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The Chances You'll Make The Same Money As Mom & Dad

For good or bad, our earning power often mirrors what our parents make.
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The Chances You'll Make The Same Money As Mom & Dad

Economists study something called intergenerational elasticity, or IGE. It looks at how our incomes drift from where our parents stood.

If there is a perfect elasticity of 1.0 (meaning there's no give in the tether), parents with median incomes will have kids who earn median incomes. By contrast, zero elasticity means a parent's income won't tell us anything about how much their child will earn.

This isn't to say individuals don't break away from their parents' financial influence. But overall, it's a significant predictor.

In this segment for "The Why," Newsy's Chance Seales examines why U.S. children are more tethered to their parents' earning power than the typical market-based economy. He also spoke with Professor Steve Horwitz of Ball State University about why trends are changing toward tethering.

"The Why" airs on the Newsy channel Monday-Thursday nights from 7-9:00 p.m. Click here to check your local listings.