Justifying ‘Never-Working Families’?

Author: Lindsey Macmillan

Justifying ‘Never-working Families’?

The Secretary of State for Work and Pensions, Iain Duncan Smith, has repeatedly made references to families where generations never work. When asked to justify these claims (to Paul Goggins MP), he concedes this is based on personal observations, not evidence.  His justification for this is that statistical information on the number of UK families that never work is not available.

A recent Freedom of Information (FOI) request makes the same argument – but then goes on to cite my own research;

“a research report was produced by the University of Bristol in 2011 
looking at this issue. This reports that there are pockets in Britain where there are two and three generations of families who are unemployed.”

In fact, there is clear evidence that shows how rare a phenomenon the never-working family is.

In my paper in Dec 2011, I looked at the number of households where two generations had never worked. Evidence from the Labour Force Survey, which is used by DWP in their labour market statistics analysis, showed that in Spring 2010, only 0.3% of multi-generational households were in a position where both generations had never worked. That’s just 15,000 households in the country. Of these, in 5,000 households the younger generation had only just left full time education, within the last year, and so had barely had a chance to work yet.

This story holds in data where the families don’t live together in the same house (as seen in the National Child Development Study, the British Cohort Study and the British Household Panel Survey). There is very little evidence of even two-generation-never-working families, driven by the fact that so few of the younger generation are never in work (less than 2% by age 23 and less than 1% by age 29 – see here). Instances of three-generation-never-working families would be even rarer.

A recent Joseph Rowntree Foundation Study took the more direct qualitative approach and sent researchers out into deprived neighbourhoods in Glasgow and Middlesbrough to look for families where three generations had never had a job. They couldn’t find a single one.

Iain Duncan Smith isn’t the only senior politician to make these claims – Tony Blair said in 1997 that “Behind the statistics lie households where three generations have never had a job” (see p16 of this). But my work and others’ shows the evidence doesn’t match the rhetoric.

Who gets the best jobs? The economics evidence

Lindsey Macmillan

 

Social mobility is back on the agenda with the first meeting of social mobility czar Alan Milburn’s advisory panel taking place next week to assess how well the current coalition Government is doing with its aim of improving social mobility.  So far it might be too early to tell but we do know there is a lot to do.

Tonight’s BBC programme ‘Who gets the best jobs?’ illustrates the growing evidence in the UK that social mobility is worse now than it was a generation ago. Well-cited evidence from economists showed that individuals born to poorer families in 1970 were more likely to end up poor as adults than if they had been born to the same circumstances 15 years previously (Blanden, Gregg, Goodman, Machin, 2004).  Following on from this, research into the potential drivers of mobility found that educational attainment was one of the key factors in accounting for persistence in incomes across generations. For the later cohort born in 1970, the fact that where they came from was a better predictor of their educational attainment than before was a key factor in their lack of mobility (Blanden, Gregg and Macmillan, 2007).

This is not to say however that the change is driven by ability. Ability and education are clearly two different things. It has been argued in the past that some degree of persistence in how well you do compared to where you come from is to be expected given genetic transmissions of ability. The trouble with this argument is that you wouldn’t expect the underlying trend in genetic transmissions to change much across time. If all of the persistence across generations was driven by well-off, more able parents’ having more able children, why would things be getting worse?

Evidence from a report looking into the family background characteristics of those entering top professions illustrates this point. The evidence suggests those who go on to become lawyers and doctors were from substantially richer families than those who went on to become engineers or nurses compared to the average at age 16 in both British cohort studies. Consistent with the mobility evidence, this trend appears to have worsened for many of the top professions over time. For those born in 1970 compared to those born in 1958, the gaps in family income between top professions and the sample average had increased. Evidence on the ability levels of these individuals however suggests that whilst those who became doctors and lawyers were of higher ability than the average, this trend has decreased across time. This would suggest that there is a widening social gap in entry to the top professions. Some of the top professions are increasingly being filled by individuals who look less different to the average in terms of ability and more different to the average in terms of family income (Macmillan, 2009).

One of the main problems with mobility evidence is the length of time it takes to measure trends. All of the evidence mentioned above focuses on individuals now in their 40s and 50s. What do we know about mobility for younger people? A couple of new pieces of work have analysed the link between family background and educational attainment for younger individuals to get a picture of what we might expect from future trends in mobility. The evidence is mixed. On the one-hand, there is some evidence for children born around 1990 that the association between family incomes, Key Stage 2 attainment and GCSE attainment is weakening. This could be a promising sign. There is also the suggestion that post-16 participation has become less associated with where you come from (Gregg and Macmillan, 2009). On the other-hand, there is less evidence of this trend continuing into higher education and no change in the relationship between background and early attainment (age 3 to 5) for children born around 2000 (Blanden and Machin, 2009).

So what can be done?  Identifying policy levers in this setting is often problematic. However, some research in the US from the Perry pre-school program indicates that improving ‘soft skills’ in childhood had positive effects in terms of greater employability, less contact with the police and higher completed education (principally the work of Nobel Laureate James Heckman and others). There is also evidence that lower family income in childhood causes lower educational attainment and lower educational attainment causes lower incomes in adulthood (Dahl and Lochner (2008), Oreopoulus et. al. (2006)).  With this view that education is still a key policy lever in changing patterns of mobility, policies aimed at widening participation in higher education for those from the poorest backgrounds could be important to reversing the current trend of where you come from predicting your educational attainment and hence later-life income. Unfortunately the most recent policy announcements with the scrapping of EMA and trebling of tuition fees are unlikely to encourage such changes in behaviour.

 

Blanden J, Goodman A, Gregg P and Machin S. (2004) Changes in intergenerational mobility in Britain. In M. Corak ed. Generational Income Mobility in North America and Europe, Cambridge University Press, Cambridge.

Blanden J, Gregg P and Macmillan L. (2007) Accounting for intergenerational income persistence: Noncognitive skills, ability and education, The Economic Journal, 117, C43-C60.

Blanden J and Machin S. (2008) Up and down the Generational Income Ladder in Britain; Past Changes in Future Prospects. National Institute Economic Review No. 205.

Dahl G and Lochner L. (2008) The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit NBER Working Paper No. 14599.

Gregg, P. and Macmillan, L. (2009) Family income and education in the next generation: exploring income gradients in education for current cohorts of youth. Journal of Longitudinal and Life Course Studies, Vol. 1 (3), 259-280

Macmillan, L. (2009) Social mobility and the professions. CMPO report. http://www.bris.ac.uk/cmpo/publications/other/socialmobility.pdf

Oreopoulos P and Page M. (2006) The Intergenerational Effects of Compulsory Schooling. Journal of Labor Economics, 24(4), 729-760.

 

 

Welfare is an engine of mobility

Sarah Smith

Nick Clegg declared earlier this week that “welfare needs to become an engine of mobility, changing people’s lives for the better, rather than a giant cheque written by the state to compensate the poor for their predicament.” Few would disagree that welfare should bring about real, positive changes in people’s lives but let’s hope that Nick Clegg and his advisers are aware of the evidence that – at least some of – the welfare reforms introduced by the last government seem to have done just that.

In October 1999, a package of reforms was introduced to help low income families with children. These included the Working Families Tax Credit which boosted incomes for working families as well as increases in payments to non-working families with children. The scale of the rise in government support going to families with children was unprecedented over more than thirty years. Per-child spending increased by 50 per cent in real terms between 1999 and 2003, most of it targeted at the poorest one-quarter of families.

There is now a substantial body of evidence that these reforms brought about real improvements in the lives of tens of thousands of people. A number of studies have looked at whether the reforms raised levels of employment – and using different datasets and different methodologies there is a consensus (a fairly rare thing in applied work) that the reforms succeeded in getting 60-85,000 lone parents into work and encouraged a further 40,000 to increase their hours of employment.¹

Going beyond the immediate employment effects, a CMPO study has looked at the effect of the reforms on measures of well-being among lone parents and on the outcomes of their children (including self-esteem, (un)happiness, relationships with their mother, risk taking behaviour and aspirations) and found that the reforms have had significant positive effects². At least in part, these effects come through the positive impact of the reforms on mother’s employment, but this is not the whole story. Another important channel is that increasing the money available to lone parents softened the harsh financial blow of separation – and did so without any obvious effect on the probability of becoming a lone parent. Sometimes, compensating people for their predicament (separation and divorce) is exactly what the welfare state should do – and with good reason.

This is not to say that the current welfare system cannot be improved. But in the search for a welfare system that can deliver real improvements in people’s lives, the current government should not wipe the slate clean and could learn some useful lessons from what has worked in the past.

References

1. See for example, Francesconi, M and van Der Klaauw, W. (2007) “The socioeconomic consequences of in-work benefit reform for British lone mothers”, Journal of Human Resources, Gregg, P. and Harkness, S. (2003) “Welfare Reform and Lone Parents Employment in the UK.” CMPO Working Paper Series 03/072, Brewer, Mike, Alan Duncan, Andrew Shephard, and Maria J. Suarez. (2006). “Did working families’ tax credit work? The impact of in-work support on labour supply in Great Britain.” Labour Economics, 13(6): 699-720.

2. Gregg, P., Harkness, S. and Smith, S. (2009) “Welfare reform and lone parents in the UK”, Economic Journal