For American families economic opportunity typically means that, with hard work, all children can do better than their parents. This concept has held an important place in U.S. history, but does it still hold true today? According to a recent survey, only 64 percent of Americans now believe that opportunities for mobility—for having a better life than their parents did—are widely available, the lowest percentage in the roughly three decades the question has been tracked.
This report examines the transmission of economic advantage across generations using the first comprehensive set of intergenerational elasticity (IGE) estimates—which measure the persistence of advantage—based on tax and other administrative data. The analysis finds that children born into lower-income families can expect very different futures compared with those from higher-income families, indicating the importance of policy efforts to meet the country’s commitment to equality of opportunity for all families.
Approximately half of parental income advantages are passed on to children.
The IGE, when averaged across all levels of parental income, is estimated at 0.52 for men and 0.47 for women. These estimates are at the high end of previous estimates and imply that the United States is very immobile.
Children born far apart in the income distribution have very different economic outcomes.
The expected family income of children raised at the 90th income percentile is about three times that of children raised at the 10th percentile.
Parental income matters more for men’s earnings than for women’s.
Although both men and women benefit from being born into higher-income families, men benefit much more, at least in terms of their own earnings.
The persistence of advantage is especially large among those raised in the middle to upper reaches of the income distribution.
The IGE among adults whose parents were between the 50th and 90th income percentiles is 0.68 for men and 0.63 for women. This means that approximately two-thirds of parental income differences within this region of the income distribution persist into the next generation.