Economic Perspective: Will Kids Earn More Than Their Parents?

MIKE WALDEN:

“Today’s program  asks, ‘If kids will earn more than their parents?’ Traditionally a source of pride for the American economy was children will always do better economically than their parents. We’ve seen examples of this trend in the past, even in my own family. But the big question is, ‘Is that still something we can count on today?’”

“Now that’s an excellent question. Fortunately, we have some new research done by a very good economist, and what they did is they compared the earning of children born in 1940. They compared their earnings to the earnings of their parents, and then they did the same thing for the earnings of children born in the 1980’s. They compared their earnings to those of their parents.”

“Here’s what they found. They found that 90% of the children born in 1940 had higher earnings than their parents. So that American dream of children outearning their parents really is true for those children born in 1940. But for the children born in the 1980’s, only half of them did better in terms of their earnings than their parents.”

“Now one explanation for this is the fact that educational attainment has been increasing. For example, in 1940 very few of the parents in 1940 would’ve had a college education. More of their children did get a college education, and that could account for the big increase in earnings. Whereas today, and we’re using the 1980’s as an example of today, more parents as well as their children both have college educations.”

“So I don’t think these findings are exactly negative for the fact that individuals can still get ahead, but it certainly does change the dynamics within families.”