It’s been well documented that one of the best predictors of a person’s economic status is the economic standing of their parents. While that’s good news for those whose parents are well-off, it’s really bad news for economic mobility. A new study from the St. Louis Fed attempts to discern precisely what factors contribute to this phenomenon, and how those factors might be manipulated to increase economic mobility in America.
The paper’s authors, George-Levi Gayle and Limor Golan of Washington University in St. Louis; and Mehmet A. Soytas of Ozyegin University, looked at several characteristics to figure out the factors that play the largest role in the earnings alignment between parents and their children. They looked two-parent households and their respective participation in the labor market, education, number of children, spousal choice, and division of labor.
Gayle says that some of what they found surprised them. They initially thought that assortative mating, an increasingly common occurrence where individuals wed someone of a similar educational status, would be a significant determinant of earnings similarity. But according to their analysis, it only accounted for around 13 percent of correlation. “This is supposed to be one of the holy grails of household economics in terms of generating persistence,” he said.