How many children manage to outperform their parents in terms of income? A study shows the extent to which this is possible in Germany and the USA – with decisive differences between the two countries.
The children should have it better. This is the wish of many parents who work hard and want to give their offspring the chance of a successful professional life. With overall growing prosperity, this is definitely a realistic wish. But how often does it actually come true in detail?
This is what a study by distribution researcher Maximilian Stockhausen tries to find out for Germany and the USA. He comes to the conclusion that people in this country are more likely to exceed their parents in terms of income, while Americans are finding it increasingly difficult. “Social advancement is possible to a greater extent in Germany than in the USA,” writes Stockhausen
For his cross-generational study, the Berlin economist evaluated the income data from two long-term surveys, the Socio-Economic Panel (SOEP) in Germany and the Study of Income Dynamics (PSID) panel for the USA. In these, the same households are surveyed over and over again on the same topics over many years. This makes it possible to actually compare the incomes of parents then with their now adult children and not just any statistical values of people who are not related to each other at all. Inflation is also offset in order to make the values comparable.
Only considered fathers and sons
The study included data from 320 father-son pairs from Germany and 619 from the USA. Mothers and daughters are not included in the comparison, as their employment behavior changed so much from one generation to the next that this could not be reflected in the study design. In historical comparison, women’s income is much more dependent on whether and how much they worked at all in the period under consideration and not on how high the salaries they earned.
The study shows that in Germany, 67 percent of sons born between 1955 and 1975 have a significantly higher earned income than their fathers. The sons of the same age in the USA, on the other hand, only manage to do this in an average of 60 percent of the cases. In addition, comparatively more sons of low-wage earners made the leap in Germany, while in the USA slightly more sons of high-income earners managed to outperform their father. Nevertheless, the average values between the countries are not very far apart. What is striking, however, is the look at the US trend within the period under review.
American men left behind
The promotion promise for the US age groups 1956 to 1960 was fulfilled in 66 percent of the cases, for the age group 1971 to 1975, however, only 48 percent. This means that every second man in the USA aged 45 to 50 today has to recognize that despite general economic growth, he will not be able to earn a higher income than his father. “Fewer and fewer Americans are living the American dream,” writes study author Stockhausen.
The results are consistent with other research from the United States. A study published in Science in 2017 found that the trend is even more blatant if you look back further: Americans born in 1940 surpassed their fathers in income in nine out of ten cases; in 1984 it was just everybody Second. The political implications have been discussed extensively in the wake of Donald Trump’s rise. The ex-US president found many voters in the group of suspended white men.
Social inequality in Germany
In Germany, however, according to Stockhausen’s analysis, the negative generation income trend is not found in this way. The majority of the sons still outperform their fathers in terms of income and are thus able to participate in the growing prosperity of the country. This suggests that economic growth in Germany has benefited more people than in the United States.
However, the finding is not proof of equal opportunities and social justice across society. For years, numerous studies have indicated that income inequality is increasing in Germany as a whole and that social advancement within society is becoming more difficult, as the Hans Böckler Foundation has shown in various studies.
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Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
