If Fathers Are Fathers, Are Children Also Children? A Comparison of Absolute and Relative Intergenerational Labor Income Mobility in Germany and the United States

Stockhausen, M. Like Father, Like Son? A comparison of absolute and relative intergenerational labor income mobility in Germany and the United States. J Econ Inequal (2021). https://doi.org/10.1007/s10888-021-09483-w

Commentary

This study asks the question: Are children economically better off than their parents? In response to this controversial topic in political economy, this study analyzes and investigates trends in absolute and relative intergenerational labor income mobility in Germany and the United States.

In the case of Germany, it is the SOEP; in the case of the United States, it is the PSID.

In Germany, 67% of children born between 1955 and 1975 were found to have earned substantially higher real long-term labor income than their fathers. Those with fathers in the lowest earnings bracket were absolute and fluid.

In contrast, the percentage of U.S. children earning more than their fathers was shown to average 60 percent for the same cohort. These declined from 66% in the 1956-1960 birth cohort to 48% in the 1971-1975 birth cohort, but these results were not found in Germany.

The results show that absolute and relative labor income mobility is greater in Germany than in the United States. This indicates that economic growth is more widely distributed in Germany than in the U.S. The majority of German men share in the country's rising prosperity and tend to be wealthier than their fathers, while American men continue to lose ground.

This supports the hypothesis that the American dream is a status quo that is being lost.