A child’s future income level in Canada is more strongly determined by his or her father’s income than previously thought, according to a new study.
Intergenerational income mobility is measured by comparing the income of parents with the income of their children when the latter become adults. If parents and their adult children were all located in the exact same positions in the income distribution, a rate of 1.0 would result. Conversely, if their respective locations in the income distribution were completely unrelated, a rate of 0 would result.
Earlier studies in Canada had pegged the national rate for fathers and sons at around 0.2, but using improved measures of lifetime earnings for both fathers and sons, the rate is closer to 0.32. This means that about 32% of the earnings differences among fathers’ generations is passed on to sons. The rate is slightly higher if based on total income. The availability of new data to observe children’s earnings and total income at mid-career accounts for about two-thirds of the difference between this study and earlier ones.
The intergenerational persistence of earnings is weaker for daughters, at 0.23. This is comparable to estimates from earlier studies.
The average mobility rate of 0.32 for sons conceals differences across the earnings distribution. Among sons born to fathers with lower earnings, the rate is 0.20. This suggests there is a significant degree of upward intergenerational mobility among sons from the bottom of the earnings distribution. In contrast, among sons born to fathers with higher earnings, the rate is 0.45. This suggests that nearly half of the earnings advantage of high-earning fathers is passed on to their sons.
While intergenerational income mobility in Canada is weaker than previously thought, it is still higher than in many other advanced countries. The comparable figure for the United States, for instance, is around 0.50.