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Saturday, May 19, 2012

"A Little Secret Denmark Shares with Canada about Social Mobility that Americans and Brits Should Know"

Miles Corak explains one of the ways in which inequality is transmitted between generations:

A little secret Denmark shares with Canada about social mobility that Americans and Brits should know, by Miles Corak: ...Denmark has a little secret, one it shares with Canada, about how kids get jobs, and about how this determines life chances even in places with low inequality.
The Russell Sage Foundation has just published a collection of essays... This ... chapter I co-authored with two Danish researchers, Paul Bingley and Niels Westergård-Nielsen,... examines the degree to which sons end up working in the very same firm as their fathers, an aspect of social mobility that is directly related to equality of opportunity.
We find three remarkably similar outcomes in Canada and Denmark. ... First, the transmission of employers between fathers and sons is a common feature, with about 30% of young Danes and 40% of Canadians having at some point been employed with a firm that also employed their father. In large measure this is associated with the first jobs ... during their teen years, but for four to about six percent it also refers to their main job in adulthood. ...
Even if the transmission of employers across generations is in large measure about temporary employment as teens make the transition from school to work, it still represents a type of parental investment that may have longer-term consequences. Sons inheriting a job may be more likely to gain work experience, job tenure and associated general and firm-specific skills. They may also avoid unemployment, and can be imagined to gain a head start in establishing themselves in the labour market.
Our second major finding is that the transmission of employers between fathers and sons is greater, the greater the father’s earnings, and rising distinctly and sharply for top earners. ... In fact, if the father’s earnings placed him in the top 1%, the majority of sons—indeed almost 7 out of 10 in Canada—had worked for an employer at which the father had also worked (graph). ... This pattern holds up when the focus is on the career employer, the employer accounting for the majority of earnings in adulthood...
Our third finding is that the transmission of employers between fathers and sons has implications for earnings. The degree to which a son’s earnings are related to his father’s is very similar in Canada and Denmark... In both countries sons born to fathers in the bottom 25% of the earnings distribution have about a 30% chance of ending up in the bottom 25% as adults, and about a 15% chance of rising to the top 25%.
These are enviable rates when compared to other countries like the United States or the United Kingdom. ... But mobility out of the bottom has little to do with inheriting an employer from the father, while the preservation of high income status is distinctly related to this tendency. ...
My co-authors and I feel that this research raises the importance of recognizing that child outcomes are related not just to the quality of the early years, but also to the structure of labour markets, and the resources parents have—though information, networks, or direct control of the hiring process—to influence the final transition children make in becoming self-sufficient and successful adults.
Most importantly it also makes us wonder what is happening in other countries. If the inheritance of employers is this strong in a country with a great deal of equality like Denmark, and if it is even stronger in Canada, where inequality is somewhat greater, then how do labour markets function in the United Kingdom and the United States where inequality is even greater and generational mobility lower? ...

I was determined not to get stuck working in the tractor stores that captured so many other members of my family -- my first jobs beyond summer employment were waiting on farmers at tractor parts counters in high school and college and my father had a direct hand in my getting the jobs. I somehow managed to beat the odds, but it would have been very easy to simply follow in the same footsteps, and I may have had little choice if education at the state universities in California hadn't been so cheap (without tuition of $100 per semester, there's a good chance I'd still be spending my days at a John Deere dealership -- I know how many other people there are like me, and it's hard to watch opportunity implode along with the California State University system.

    Posted by on Saturday, May 19, 2012 at 11:12 AM in Economics, Income Distribution | Permalink  Comments (43)


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