Inequality of opportunity is often in the news, but until recently surprisingly little was known about the actual extent of it in the Netherlands. With new data from Statistics Netherlands, PhD candidate Sander de Vries was able to analyse the relationship between a person's income position and their family background.
De Vries examines the income position of people born between 1980 and 1989 and compares it with the position their parents occupy on the income ladder. His research shows that the higher the income of the parents, the higher the income of their children is when they are between 30 and 40 years old. The relationship between the income of parents and children is stronger in the Netherlands than in the Scandinavian countries, Germany, Australia and Canada. The degree of inequality of opportunity is at a similar level as in France, the United Kingdom and Italy, and is lower than in the United States.
The extremes of the income distribution are particularly striking. De Vries: ‘If you look at the lowest incomes, a small increase in the income of parents means a fairly large increase in the income of their children. At the lower end of the income distribution, that little extra income can make a big difference to the opportunities you can offer to your children. At the top, the relationship is even stronger: very rich parents can pass on their financial advantage better than slightly less wealthy parents.’
This type of analysis is new in the Dutch context. ‘For this type of research, you need at least five years of income data from both parents and their children, which you must be able to link together. Before the 1980s, such data did not exist, and then we had to wait until the children were 30 to 40 years old’, says De Vries. Other studies often base themselves on income at a younger age, but according to De Vries, this leads to an underestimation of inequality of opportunity. ‘Especially among highly educated people, income rises very sharply around the age of thirty.’
With more background data about the parents, such as wealth, education and health, and the family composition, the income positions of the poorest and richest children can be estimated even more accurately. ‘The 0.5 percent most privileged children – with the richest and wealthiest parents – receive a disproportionate advantage. They themselves earn considerably more than the following 0.5 percent of most advantaged children’, explains De Vries. ‘It involves large sums. Children from the richest 0.5 percent later earn an average of 140,000 euros more annually than children from the poorest 0.5 percent. And this is only based on family background, without taking other factors into account.’
The education that children complete is even more dependent on family background than their income, according to the research. De Vries: ‘Children from the least fortunate families have attended school for an average of less than 12 years – too little for a basic qualification. In contrast, children from the most privileged families have an average of more than 17 years of education, comparable to a bachelor's degree.’
Children from low-income families often start with a disadvantage in other areas as well. ‘These children often grow up in single-parent families, with young parents. In many cases, the father is not in the picture. The parents are more likely to suffer from health problems, have been convicted of criminal behaviour more often, and have been to school for less time’, says De Vries. ‘On average, children in this vulnerable group have lower incomes, attain lower levels of education, and are more often suspected of violent crimes compared to their peers.’ To reach the most disadvantaged children with policy, it can therefore be wise to look not only at the income and education level of the parents, but also at other background information.
The working paper of the research is now online and can be read here.
Interview by Yrla van de Ven for Vuurwerk magazine. Read the latest edition of our alumni magazine Vuurwerk from the VU School of Business and Economics.