Examining the relationship between parental income and that of their offspring in their mid-30s, the study confirms the obvious: richer parents beget richer kids.
More interesting is how economic outcomes of those from low-, middle- and top-income households are affected by their parents’ finances. For those with lowest incomes, the main way in which your parents being slightly better off increases your own earnings is by raising the chance of you working at all.
Among middle-income families, it’s education, not employment, that matters. Higher income households have more highly educated children. But for the top 5%, something new happens: rich parents boost the next generation’s prosperity via higher capital income (returns on owning assets). So it’s the passing on of assets that keeps the very rich, rich. Our parents shape us all, but in very different ways.
