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Intergenerational Mobility in Europe and North America

A Report Supported by the Sutton Trust

Jo Blanden, Paul Gregg and Stephen Machin1

April 2005

Embargo: 00.01 HOURS Monday April 25th

Contacts: Jo Blanden J.Blanden@lse.ac.uk Tel: 020 78523524


Paul Gregg P.Gregg@bristol.ac.uk Tel: 0117 9289083

1
Jo Blanden and Stephen Machin are in the Department of Economics, University College London
and Centre for Economic Performance, London School of Economics, Paul Gregg is in the Department
of Economics, University of Bristol and Centre for Economic Performance, London School of
Economics.
Executive Summary

The level of intergenerational mobility in society is seen by many as a measure of the


extent of equality of economic and social opportunity. It captures the degree of
equality in life chances - the extent to which a person’s circumstances during
childhood are reflected in their success in later life, or on the flip-side, the extent to
which individuals can make it by virtue of their own talents, motivation and luck.

Under a project supported by the Sutton Trust we have sought to understand more
about how intergenerational mobility compares across countries in Europe and North
America. In addition, work has been carried out to understand more about mobility in
Britain: how mobility has changed over time; and the role of education in shaping
opportunity.

The key findings are:

• International comparisons indicate that intergenerational mobility in Britain is of


the same order of magnitude as in the US, but that these countries are substantially
less mobile than Canada and the Nordic countries. Germany also looks to be more
mobile than the UK and US, but a small sample size prevents us drawing a firm
conclusion.
• Intergenerational mobility fell markedly over time in Britain, with there being
less mobility for a cohort of people born in 1970 compared to a cohort born in
1958. No similar change is observed in the US.
• Part of the reason for the decline in mobility has been the increasing relationship
between family income and educational attainment between these cohorts. This
was because additional opportunities to stay in education at both age 16 and age
18 disproportionately benefited those from better-off backgrounds.
• For a more recent birth cohort (born in the late 1970s and early 1980s), there is a
more mixed picture on changes in educational inequality. Their education
participation in the 1990s was characterized by a narrowing in the gap between the
staying on rates at 16 between rich and poor children, but a further widening in the
inequality of access to higher education.

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• The expansion of higher education since the late 1980s has so far
disproportionately benefited those from more affluent families.
• The research shows clearly, using a variety of identification techniques, that
family income in the childhood years does make a genuine difference to
educational outcomes, rather than reflecting other aspects which differ across
families. However, the estimates are not able to say definitively whether this
causal effect has increased in strength over time.

Implications
International comparisons of intergenerational mobility show that Britain, like the
United States, is at the lower end of international comparisons of mobility. Also
intergenerational mobility has declined in Britain at a time of rising income
inequality. The strength of the relationship between educational attainment and family
income, especially for access to higher education, is at the heart of Britain’s low
mobility culture. If improving intergenerational mobility is viewed as desirable, this
clearly suggests that from early ages, including prior to school entry, Britain needs to
adopt a strategy to equalize opportunities. This should apply at all stages of the
education process, and include support during the early years, for both parents and
children; policies to improve the performance of deprived children in schools; and
steps to promote participation at the post-compulsory level. Such policies have the
potential to enhance intergenerational mobility by ensuring greater equality of
educational opportunity.

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Intergenerational Mobility

The level of intergenerational mobility in society is seen by many as a measure of the


extent of equality of economic opportunity or life chances. It captures the extent to
which a person’s circumstances during childhood are reflected in their success in later
life, or on the flip-side, the extent to which individuals can make it by virtue of their
own talents, motivation and luck.
The most intuitive way to see the extent of intergenerational mobility is to see
where children from the most or least affluent families end up in the earnings or
income distribution as adults. This can be shown by a transition matrix showing
movements in the income distribution across generations.
Table 1 reports an example of such a transition matrix for Britain for children
born in 1970. It splits each generation’s distribution up into four equal sized quartiles
(each containing 25 percent of people) and sees how much movement there is
between quartiles across generations. In a fully mobile society a quarter of the
children from each income group would then end up in each quarter of the adult
earnings distribution, so every cell would contain a .25. In the case of no mobility, all
children would be in the same quartile as their parents and the lack of movement
between quartiles would be shown by 1’s on the diagonal and 0’s elsewhere.
The Table makes it clear that, for the cohort born in 1970, 37% remained in
the poorest quarter as adults, whilst only 16% made it to be among the most affluent
as adults. Likewise, far more of the most affluent quarter remains in the top quarter in
the next generation than would occur with perfect mobility.

Table 1: Transition Matrix for Britain, Sons Born in 1970

Sons’ earnings quartile aged 30 in 2000


Parental average Bottom 2nd 3rd Top
income quartile
(average of incomes
measured when son
aged 10 and 16)
Bottom .37 .23 .23 .16
nd
2 .30 .30 .24 .16
3rd .20 .24 .29 .27
Top .13 .23 .24 .40
Data drawn from the British Cohort Study of 1970 as described in the text.

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Among economists, intergenerational mobility is most commonly measured
by an intergenerational elasticity (β) measuring the strength of the statistical
association between parent and child outcomes. A higher elasticity indicates a
stronger impact of parental outcomes on children’s economic success, meaning higher
intergenerational inequality and less intergenerational mobility. If β equals1 this
corresponds to complete intergenerational immobility. If β equals 0, and there is no
relationship between incomes across generations, this corresponds to complete
mobility. On this basis our research reports an intergenerational elasticity of son’s
earnings with respect to family income of .29 in Britain for those born in 1970.
From one such observation of intergenerational mobility in one country, it is
not instantly obvious what constitutes a high or low level of mobility. So here we
adopt two approaches to give benchmarks for mobility in countries. Firstly we
compare mobility across a set of other major industrial countries and secondly we use
a historical comparison to suggest whether the extent of mobility in Britain has
changed over time.

International Comparisons of Mobility


Most evidence on intergenerational mobility across countries is generally from studies
considering one or two countries in isolation. However, drawing strong conclusions
about relative levels of mobility in different countries is hampered by the fact that few
studies are carried out with an explicit comparative aim. Different researchers take
their own decisions about variable choice, sample selection and estimation methods,
meaning that it is impossible to know whether differences are a consequence of
fundamentals or a lack of comparability across studies.
The research outlined here seeks to fill this gap. Here we combine our own
analysis for mobility in Britain, the US, West Germany and Canada, with research by
Bjorklund et al (2005) who consider Britain, the US, Sweden, Norway, Finland and
Denmark. Both studies are strongly focused on using a consistent approach across the
studies. Combining them enables a comparison to be made over eight countries.
Table 2 provides estimates of intergenerational mobility on the available data
across the two studies. Data limitations mean that not all countries are available for

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the same broad periods of time. Also, for some countries data is available on father’s
earnings whereas for others we only have combined parental income.2

Table 2: Internationally Comparable Estimates of Intergenerational Mobility

Country Dataset Sons Sons Measure of Intergenerational


Born Earnings Parental Status partial
Measure correlation1
Britain British Cohort Study 1970 2000 (Age Parental income .271a
30) 1980 and 1986
(average)
US Panel Study of Income 1954- Age 30 Parental income .289 a
Dynamics 1970 when son age 10 and
age 16
(average)
West Socio-Economic Panel 1960- 2000 Parental income .171a
Germany 1973 1984 and 1988
(average)
Canada Intergenerational 1967- 1998 Parental income .143 a
Income Data (from tax 1970 when son aged 16
registers)
Norway Register data 1958 1992 and Father’s earnings .139 b
1999 1974
(average)
Denmark Register data 1958- 1998 and Father’s earnings .143 b
1960 2000 1980
(average)
Sweden Register data 1962 1996 and Father’s earnings .143 b
1999 1975
(average)
Finland Quinquennial census 1958- 1995 and Father’s earnings .147 b
panel 1960 2000 1975
(average)
a
Blanden (2005) Table 3.3
b
Bjorklund et al (2005) Table 3.
The partial correlation is equal to the beta coefficient scaled to adjust for changes in inequality across
generations. This is important as inequality grew at different rates for the countries in this sample.
1
These results differ slightly from those in Table 5 owing to some adjustments required to ensure that
results are comparable across countries and over time.

The results in Table 2 that compare intergenerational mobility across the eight
countries suggest a clear pattern. America and Britain have the highest
intergenerational persistence (lowest mobility). Germany is around the middle of the
estimates, while the Nordic countries and Canada all appear to be rather more mobile.

2
The earlier data uses a two year average of earnings which will include earnings measured at a
younger age, the later data has a single year’s measure for earnings as an adult.

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Among the Nordic countries the levels of mobility are similar: Norway has the
greatest mobility and Sweden the least. The estimates shown here are broadly in line
with what we would expect from the current literature which takes one country at a
time (as reviewed by Corak, 2004)
Thus the picture that emerges is that Northern Europe and Canada are
particularly mobile and that Britain and the US have the lowest intergenerational
mobility across the European and North American countries studied here. The USA is
seen by some as a place with particularly high social mobility. In part this is a
consequence of using measures of class to estimate mobility (these will be affected by
changes in the class structure over time). However, the idea of the US as ‘the land of
opportunity’ persists; and clearly seems misplaced.
As we go on to show below, low mobility in Britain is partly explained by the
strong relationship between parental income and educational attainment. For the US,
the picture is slightly different - parental income leads to a less marked advantage in
terms of education, but this educational advantage is worth more in the labour market
in the US than in the other countries. Another important dimension of the low
mobility in the US is related to race, with Hertz (2004) showing that mobility is
substantially more restricted for black families than white families, although he does
not show precisely how much of the persistence this accounts for.

Changes in Intergenerational Mobility in Britain


In the internationally comparable estimates, information has been used for two
cohorts of British sons, those from the National Child Development Survey (NCDS)
who were born in 1958, and those from the British Cohort Study (BCS) who were
born in 1970, which were used in the first section. If care is taken in treating these
datasets comparably then they can be used to explore how intergenerational mobility
has changed over time.
Looking at the transition matrices reported in Tables 3 and 4 it is instantly
clear that many more children from the poorest quarter remain in poorest quarter as
adults in the more recent cohort. Likewise among the most affluent far more stay
among the most affluent as adults than was the case for the earlier cohort.

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Table 3: Transition Matrix for Sons born in 1958

Sons’ earnings quartile when aged 33 in 1991


Parental income Bottom 2nd 3rd Top
quartile when son
aged 16
Bottom .31 .28 .23 .17
2nd .30 .28 .23 .19
3rd .22 .25 .25 .28
Top .17 .20 .28 .35
Data drawn from the National Child Development Survey.

Table 4: Transition Matrix for Sons born in 1970

Sons’ earnings quartile when aged 30 in 2000


Parental income Bottom 2nd 3rd Top
quartile when son
aged 16
Bottom .38 .25 .21 .16
2nd .29 .28 .26 .17
3rd .22 .26 .28 .25
Top .11 .22 .24 .42
Data drawn from the British Cohort Study.

Considering estimates of the intergenerational elasticity confirms that


intergenerational mobility has fallen over time in Britain; equality of opportunity
declined for those born in 1970 compared with those born in 1958. Table 5 provides
the results for males, showing the estimated mobility parameter - the intergenerational
elasticity of earnings with respect to family income - and the partial correlation across
the generations. It is clear that by either of these measures intergenerational mobility
has declined substantially and that these changes are statistically significant. In our
underlying papers we explore these results and we are confident that they are robust.

Table 5: Changes in Intergenerational Mobility in Britain


NCDS 1958 BCS 19703 Change
Mobility .205 (.026) .291 (.025) .085 (.036)
Parameter
Partial Correlation .166 (.021) .286 (.025) .119 (.033)
Sample Size 2163 1976
Source: Blanden (2004) Table 4.2 Standard errors are shown in parentheses.
3
These results differ slightly from those in Table 2 owing to some adjustments required to ensure that
results are comparable across countries and over time.

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As a check that this is not a widespread phenomenon in developed countries
experiencing rising inequality, we have also explored the extent to which this
experience was shared by the US over the same period. The conclusion from this
exercise is that there has been no similar change in intergenerational mobility in the
US to match the one that occurred in Britain between the 1958 and 1970 cohorts. This
indicates that what happened in Britain is exceptional even when compared with a
country experiencing similar changes in inequality4.

Decomposing the role of education


What lies behind this large reduction in mobility in Britain? Many commentators and
political parties link mobility and the education system. In our studies the persistence
between incomes across generations is decomposed into that part which is related to
education and the part which is not. Further, the education-related aspect of
persistence can be split into that part due to the difference in education attainment
between people from different income groups and the value of this education in the
labour market (i.e. the extent to which those with more education are paid more).
Formally: It is clear that education attainment varies according to parental
income, such that Edijson = α 0 j +ψ j ln Yijparents + eij , where j refers to the cohort.

Education has benefits in the labour market such that


ln Yijsons + α1 j + φ j Edijsons + uij where φ j denotes the return to education in cohort j. This

means that the overall intergenerational elasticity can be decomposed into the return
to education multiplied by the relationship between parental income and education,
plus the unexplained persistence in income that is not transmitted through education.

Cov(uij , ln Yijparents ) (3.3)


β j = φ jψ j +
Var (ln Yijparents )

To explore this decomposition the highest qualification levels of the cohort members
are translated into the number of years generally taken to obtain them.
The results of the decomposition are shown in Table 6. It is clear that
education has an important role to play, with around 35 to 40 percent of the
intergenerational coefficient being accounted for by the measures of education used in
the decomposition. In addition, the Table demonstrates that the increase in

4
See Blanden (2005) Chapter 5 for more information on changes in mobility over time in the US.

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intergenerational mobility is explained by two factors: an increase in the sensitivity of
education to parental income and educational attainment, and an increase in the link
between parents’ incomes and sons’ earnings which is not explained by education. An
increase in the wage returns to education in the labour market would also lead to an
increase in persistence, however the evidence presented here suggests that for these
cohorts at least, the returns to education have not changed.

Table 6: Education and Intergenerational Mobility: Decomposition


β Return to Relationship Persistence Persistence not
education between parental through through education
(φ j ) income and Education Cov(u son , ln Y parents )
education (ψ j ) ( φ jψ j ) Var (ln Y parents )
1958 .205 (.026) .081 (.004) .947 (.121) .077 .132 (.024)
Cohort
1970 .291 (.025) .075 (.005) 1.350 (.098) .101 .191 (.024)
Cohort

Changes in the Impact of Education on Family Income


As the link between family income and educational attainment of children has
increased between the two cohorts, the next step is to assess how education levels
achieved have evolved for young people from different family backgrounds. We
consider two stages of educational performance, staying on at school after the
compulsory school leaving age of 16 and Higher Education degree attainment. As we
are now considering educational attainment rather than adult earnings we can add a
third cohort of British children reaching age 16 in the 1990s (from the British
Household Panel Survey). This gives a partial picture of how mobility may be
changing for a more recent birth cohort.
Figure 1 shows the proportions of young people (both males and females)
staying on in education beyond age 16 over time. Educational inequality is measured
as the difference in the staying on rate of young people with parental income in the
richest 20 percent compared with young people with parents in the poorest 20 percent.
The first thing to note about these results is that the staying on rate has increased from
1974 to the late 1990s for young people from both income groups. The more
interesting result is that the speed of the increase has varied substantially for young
people in different periods. It is clear that between 1974 and 1986 (when the cohorts
used in the previous section were aged 16) staying on rates for children from the

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richest backgrounds were rising faster; this led to an increase in educational
inequality. From 1986 to the late 1990s the staying on rate of those from the poorest
backgrounds was rising more quickly, leading to a reversal in the extent of
educational inequality5. Over the 1990s young people from poorer backgrounds have
clearly taken up the opportunity to stay on in post-compulsory education, as never
before. This is likely to be in part a consequence of the introduction of the GCSE
Given the variety of courses available at further education colleges there might be a
wide variation in the courses that young people stay on to do. Therefore the next
question is: are the trajectories that they are on leading to higher qualifications?
Figure 1: Staying on Rates (Proportions) by Parental Income Group
1

0.9 0.86

0.8

0.7
0.7

0.61
0.6

Poorest 20 percent at age 16


0.5 Richest 20 percent at age 16
0.45
Difference (Educational Inequality)

0.4 0.38

0.32
0.3
0.24 0.25
0.21
0.2

0.1

0
1958 Cohort (NCDS) 1970 Cohort (BCS) Late 1970s cohort (BHPS)
Proportion of sample who stayed on at school after age 16

Source: Blanden, Gregg and Machin (2005) Table 5.3.


We can find out more about this by considering the completion of higher
education by income group in a similar way. Figure 2 presents results similar to those
from Figure 1 but this time treating degree attainment by age 23 as the outcome of
interest. Once again, educational expansion is evident, with increases in degree
attainment for students from all backgrounds. However, in contrast with the staying
on results, educational inequality has risen in all periods. Young people from the
poorest income groups have increased their graduation rate by just 3 percentage points
between 1981 and the late 1990s, compared with a rise in graduation rates of 26
percentage points for those with the richest 20 percent of parents.

5
This pattern is also found when an alternative data source is used.

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Figure 2: Degree Completion by Age 23 by Parental Income Group
0.5
0.46
0.45

0.4
0.37 0.37

0.35

0.3
0.3

Poorest 20 percent at age 16


0.25 Richest 20 percent at age 16
Difference (Educational Inequality)
0.2
0.2

0.15 0.14

0.1 0.09
0.07
0.06
0.05

0
1958 Cohort (NCDS) 1970 Cohort (BCS) Late 1970s cohort (BHPS)
Proportion of samples obtaining a degree by age 23

Source: Blanden, Gregg and Machin (2005) Table 5.4.


The clear conclusion here is that the expansion of higher education in the UK
has benefited those from richer backgrounds far more than poorer young people. This
occurred over a period when means-tested student support declined sharply in the UK.
This evidence is a cautionary tale in the recent debate around the introduction of top-
up fees for Universities in England and Wales. In the past, increasing the numbers of
students has failed to increase the participation of the poorest groups, it is crucial that
this situation changes for further expansion of higher education and this is going to
require commitments to provide more generous grants, bursaries and other measures
to widen participation.
We have found a strong increase in the relationship between educational
outcomes and parental income between the children reaching 16 in the mid-1970s and
mid-1980s. For a more recent cohort there is a further strengthening of the
relationship between family income and degree performance but a weakening for
staying on at 16. What is less clear is the extent to which the relationships between
education and income are causal, in other words whether ‘money matters’ or whether
it is that richer families produce more educated children because parental education,
motivation and other aspects of family culture differ. Separating the effect of income
from the impact of other aspects of the family is a difficult identification problem. In

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our research we have utilized a number of techniques which net out permanent
differences in income (which will be related to factors such as parents’ education), to
focus on transitory differences in income and their impact on educational outcomes.
This can be done in a number of ways focusing on differences across siblings or
across time for the same child.
Overall, the results of this investigation provide consistent evidence of a
significant causal impact of family income on educational attainment. The results
suggest that a one third reduction in income from the mean increases the probability
of a child getting no A-C GCSEs by around 3 to 4 percentage points, on average, and
reduces the chances of achieving a degree by a similar magnitude (Blanden and
Gregg, 2004). Unfortunately it is not possible to judge if the causal effect of income
on education has changed across cohorts as our most stringent models cannot be
applied consistently across all datasets. While it is clear that family income
differences between the rich and the poor do have a substantial impact on children’s
educational outcome, the estimated impact of income is modest relative to the large
differences in attainment between children from richer and poorer families.
Consequently, while reducing child poverty can have some beneficial effects, policies
to increase intergenerational mobility will need to focus on raising poorer children’s
attainment through targeted services and access to the best schools.

Conclusion
Social mobility and equality of opportunity have once again become issues of political
and social concern in the recent past. Our research has highlighted the decline in
intergenerational income mobility in Britain over the last few generations of school
leavers. The wider focus of our research is to understand better whether the extent of
intergenerational mobility seen in Britain is mirrored in other developed countries and
to measure the role of education in this process. The research we have described
offers a comparable benchmark of Britain’s performance in this dimension. The
results show that Britain and the United States have the lowest levels of cross-
generation mobility, lying well below Canada and the Nordic countries.
Education has been often seen as a route to greater intergenerational mobility.
So it is natural to ask what role education has in the recent decline in mobility in
Britain and whether it can help explain why mobility has not fallen but remained
constant in other countries like the US. Our research highlights how the relationship

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between family income and children’s higher education attainment has grown
between cohorts completing education in the 1970s and the late 1990s. This implies
that the big expansion in university participation has tended to benefit children from
affluent families more and thus reinforced immobility across generations.
Income inequality has risen at the same time as the gap between the
educational attainments of the richest and poorest has grown. Our evidence indicates
that income and educational attainment are causally related, through research that
tests this hypothesis using a number of approaches to control for observed family
differences and to isolate the impact of transitory income shifts. However, they also
indicate that equalizing educational attainments by redistribution alone would be
unrealistic. To improve this situation we need also to use more direct means such as
early years’ education, improved schools for poor communities and financial support
to pursue post-compulsory education. Indeed, this is the policy direction that the
Government seems to be taking through programmes like Sure Start, Excellence in
Cities and the Educational Maintenance Allowance (EMA). It is important, however,
that all policies used have solid evaluation strategies, as has been pursued with these
examples, so we can improve our knowledge of what really works (see Machin and
Vignoles, 2005). However, the low level of intergenerational mobility for children in
Britain means that current extent of policy development is currently insufficient for
the task at hand.

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References and Supporting Papers:
Björklund, A. B. Bratsberg, T. Eriksson, M. Jäntti, R. Naylor, O. Raaum, K. Roed and
E. Österbacka (2005) ‘Intergenerational earnings mobility in the Nordic
countries, the United Kingdom and the United States: An overview’. Mimeo
Åbo Akademi University, Finland.
Blanden, J. (2005) Essays on Intergenerational Mobility and Its Variation over Time,
Place and Family Structure, PhD Thesis, University of London.
Blanden, J. and P. Gregg (2004) ‘Family Income and Educational Attainment: A
Review of Approaches and Evidence for Britain’, Oxford Review of
Economic Policy, 2, 245 – 263.
Blanden, J. and S. Machin (2004) ‘Educational Inequality and the Expansion of UK
Higher Education’, Scottish Journal of Political Economy, 51, 230-249.
Blanden, J, P.Gregg and S. Machin (2005) ‘Educational Inequality and
Intergenerational Mobility’ in What’s the Good of Education? The Economics
of Education in the United Kingdom, eds. S. Machin and A. Vignoles,
Princeton University Press.
Blanden, J, A. Goodman, P. Gregg and S. Machin (2004) ‘Changes in
Intergenerational Mobility in Britain’ in M. Corak ed. Generational Income
Mobility in North America and Europe, Cambridge University Press.
Corak, M. (2004) ‘Do Poor Children Become Poor Adults? Lessons for Public Policy
from a Cross Country Comparison of Generational Earnings Mobility.’ Mimeo
UNICEF Innocenti Research Centre. An expanded version of the introduction to
M. Corak (ed.) Generational Income Mobility in North America and Europe,
Cambridge University Press.
Hertiz, T. (2004) ‘Rags, Riches and Race: The Intergenerational Economic Mobility
of Black and White Families in the United States’ in S. Bowles, H. Gintis and
M. Osborne (eds) Unequal Chances: Family Background and Economic
Success New York: Russell Sage and Princeton University Press.
Machin, S. and A. Vignoles (eds.) (2005) What’s the Good of Education? The
Economics of Education in the United Kingdom, Princeton University Press.

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Addendum, Response to Comments and Criticisms from Stephen Gorard:
Reconciling Cross Country and Over-Time Comparisons of Intergenerational
Mobility in the UK

This addendum provides further details on the findings described in the report
‘Intergenerational Mobility in Europe and North America’. This is in response to
comments and criticisms from Stephen Gorard, and the aim is to offer more clarity
about comparing estimates based on different measures of parental economic status.
In Table 2 of the report we show comparisons of intergenerational mobility
across countries. These do not refer to the same cohorts and time periods across all
countries, nor are they necessarily based upon the same statistical models (some relate
earnings to father’s earnings; some relate earnings to parental income).
An alternative way to present the results is to break down this analysis into
two sets of consistently defined comparisons. Neither of these is able to include all the
countries, but when taken together they confirm the picture that the US and UK are
less mobile than the other countries under consideration.
Table A1 shows details of the data sources. The estimated intergenerational
parameters are given in Table A2. Results in Panel 1 are for older cohorts of sons
compared to those in Panel 2. Panel 1 shows correlations of earnings with father’s
earnings; Panel 2 shows correlations of earnings with parental income. The use of
father's earnings or parental income as an independent variable clearly matters for
interpretation. It is important to ensure that one is comparing like with like.6 Indeed,
estimated parameters are different for the two independent variables, usually being
higher at a point in time for models using father’s earnings rather than parental
income as the independent variable of interest.
International Comparison
For data reasons, to do with availability of data on father’s earnings and/or parental
income, in the first period (shown in Panel 1 of Table A2) the US, UK and West
Germany are compared with the Nordic countries, and in the second period (shown in
Panel 2 of Table A2) Canada is compared with the US, UK and West Germany. The
US and West Germany can be compared in both periods as the available data spans
6
Running a regression (or computing a correlation between) of son’s earnings on father’s earnings is
not the same as a regression of son’s earnings on parents’ combined earnings plus non-labour income
except under very special circumstances (e.g. if only father’s worked and there was no non-labour
income in the household). In the absence of these special circumstances, it is simply not correct, and
would be unscientific, to carry out comparisons based on the two different models. The implications of
this are considered in Blanden (2005, Chapter 3) and in Blanden, Goodman, Gregg and Machin (2004).

16
both time frames. For the UK, data from two cohort studies (the NCDS 1958 cohort
and the BCS 1970 cohort) are available, enabling comparisons to be made between
the UK and other countries in each time period. This, however, does NOT mean that
this Table can be used to make comparisons of changes over time in the UK since the
independent variables differ across the Panels (consistently defined changes over time
are discussed below).

Finding 1: Table A2 shows, as stated in the report, the extent of intergenerational


mobility for sons is lowest in the UK and US, is at intermediate levels for West
Germany and is highest for the Scandinavian countries.

The point being made here is that is important to compare like with like. If
non-comparable estimates are compared then the conclusions reached can be
misleading. For example, if the NCDS 1958 parental income estimate of 0.166 (given
in Table 5 of the report) was used in the international comparisons, then mobility in
the UK would be at a similar level to what is observed for the Nordic countries. This
comparison would be misplaced however, as the Nordic estimates are derived from
specifications use fathers’ earnings as the independent variable.
It should be noted that the ranking we find in Table A2 is completely
consistent with comprehensive scholarly reviews of the intergenerational literature
found in Solon (2002) and Corak (2004).
Changes over Time in the UK
In the results shown in the first panel of Table A2, an average measure of
son’s earnings is regressed on a single measure of father’s earnings. In the second
panel, a single measure of son’s earnings is regressed on an averaged measure of
parental income. It is not legitimate to compare the NCDS and BCS results in the
Table to obtain a picture of changes over time for the UK. The difference between
using father’s earnings and parental income is particularly important.
Table 5 of the report (reproduced below) shows changes over time in the
extent of intergenerational mobility in the UK. We compare estimates from the same
datasets used for the UK in panels 1 and 2 of Table A2, but change the estimation
approach used to ensure that the comparison across time is legitimate. In Table 5 we
report estimates for the two cohorts on a consistent basis, looking at the relationship

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between son’s earnings in his early 30s and parental income when the son was aged
16.

Finding 2: When considered on a consistent basis (relating sons’ earnings to parental


income) the intergenerational association increases over time. The estimate for the
first (NCDS) cohort reported in Table 5 of the report is substantially lower than the
one shown in Table A2 (.166 in Table 5 of the report compared to .260 in Panel 1 of
Table A2). When this estimate of 0.166 is squared up against the comparable estimate
for the BCS cohort (.286 in Table 5) it is very clear that intergenerational mobility for
sons has fallen over time.

Robustness
In an ideal world, it would be reassuring if results were proven to be robust to
using alternative datasets to consider the same research questions. However, research
into transmissions of incomes across generations is challenging precisely because
good data on parents’ incomes and children’s outcomes is rare. It is however, possible
to compare results on changes in the relationship between educational outcomes and
family incomes with those from another dataset. In Figure 1 of the report we show
that the impact of parental income on staying on beyond age 16 increases between the
1958 and 1970 cohorts. In Blanden, Gregg and Machin (2005) we repeat this analysis
using data from the Family Expenditure Survey for the relevant years when the cohort
members were leaving school. We find exactly the same pattern. This is further
reassuring evidence that the patterns between family income and children’s outcomes
found in the cohort studies are genuine.

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Table A1: Samples Available for Internationally Comparable
Estimates of Intergenerational Mobility

Country Dataset Sons Born Sons Observed Measure of Parental Status


Data for older cohorts:
UK National Child Development 1958 1991 and 2000 Fathers’ Earnings 1974
Study
Norway Register data 1958 1992 and 1999 Father’s Earnings 1974
Denmark Register data 1958-1960 1998 and 2000 Father’s Earnings 1980
Sweden Register data 1962 1996 and 1999 Father’s Earnings 1975
Finland Quinquennial census panel 1958-1960 1958 and 1960 Father’s Earnings 1975

Data which spans cohorts:


US Panel Study of Income 1954-1970 1995 and 1999 Father’s earnings 1978
Dynamics (or age 30 for Parental Income son age 10
the BCS and age 16
comparable
results)
West Socio-Economic Panel 1960-1973 1995 and 1999 Father’s earnings 1986
Germany (or 2000 for the Parental Income 1984 and
BCS comparable 1988
results)

Data for younger cohorts:


UK British Cohort Study 1970 2000 Parental Income 1980 and
1986
Canada Intergenerational Income Data 1967-1970 1998 Parental Income son age 14-
(from tax registers) 18

Table A2: International Estimates of Intergenerational Mobility


Panel 1
Earlier Cohorts - Fathers’ Single-Year Earnings as Measure of Status –
Two year average of son’s earnings.
Country Sons Born Partial Correlation
US 1954-1970 .3483
UK 1958 .2601
W. Germany 1960-73 .1803
Finland 1958-1960 .1471
Sweden 1962 .1431
Denmark 1960-1973 .1431
Norway 1958 .1391
Panel 2
Later Cohorts - Parental Income Average as Measure of Status – Single
Year Measure of son’s earnings
Country Sons Born Partial Correlation
US 1954-1970 .2892
UK 1970 .2712
W. Germany 1960-1973 .1712
Canada 1967-1970 .1432

Notes: 1Bjorklund et al Table 3 2 Blanden Table 3.3 3


Additional estimates.

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Table 5: Changes in Intergenerational Mobility in Britain
NCDS 1958 BCS 1970 Change
Mobility .205 (.026) .291 (.025) .085 (.036)
Parameter
Partial Correlation .166 (.021) .286 (.025) .119 (.033)
Sample Size 2163 1976
Source: Blanden (2004) Table 4.2 Standard errors are shown in parentheses.
This table is reproduced from the main report.

Addendum References
Blanden, J. (2005) Essays on Intergenerational Mobility and Its Variation over Time,
Place and Family Structure, PhD Thesis, University of London.
Blanden, J, P. Gregg and S. Machin (2005) ‘Educational Inequality and
Intergenerational Mobility’ in What’s the Good of Education? The Economics
of Education in the United Kingdom, eds. S. Machin and A. Vignoles,
Princeton University Press.
Blanden, J, A. Goodman, P. Gregg and S. Machin (2004) ‘Changes in
Intergenerational Mobility in Britain’ in M. Corak ed. Generational Income
Mobility in North America and Europe, Cambridge University Press.
Solon (2002) ‘Cross-Country Differences in Intergenerational Earnings Mobility’,
Journal of Economic Perspectives, Vol. 16, pp. 59-66.
Corak, M. (2004) ‘Do Poor Children Become Poor Adults? Lessons for Public Policy
from a Cross Country Comparison of Generational Earnings Mobility.’ Mimeo
UNICEF Innocenti Research Centre. An expanded version of the introduction to
M. Corak (ed.) Generational Income Mobility in North America and Europe,
Cambridge University Press.

Jo Blanden, Paul Gregg, Stephen Machin


June 15 2005

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