The Changing Effect of Family Background on the Incomes of American Adults

Abstract:     
We analyze changes in the determinants of family income between 1961 and 1999, focusing on the effect of parental education, occupational rank, income, marital status, family size, region of residence, race, and ethnicity. Our data, which cover respondents between the ages of thirty and fifty-nine, come from two Occupational Changes in a Generation surveys, the General Social Survey, and the Panel Study of Income Dynamics.

The multiple correlations between respondents' family income and their parents' characteristics fell between 1961 to 1999. During the 1960s the overall dispersion of respondents' family incomes also fell, so the income gap between respondents from advantaged and disadvantaged families narrowed dramatically. During the 1970s, 1980s, and 1990s the overall dispersion of respondents' family income rose again. But because the correlation between respondents' family income and their parents' characteristics was still falling, the income gap between respondents from advantaged and disadvantaged families showed no consistent trend.

All else equal, the economic cost of being Black, Hispanic, or born in the South fell between 1961 and 1999. The cost of having a parent who worked in an unskilled rather than a skilled occupation fell between 1961 and 1972 but not after that. Indeed, occupational inequality among parents has probably become more important since 1972. Neither the effect of parental education nor the effect of parental income changed significantly during the years for which we have data.

Daughters were considerably less mobile than sons in the 1970s, but this difference diminished in the 1980s and 1990s. Respondents with parents in the bottom quarter of the socioeconomic distribution were more likely to remain in their quartile of origin than respondents with parents in the top quarter of the distribution.

We conclude by arguing that while both justice and economic efficiency require a significant amount of exchange mobility, neither justice nor efficiency implies that the correlation between family income and parental advantages ought to be zero. The case for programs that seek to reduce intergenerational inheritance depends on whether they reduce poverty and inequality.

Number of Pages in PDF File: 58

Keywords: Welfare, Healthcare, Social Policy

JEL Classification: D13, D63

Accepted Paper Series