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

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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.
SHOW TRANSCRIPT

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.