New Zealand Election Study. We have used this data to calculate the relationship between parents' economic situation and the subsequent economic situation of their grownup children. This has been the most detailed research since the 1980s into intergenerational economic mobility by New Zealanders. Nevertheless, our research has been exploratory and our findings are very tentative.
Using data from the Dunedin Study, our preferred model for men and women produced an estimate of the intergenerational income elasticity of 0.26 (95% confidence interval: 0.14 to 0.39). This implies that, on average, having a father who earned 1% more than another person is associated with the person with the higher income father earning 0.26% more at age 32, all else being equal. Using combined parents' income, rather than father's income, as the main explanatory variable had very little effect on the results. Our estimates for men are very similar to a recent estimate for New Zealand men in a comparative study, which used national survey data on respondents' recall of their fathers' occupations to impute income (Andrews and Leigh, 2008, p. 13). Our results indicated that, on average, the childhood income of people’s parents explains a modest proportion of the variance in their adult income compared to other possible explanatory variables.
The results suggested that some of the effect of parents' income on the income of their children occurs because children from better-off families tend to spend longer in the education system. Our estimate using Dunedin Study data was that just under half of intergenerational income persistence was attributable to the length of time spent in the education system. This is a very approximate proportion, however, and adding additional variables could alter this estimate (Bowles and Gintis, 2002, p. 22).
We have to be cautious because many of the Dunedin Study participants are unlikely to have reached their peak earning years at age 32 (Coleman, 2006, pp. 14-15, 29-30; Corak, 2006, pp. 10-11). Indeed, the data indicates that some participants were not participating in paid work or had reduced their participation because they were having or looking after children. In addition, if we had additional years of income data we would have a clearer picture of people’s long-term economic circumstances. This would probably alter the results (Jäntti, et al., 2006, p. 20). We were unable to reach firm conclusions about the rate of intergenerational income mobility for people from Dunedin compared to those who were born in most other developed countries. However, our results suggested that rates of intergenerational income mobility for New Zealand men and women are probably within a similar range to rates in most other developed countries.
We also used occupation data from the nationwide 1996 Election Study to see what effect the SES of a person's father had on their own SES when they were grown up. When the Election Study analysis was restricted to people aged 25 or over the intergenerational occupational effect for New Zealanders on the electoral roll was 0.20 in 1996 (95% confidence interval: 0.16 to 0.24). This implies that, on average, each one unit relative difference in the SES of a person's father is associated with a 0.20 unit relative difference in their own adult SES. As with the income data, a family's economic circumstances when a person is growing up had only a modest effect on that person's subsequent economic outcomes. People who identified as Māori had lower SES on average than New Zealand's population as a whole. However, intergenerational occupational mobility for Māori was not statistically significantly different from the level for all New Zealanders.
When we compared our intergenerational occupational mobility results to those from a similar overseas study, there was weak evidence that New Zealanders were more mobile than people in Britain, and stronger evidence that New Zealand men were more mobile than German men. Important limitations to our intergenerational occupational mobility results include that they are based on a single measure in time of people's economic circumstances, rely on people being able to accurately recall their father's occupation and that the data is now over 14 years old. Insufficient data is available to reach conclusions about intergenerational occupational mobility in New Zealand compared to other countries, although the occupational mobility results give no reason for concern.
It should be emphasised that our findings are very preliminary. When Dunedin Study participants are in their late thirties and forties they are more likely to be in their peak earning years. Using data from the 2010-11 assessments should result in more accurate, but still imperfect, estimates of intergenerational income mobility (Haider and Solon, 2006, p. 1317). The results could potentially be cross-validated using data from the Christchurch Study of children born in 1977 and even possibly using government statistical records for a national sample. In 2008 the New Zealand Election Study asked about the occupations of respondents’ parents for the first time since 1996 and the data could be used to update our research into intergenerational occupational mobility.
