Nathan Deutscher and Bhashkar Mazumder.
Equality of opportunity is central to many conceptions of a just society, and a perennial touchstone in public policy debates. An important dimension of equality of opportunity is intergenerational mobility – the extent to which economic outcomes persist from one generation to the next. Despite this, the evidence on the degree of intergenerational mobility in Australia to date has been limited in its precision and scope by the data available.
This paper helps fill this gap, presenting the first national and regional estimates of standard measures of intergenerational mobility using administrative data. Australia emerges as among the most mobile countries in the world. For example, we estimate a rank-rank correlation of 0.215, implying that a child with parents 10 percentile rank points higher in the income distribution on average ended up a little over 2 percentile rank points higher themselves. In the United States the rank-rank correlation is likely 0.4 or higher.
These average experiences mask significant movements across the income spectrum. For example, of those children born into the bottom 20 per cent of the parent income distribution some 31 per cent remain there, while 12 per cent end up in the top 20 per cent. Thus, while poverty is more likely to persist than be replaced by relative riches, neither outcome is rare in the Australian setting.
Finally, we estimate intergenerational mobility across Australian regions. Australian regions are more alike than those in the United States – but meaningful differences nonetheless emerge both within the country and within individual cities such as Sydney and Melbourne. Perhaps most notably over the period studied, the mining boom appears to have lifted the expected income ranks for children born in resource-rich regions, but to have done so relatively consistently across the income spectrum. These regions thus appear more mobile when looking at the absolute outcomes of children born into poorer families, but not when looking at the outcomes of those children relative to those born into richer families in the same region. This highlights the conceptual differences between different measures of intergenerational mobility.
Examining finely grained measures of mobility in Australia has the potential to tell us much about the diverse experiences of intergenerational mobility and the potential mechanisms that underlie it. This paper provides a step in that direction, providing more precise national estimates of intergenerational mobility, and describing some of the detail lost in such national averages.
This paper examines a cohort born between 1978-82, for whom we can examine later life outcomes. Other countries have seen mobility change with economic, societal and policy circumstances, and it is not yet clear what these measures of mobility will look like for children of the 1990s, 2000s and beyond.
January 22, 2019