Childhood Is a Decisive Factor in Income Disparities in the UK and the US

Income disparities and equal opportunities are closely interconnected: the higher the degree to which income disparities are determined by on one's own efforts, rather than one's origin or family background, the more equal is the distribution of opportunities within a society. While individual effort is a deliberate choice, one's origin and childhood experience are beyond individual control. According to a recent study by the Centre for European Economic Research (ZEW), the share of income disparity based on external circumstances, such as origin and childhood, amounts to at least 31.8 per cent in the UK and to 45.7 per cent in the US, respectively.

In other words, almost one third of income disparities in the UK, and even just under fifty per cent in the US are contingent on external circumstances. The ZEW study is based on representative microdata from the Centre for Longitudinal Studies at University College London and from the United States Department of Labor.

Both longitudinal studies consider the socio-economic environment during childhood of the examined cohorts. The studies also address cognitive and non-cognitive skills, such as school performance, perception and memory as well as motivation, discipline, and interpersonal skills. The ZEW researchers assume that any achievements and behaviour patterns of children up until the age of 16 are attributable to external circumstances.

"The public debate about increasing income disparities shows that we are more willing to accept income disparities caused by diligence or laziness than by external circumstances," explains Professor Andreas Peichl, Head of the Research Group "International Distribution and Redistribution" at ZEW. The study by Andreas Peichl and his colleagues shows, however, that external circumstances are highly relevant for income disparities, if childhood experiences are considered. "This high proportion of 'unfair' inequality should make us reconsider our current educational, tax and transfer policy. Greater account must be taken of family background, and children from vulnerable groups must be given more support," concludes Peichl.

For more information please contact

Professor Andreas Peichl,  Phone +49/621/1235-389, E-mail peichl@zew.de