Social status of parents affects earnings of kids

“If you’re born poor, you die poor,” a U.K. politician lamented six years ago. Sadly, little has changed. Great Britain is joined by the United States, France and Italy in having a high correlation between parents’ earnings and those of their children, according to a report by Standard Life Investments. The relationship also exists in Scandinavian economies as well as in Australia, Germany and Canada, but to a lesser extent.

That is creating challenges for the most affected countries. Workers are often less motivated and as a result, less productive; and the associated higher levels of inequality are found to be detrimental to economic growth, the research shows.

“Addressing low mobility is challenging,” said Jeremy Lawson, chief economist at Standard Life and a lead author of the report.

In the U.S., three decades of sluggish real wage gains have prompted researchers to seek answers. They tracked the proportion of those age 30 who earned more than their parents at that age and found a significant down trend: just 50 percent of children born in the 1980s earned more than their parents at the same age, compared with nearly 80 percent of 1950s kids.

Industrial decline has been a major culprit. In the American Midwest, just 41 percent of children born in 1984 earned more than their parents, compared with 95 percent for those born in 1940.