Quest to understand factors to secure our children’s future

In most countries, parents would like to see their children have a higher living standard—and with it a better life—than they have had themselves.

That’s how, in the above sentence, a recent World Bank analysis captured the hope many of us harbour as we try our best to secure our children’s future.

The analysis, “Fair Progress? -  Economic Mobility Across Generations Around the World”, examines education and income trends going back 50 years about whether those born in poverty or in prosperity are destined to remain in the same economic circumstances into which they were born.

Its findings are not entirely unexpected, and may be summed up thus, quoting from an observation in the report: Circumstances of an individual at birth interact with policies, markets, and institutions to shape opportunities at various stages, which, in turn, influence the individual’s adult earnings and thus inter-generational mobility (IGM) in income.

This suggests that, given all these factors and how they may interplay with each other, how a child’s socio-economic situation may turn out in adulthood is not guaranteed.

However, the analysis confirms that for a child born in most developing countries, it is harder than in wealthier countries to move from the bottom to the top of the economic ladder.

This confirmation, nevertheless, is not new, except it calls one to appreciate that in our often “undeveloped” African circumstance, it is also personal in that a child’s eventual circumstance must issue from the parent, whatever the parent’s situation may be.

As the report reminds us, circumstances begin affecting opportunities early in a child’s life: Children’s endowments at birth are affected by maternal nutrition and health during gestation, as well as by non-monetary endowments or traits inherited from parents, all of which may be associated with circumstances such as parental education, income, and geographic location.

The analysis notes three channels that I will mention in passing, through which parental circumstances influence income of the next generation. 

The first channel describes how parental education may influence their offspring’s income, taking into consideration the offspring’s education.

The second channel explains parental education influence on the determinants of the offspring’s income that are independent of the offspring’s education.

The third is about parental characteristics (other than education) that may influence the offspring’s income.

I reckon, as an average parent with a vested interest to better understand, it probably is the third channel that should be of particular interest.

Analysis of 49 economies suggests that the third channel is typically the strongest, accounting for an average of about 80 per cent of what is termed the persistence of income.

Persistence of income refers to earnings that continue from one generation to the next. The economic reason for taking it into consideration is that it can be indicative of equality of opportunity or lack of it to earn better depending on one’s root circumstances.

For this reason, it seems to me the third channel should be of more interest, given that it reflects the share of income persistence attributable to all parental characteristics, including unobservable ones that are associated with income but independent of the quantity of parental education.

There are encouraging signs, however. In Africa, average enrolment in primary school increased from 73 to 98 per cent between 1996 and 2014.

This, the analysis observes, may signal an increase in absolute mobility among children born during the 1990s.

Rough predictions of what the mobility might look like for the 1990s children suggest that average absolute intergenerational mobility in Africa may indeed be improving faster than in the previous two decades and catching up with the developing economy average.

This is on the face of it, meaning a lot more remains to be done even if this positive outlook should pan out for Africa, especially in ensuring sustainable and inclusive growth by ensuring equal opportunities for all.

The analysis points out that at each stage of a person’s life cycle there are a few external actors that are key to mediating the process of equalizing opportunities.

These include, for example, the systems of maternal and early childhood care at the first stage; the school system at the second stage; and the institutional structure of factor markets—labour, capital, and land—at the third stage.

It goes without saying governments can influence these external actors in crucial ways, such as through regulations and policies that affect markets and the provision of services, and through public investments that seek to equalise opportunities.

The rest of the responsibility is personal in our parental and communal quest to secure our children’s future.

Twitter: @gituram

The views expressed in this article are of the author.