American children born into high-income families can expect far greater earnings and income over their lifetimes than children born into low-income families, according to a new study by Stanford researchers.
"This result is not consistent with the 'American dream' in which children from low-income families are supposed to have ample opportunities for economic mobility," said David Grusky, the director of the Stanford Center on Poverty and Inequality.
In a new study of economic mobility, based on tax data, the gap between this ideal and the reality of the US economy is shown to be very large, Grusky said.
Pablo Mitnik, a research associate at the Stanford Center on Poverty and Inequality and lead author of the report, said the research is based on a measure of economic mobility known as the "intergenerational income elasticity," which reveals the economic payoff of being raised in a higher-income family.
Thus, in a society with perfect mobility, this elasticity would equal zero and there would be no economic payoff, on average, to being raised in a higher-income family.
In other words, if children from families making $50,000 per year are compared with those from families making $60,000 per year, this measure describes how much of that 20 per cent difference is carried forward into the adult lives of those children, according to Mitnik. If the elasticity were one, then the full 20 percent advantage would be passed on.
The study revealed that the elasticity is very large: the family-income elasticity is 0.52 for men and 0.47 for women.
Read the whole report here .