"I find that countries differ significantly in the extent to which family economic status is related to the labour market success of children in adulthood. At one extreme, about 40% of parental earnings advantage is passed on to children in France, and up to 50% in the United Kingdom and United States. At the other extreme children inherit less than 20% of any parental earnings advantage or disadvantage in Canada, Finland, and Norway, and Denmark. A good deal of care, however, is needed in interpreting these patterns, and while a case can be made to suggest that they offer a much needed indicator of social inclusion from the perspective of children, it is not clear they offer a target or 2 menu for the conduct of policy. Two things are needed for this to be so: first, a sense of what equality of opportunity means, and second an understanding of the underlying causes''.

New analysis by researchers at Stanford University, funded by The Pew Charitable Trusts and the Russell Sage Foundation, finds that approximately half of parental income advantages in the United States are passed on to children, which is among the lowest estimates of economic mobility yet produced. The research also finds that the degree to which income advantages are transferred from parents to children differs across the income spectrum, and that parental income differences benefit children from higher-income families more than those from lower-income families. The results indicate that opportunities for economic success are far from equally distributed. 

The report, "Economic Mobility in the United States," provides the most comprehensive assessment to date of the intergenerational transmission of economic advantage. It draws on a new data set from tax returns and other administrative sources to overcome limitations that hampered previous studies. These findings make clear that children raised in families that are far apart on the income ladder can expect markedly different economic futures.

“This analysis finds that a family’s economic circumstances play an exceptionally large part in determining a child’s economic prospects later in life,” said Erin Currier, director of Pew’s financial security and mobility project. “For example, children raised in families at the 90th percentile can expect their own family income to be three times more than the children raised at the 10th percentile. These findings are at odds with our country’s aspirations for equal opportunity.”

"Abstract In this paper we explore the association between family income and children’s cognitive ability (IQ and school performance), socio-emotional outcomes (self esteem, locus of control and behavioural problems) and physical health (risk of obesity). We develop a decomposition technique that allows us to compare the relative importance of the adverse family characteristics and home environments of low income children in accounting for different outcomes. Using rich cohort data from the UK we find that poor children are disadvantaged at age 7 to 9 across the full spectrum of outcomes, the gradient being strongest for cognitive outcomes and weakest for physical health. We find that some aspects of environment appear to be associated with the full range of outcomes - for example, maternal smoking and breastfeeding, child nutrition, parental psychological functioning. We also find some some aspects of the environment of higher income households hinder child development. We conclude that many aspects of growing up in poverty are harmful to children’s development, and that narrowlytargeted interventions are unlikely to have a significant impact on intergenerational mobility. Key words: Child outcomes, income, pathways, mediating factors.

Understanding what drives the deficits of poor children is of key importance to academics interested in the process of life cycle skill formation and to policymakers concerned with intergenerational social mobility. A large body of research has documented the cognitive ability and socio-emotional deficits of low-income children (e.g. Duncan and Brooks-Gunn, 1997; Duncan et al., 1994; Dearing et al., 2001; Taylor et al., 2004). More recently, attention has turned to deficits in non-cognitive skills, including self esteem, outlook on life, motivation and persistence (e.g. Heckman, Stixrud and Urzua, 2006; Blanden et al. 2007). A considerable focus of research has been to isolate the impact of income on these outcomes. Many studies find that the direct income effect is only a moderate part of the observed relationship between low income and child development (e.g. Blau, 1999; Morris and Gennetian, 2003, Dahl and Lockner, 2005). A much smaller set of studies have examined how income is translated into better childhood outcomes (e.g. Guo and Harris 2000; Yeung et al, 2002). Quantifying the causal effect of income is clearly important, as is understanding how it translates into outcomes. But a focus solely on income leaves unanswered questions about what it is, if not lack of income, that accounts for the poorer outcomes of lowincome children. In this paper we propose and implement a decomposition analysis that allows us to examine both the impact of income in comparison to other aspects of family disadvantage and how these measures of disadvantage, including income, are associated with the behaviours of parents and the immediate environment in which children live. We do this for a range of childhood outcomes within a single unified model. Our approach is informed by ecological models of child development and utilises the distinction between distal and proximal factors as an organising concept. This approach permits us to compare the impact of income with other correlated measures of parental disadvantage, to examine what aspects of environment matter for which outcomes using the same measures of environment for a range of outcomes, and to identify the direct role of income compared to other aspects of parents’ disadvantage and behaviour. We do not claim that the associations we find are causal. Our aim is instead to provide a comprehensive description of the circumstances in which different types of developmental deficits arise among low-income children using common definitions of income, family characteristics, environment and parental behaviours. To implement this approach we use a cohort data set that contains measures of a large number of outcomes for children in middle childhood. The outcomes we examine are cognitive ability (IQ and school performance), socio-emotional outcomes (self esteem, locus of control and behavioural problems) and physical health (risk of obesity). These have not been analysed simultaneously in research to date. Our data (the ALSPAC cohort from the UK) also contain considerable detail on environmental risk factors and measures of parental advantage and disadvantage. The richness of our data 1 allows us to explore the role of a wider variety of proximal factors than in previous research and our methodology enables us to summarise the relative importance of these numerous factors in a way that is easily comparable across outcomes. We find that children in low-income households are disadvantaged across the full spectrum of outcomes compared with their better-off counterparts. However, different aspects of the socio-economic disadvantage that underlie parental poverty vary markedly in their association with different outcomes. We find that the child care and school environments are negligible in importance compared with the role of the home environment provided by low income parents for outcomes at ages up to 8. We find, in common with earlier research, that poorer cognitive stimulation and poorer parental psychological functioning are important mediators between income and cognitive outcomes. However, we also show that psychological functioning is also an important mediator for children’s mental health. We also find there are aspects of higher income lifestyles that are associated with relatively poorer developmental outcomes in children: environments heavily focused on learning and car use appear to put children at greater risk of obesity; greater use of certain types of childcare puts children at greater risk of behavioural problems. Finally, our finding that different aspects of the child’s immediate home environment are differentially associated with different outcomes suggests that our measures of home environment are not simply picking up common unobserved heterogeneity. The paper is structured as follows. Section 2 examines some evidence on the emergence of low income children’s deficits and factors that explain why low-income children fall behind. Section 3 discusses our modelling approach and sets out the decomposition methodology. Section 4 describes the data and shows the unconditional relationship between income and outcomes. Section 5 presents the results of our decomposition analysis. Section 6 discusses the results in the light of previous findings and provides conclusions''.