Inter-generational disadvantage – Britain compared

Social policy in Britain and the USA is less effective than in Germany at alleviating the inter-generational transmission of social and economic disadvantages, according to a new paper from the German Institute for Economic Research.

The paper tests the hypothesis that the extent of inter-generational income mobility, and the relative risk of poverty, differ according to factors in the three countries such as welfare state regime, family role patterns and social policy design.

Key findings

  • Though similar in terms of their welfare state regime, Britain and the USA differ concerning the average inter-generational income elasticity and the relative risk of poverty.
  • In the USA the inter-generational correlation of social and economic status is higher than in Germany and Britain, which contradicts the hypothesis of a mobile society, and a high 'permeability' of the social system.
  • In all the countries, the highest inter-generational income persistence is evident in the 'tails' of the income distribution. In Germany, the results reveal the highest inter-generational income mobility in the lower tail of the income distribution, indicating that social policy more effectively alleviates the inter-generational transmission of social and economic disadvantages than in Britain and the USA.
  • In the USA, the highest income persistence occurs at the upper tail of the income distribution, consistent with the idea that low-income parents cannot sufficiently contribute to the well-being of their children. This results in an increasing inter-generational transmission of poverty and social exclusion, a deepening of economic and social inequality across generations, and economic inefficiencies that impose economic and social costs.

Source: Veronika Eberharter, The Intergenerational Dynamics of Social Inequality: Empirical Evidence from Europe and the United States, SOEPpaper 588, German Institute for Economic Research
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Publication date: 
Oct 6 2013