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New Zealand government is tightening welfare benefits at the moment, and that is being vigorously opposed, citing the risk of "inter-generational poverty".

Many countries in the world suffer from the problem of low social mobility: Children of welfare receivers often become welfare receivers themselves as adults. Has any government anywhere in the world successfully managed the problem by any means other than cutting benefits?

"Success" in this question would be defined as significantly lowering the number of people who need to rely on welfare benefits.

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    It is not clear that "poor people having children" is a problem in New Zealand: Mon 19 Feb 2024 New Zealand’s fertility rate hits record low as births fall
    – User65535
    Feb 19 at 11:22
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    This question is being discussed on meta.
    – Philipp
    Feb 20 at 10:42
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    Vote to reopen. I don't agree with a lot of the framing with this question, but Western societies have had issues where generation after generation of families are caught in a poverty and welfare trap. Plenty of money has been thrown at it. What are some of the better outcomes and how were they achieved? Feb 21 at 6:24
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    I've removed the highly unethical call for eugenics based on income from the question while retaining the core question itself.
    – Philipp
    Feb 21 at 9:32
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    There are a few countries that went communist, which also increased the downward mobility of intergenerational rentiers. Feb 21 at 10:20

2 Answers 2

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First a small rephrasing of your success measure. A high intergenerational welfare dependency means that children of people on welfare are much more likely to become welfare dependent themselves compared to children of more well-off parents. Successfully combating intergenerational welfare dependency therefore means that the chance for young people becoming welfare dependent is uncorrelated to the wealth or welfare dependendancy of their parents. The actual proportion of the population who depend on welfare is independent of that.

Now if you look at the wikipedia article on social mobility you linked yourself, look at the graph called Great Gatsby curve. On the y-axis it shows the intergenerational income elasticity. If this value is low that means that the earnings of children are mostly uncorrelated to the earnings of their parents. If the value is high children tend to have similar incomes as their parents. So a high value means lots of children of welfare dependent parents will also be welfare dependent, a low value means the correlation of welfare dependency between children and their parents is low. So the countries with low values are the ones that do best in combating intergenerational welfare dependence.

Now lets look at the rest of the graph. First there is a strong correlation that countries that do well in combating intergenerational welfare dependence are countries that tend to have low inequality in general, here measured via the Gini coefficient.

Second the countries that score highest on combating intergenerational welfare dependence are Denmark, Norway and Finland. All three are known to have very generous welfare benefits, strong support for people who 'fall through the cracks' for whatever reason and a tax system that does a large amount of redistribution. That seems to be the general strategy that works best for combating intergenerational welfare dependence.

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    So much this. I will never understand how people in their right mind think that depriving parents of the means to better support their children will magically help these children to get better education and life-time income... I guess you need to be Chicago School economist in order to do so. Feb 22 at 18:58
  • @PhilipKlöcking: thereabout. Feb 22 at 23:05
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Almost every country in the world has fairly low social mobility at the top of the income and wealth scale. For example, the case of Florence, Italy came up recently in the news:

Gary Becker and Nigel Tomes concluded back in 1986, "Almost all the earnings advantages or disadvantages of ancestors are wiped out in three generations."

Barone and Mocetti show that, empirically, this is not the case, and there is meaningful income persistence across seven centuries in Florence. Their paper adds to earlier work by UC Davis economic historian Gregory Clark, which reached a similar conclusion with regard to Sweden going back to the 17th century.

They looked at 2011 income data to identity the five highest-earning surnames in present-day Florence. They then looked back at 1427 data to find information about the earnings and occupations with those same five surnames 700 years ago. . . . They show here that the four highest-earning surnames of 2011 were all above-average surnames back in 1427. Indeed, three of the four were in the top 10 percent.

In the U.K., this is supported by Clark and Cummins, Surnames and Social Mobility: England 1230-2012, the abstract of which explains that:

To what extent do parental characteristics explain child social outcomes?

Typically, parent-child correlations in socioeconomic measures are in the range 0.2-0.6. Surname evidence suggests, however, that the intergenerational correlation of overall status is much higher.

This paper shows, using educational status in England 1170-2012 as an example, that the true underlying correlation of social status is in the range 0.730. Social status is more strongly inherited even than height. This correlation is constant over centuries, suggesting an underlying social physics surprisingly immune to government intervention. Social mobility in England in 2012 is little greater than in pre-industrial times. Surname evidence in other countries suggests similarly slow underlying mobility rates.

I am aware of studies comparing the pre- and post-communist regimes of China, such as this one, although the patterns of social mobility there, in this comparatively short time frame are more nuanced and complex.

But that doesn't really answer the question. The fact that descendants of people at the top tend to continue to stay at the top of the socio-economic pyramid for long periods of time, doesn't imply that people in poverty and dependent upon welfare stay in poverty.

Periods of sustained economic growth can "lift all boats" and take the poor out of poverty and welfare dependence without actually changing the socio-economic pecking order at all.

For example, China is the standout here. Reduced poverty rates in China over the last few decades have been the leading cause of a massive reduction in the extreme poverty rate for the entire planet. As the World Bank explains:

Over the past 40 years, the number of people in China with incomes below $1.90 per day – the International Poverty Line as defined by the World Bank to track global extreme poverty– has fallen by close to 800 million. With this, China has contributed close to three-quarters of the global reduction in the number of people living in extreme poverty. At China’s current national poverty line, the number of poor fell by 770 million over the same period.

In general, it is challenging to disentangle changes in intergenerational poverty due to booms and busts in a country's economy from changes in intergenerational poverty due to changes in the degree of income inequality and relative social mobility in a given time period. Empirically, these factors are not independent of each other.

After a period of extremely high poverty rates during the Great Depression in the United States, World War II and the economic boom of the immediate post-World War II period (roughly coinciding with the Baby Boom) poverty rates fell dramatically from their Great Depression peaks for at least a generation. See, e.g., this review of U.S. income inequality and poverty rates from 1900 to 1990 (noting also that reduced income inequality can reduce poverty rates).

On the other hand, there are also studies in the U.S. showing that children of men who are incarcerated in prison are at a vastly elevated risk, of being incarcerated themselves during their lives.

Of course, at some point, you run into definitional issues about how to define poverty. If you define poverty on an income percentile basis, then it is mathematically impossible to reduce the total poverty rate and any policy that frees one family from poverty automatically and by definition, places someone else in poverty. In that scenario, intergeneration poverty could still be eliminated, by only by churning around who is all of the way at the bottom at least once twenty to thirty years or so.

On the other hand, if you define poverty in an absolute sense, defining a certain market basket of consumption and amenities to constitute not being in poverty (which is the more common way to define it), it is possible to result poverty, in principle anyway, through policies that make everyone more affluent.

At any absolute level of poverty, almost every developed country has reduced it over time. As late as the Reconstruction Era in the United States (i.e. the decade or so after the U.S. Civil War), indoor toilets and running water were uncommon in the American South, while half a century or so later, these amenities were almost universal in the same region. Complete illiteracy has fallen dramatically in every developed country. Deaths from starvation in the developed world have fallen steadily over time with the notable interruptions of the Irish Potato Famine and the famines in the Soviet Union and China respectively, following their conversions to Communism. Unlike the U.S. during the Great Depression, large portions of the population aren't dependent upon soup kitchen for daily meals. Pre-teen children no longer have to work in fields and factories to support their families in the developed world.

But arbiters of social policy tend to raise the bar for what is officially defined as poverty over time in that situation, complicating the inquiry into what poverty really means.

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    While can never completely disentangle absolute and relative poverty, welfare dependency is predominantly a sign of relative poverty. If you look at eligibility for welfare benefits over long periods of time or across different countries they vary wildly in absolute income but are a lot more comparable when measured as a proportion of average income. Proportion of population having less than x % of the average or median income seems to be the measure of choice for tracking the development of poverty over time.
    – quarague
    Feb 22 at 12:34

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