Kokomo Tribune; Kokomo, Indiana

February 9, 2014

MICHAEL HICKS: Parents, not gov't, affect income mobility

Parents, not government, affect income mobility.


Kokomo Tribune

---- — The big lesson on research and data about poverty is the limited effectiveness of public policy.

To begin with, we measure poverty poorly in the U.S. and because of that are forever stuck with something like 12 to 15 percent, no matter how good or ill the economy performs.

Fortunately, even with this silly measure, most of poverty is temporary, with more than 75 percent moving out of the poverty ranks in less than 36 months.

For those healthy folks in long-term poverty, nearly all have made one of the big three mistakes: quitting high school, using drugs and having kids without a partner. Of these, choosing to have a child without a spouse is the most pervasive.

New experimental research tells us poverty can reduce the quality of decision making, with poorer households focusing less on the long term. But, as I have noted, the problem is with the quality of decision making, not the options available to them.

Becoming affluent requires good choices repeated throughout life. It is no doubt harder for poor people to make these affirmative choices, given the relative absence of good example and the lack of resources to support them. But, it is also true that making these choices is also hard for children in affluent families, simply because these are tough, demanding choices.

Becoming poor requires poor choices repeated throughout life.

Given this, there should therefore be a convergence towards average or middle income by children of both rich and poor parents alike.

Notice of course the language is all about choice, for that is what it is, and is what serious research on poverty has been focusing on for a generation. Moreover, it is dehumanizing and amoral to pronounce if otherwise. Poor teenagers know as well as rich ones what causes babies. They are simply more likely to make a bad choice and less likely to rebound from the mistake. This has a long impact.

New research from the inequality project at Harvard finds income mobility across generations is unchanged in half a century. Moreover, this study finds parental income explains less than 10 percent of their adult child’s earnings. Education and single parenting are much larger factors. It is what kids learn at home, not how much their parents make, that affects income mobility.

So the problem is the limits to policy. We spend upwards of $150,000 per child on a high school education, but about 1 in 7 kids fail to graduate. We spend enormous sums on public contraception and abortion as well as sex education. There are hundreds of programs, still the share of births to single moms grew from 5 to more than 40 percent over 50 years of our war on poverty.

If we wish to intervene with policy, it is going to have to aim directly at the parent-child interaction, and it is going to have to be all about choices.

Michael J. Hicks, Ph.D., is director of the Center for Business and Economic Research and a professor of economics at Ball State University.