Study: Today’s Children Will Probably Earn Less Than Their Parents

By Published on December 11, 2016

Children today are less likely to earn more than their parents, according to a December 2016 study published in the National Bureau of Economic Research.

Recent analysis of absolute income mobility – a measure that compares a person’s income with that of their parents – conducted by six economists shows that income mobility has fallen across the entire income distribution. The largest declines are for families in the middle class.

The economists compared household incomes at age 30 with that of their parents’ household incomes at the same age. What they found was rather concerning: rates of absolute mobility have fallen from 90 percent for children born in 1940 to 50 percent for children born in 1980.

The largest declines in mobility were concentrated to the industrial Midwest, with states like Michigan and Illinois getting hit the hardest.

President-elect Donald Trump won almost all of the Midwest on the electoral college map, losing just Illinois and Minnesota to former Secretary of State Hillary Clinton. Trump, more so than Clinton, was able to understand and express the concerns of middle-America: lost jobs and opportunity, sluggish economic growth and the feeling of being left behind by their country.

Lower growth rates in Gross Domestic Product (GDP) and greater income inequality are the two biggest reasons. The study authors find that if the U.S. could stimulate GDP growth to rates similar to the 1940s and 1950s, and kept income distribution the same as today, absolute income mobility would increase to 61 percent. If the nation kept GDP growth rates the same as today, but distributed income more broadly, absolute income mobility could hit 81 percent.

 

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