In 2012, more than one-in-three men from disadvantaged backgrounds lived alone in their early 40s. This compared with only one-in-seven men from rich backgrounds living without a partner. This disparity has strengthened the link between the incomes of families across generations, thus reducing social mobility.
These are among the findings of a new working paper published by the Institute for Fiscal Studies entitled ‘Intergenerational income persistence within families’. The paper explores the importance of family background for household income using a variety of sources, and was produced with funding from CLOSER.
It is well known that the sons of richer parents tend to go on to have higher earnings. However, this new research shows that they also benefit from being more likely to have a partner, and from that partner being more likely to have higher earnings. Even among men in couples, the partners of men from richer backgrounds earn 73% more than the partners of men from poorer families.
Female earnings are an increasingly important component of household income and so these trends significantly reduce the household incomes of men who grew up in poor families compared with those of men who grew up in rich families. And this is a new phenomenon. Amongst men born 12 years earlier, the differences in partnership status and partner earnings by family background were considerably smaller. This change in household composition has strengthened the link between the incomes of parents and children and hence reduced social mobility.
Key findings include:
• The earnings gap between men with richer parents and their counterparts from less well-off backgrounds is widening. In 2012, employed 42-year-old men whose parents were among the richest fifth of households earned on average 88% more than those from the poorest families. In 2000, the equivalent gap for men of the same age was 47%.
• More than one-in-three men aged 42 from the poorest fifth of families did not live with a partner in 2012, compared with only one-in-seven men from high-income backgrounds. This is the result both of lower rates of marriage and of higher rates of relationship breakdown amongst men from low-income families. Men from low-income households were more than twice as likely to be divorced as those from high-income backgrounds (11% rather than 5%) and almost twice as likely never to have been married (36% rather than 20%). Amongst men born 12 years earlier, there was little difference in partnership status by family background.
• Those from rich backgrounds paid more than twice as much in income tax and National Insurance as those from poor backgrounds in the year 2012. This reduces the intergenerational persistence in inequality: employed men from rich backgrounds have gross earnings 88% higher on average than those from poor backgrounds, but net incomes only 63% higher. The differential tax burden has grown over time.
• Men from poorer backgrounds are twice as likely to be out of work as those from richer backgrounds. Only 7% of men growing up in the richest fifth of households were out of work at age 42 in 2012, while more than 15% of men from the poorest fifth of households were out of work. Men from poorer backgrounds are also more than twice as likely to receive disability benefits as those from better-off families (11% rather than 4%). As men in work typically have more income than those not in paid work, this accentuates the level of intergenerational income persistence.
Alison Park, Director of CLOSER, said:
“This new research highlights the role of longitudinal studies in helping us understand how society is changing from generation to generation. It shows how existing differences in the earnings of men from richer and poorer backgrounds are exacerbated by a new divide, with poorer men in their early 40s being less likely than those from wealthier backgrounds to be living with a partner.”
Chris Belfield, a research economist at IFS and an author of the paper, said:
“Focusing solely on the earnings of men in work understates the importance of family background in determining living standards. As well as having higher earnings, those from richer families are more likely to be in work, more likely to have a partner and more likely to have a higher-earning partner than those from less well-off backgrounds. And all these inequalities have been widening over time.”
Notes to Editors:
1. The IFS working paper entitled “Intergenerational income persistence within families” by Chris Belfield (Research Economist at the Institute for Fiscal Studies), Claire Crawford (University of Warwick and IFS), Ellen Greaves (University of Bristol and IFS), Paul Gregg (University of Bath) and Lindsey Macmillan (UCL Institute of Education). www.ifs.org.uk
2. This research was carried out as part of CLOSER (Cohort and Longitudinal Studies Enhancement Resources). CLOSER aims to maximise the use, value and impact of the UK’s longitudinal studies. Bringing together eight leading studies, the British Library and the UK Data Service, CLOSER works to stimulate interdisciplinary research, develop shared resources, provide training, and share expertise. CLOSER is funded by the Economic and Social Research Council and the Medical Research Council. Its lead research partner is the UCL Institute of Education.
3. About UCL (University College London): UCL was founded in 1826. We were the first English university established after Oxford and Cambridge, the first to open up university education to those previously excluded from it, and the first to provide systematic teaching of law, architecture and medicine. We are among the world’s top universities, as reflected by performance in a range of international rankings and tables. UCL currently has over 38,000 students from 150 countries and over 12,000 staff. Our annual income is more than £1 billion. www.ucl.ac.uk