Family Structure and Inequality

April 10, 2014
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What are the determinants of inequality? The first step in answering this question is defining exactly what we mean by inequality. A working paper by Chetty, Hendren, Kline, and Saez takes an interesting approach: it measures inequality based on the likelihood that a child born into a poor family will rise in the overall income distribution.

They call this measure “absolute upward mobility.” If absolute upward mobility is high, it means a child born into a poor family has a good chance of rising in the overall income distribution. If it is low, that means the poor child will likely be poor when she grows up.

The authors construct upward mobility for different cities. A city with a high score is considered more equal; a child born to a relatively poor family in the city has a good chance of rising in the income distribution. A city with a low score is more unequal, as a poor child is likely to remain poor as an adult.

The part of the study that interests us most is the correlation between their measure of inequality and other variables at the city level. In other words, what characterizes the most “unequal” cities?

It turns out that one variable is far more statistically powerful than any other variable: the fraction of mothers that are single. Here is the correlation across cities between upward mobility and the fraction of mothers that are single.

 houseofdebt_20140409_1

Each dot in the picture above is a city. The vertical axis is the measure of upward mobility, and the horizontal access is the fraction of mothers that are single. Cities with a higher fraction of mothers that are single have lower upward mobility. The relation is very strong, as the regression line shows.

As the authors show in their Table IX, inclusion of this single variable in a regression knocks out many other variables we might think affect the likelihood of rising in the income distribution. It knocks out the Gini coefficient and the high school dropout rate, for example. The statistical power of this one variable is stunning.

Now, we are wading into some hugely controversial issues here. So it is crucial to be scientific about what this figure means. This is a correlation; it is not necessarily evidence of causation. It doesn’t mean that if we somehow paired up single mothers with a partner, then suddenly inequality would go down. Further, the channel through which inequality and family structure are related is complex. For example, the authors show that cities that have a large fraction of mothers that are single have less upward mobility even for families where both parents are in the home. So again, the channel is unlikely to be a direct effect of single mothers on inequality.

The authors speculate that the fraction of mothers that are single is capturing other measures of income inequality. As they write, “…the fraction of single parents may capture some of the variation in other factors, most notably the level of income inequality. Indeed, [cities] with greater inequality have significantly higher rates of single parenthood. Hence, the results in Table IX are consistent with the view that inequality affects children’s outcomes partly by degrading family structure and social ties in the community.”

In our view, the last sentence is a bit strong given the evidence. It seems to imply that income inequality causes family degradation. We don’t see evidence of that in this study.

But more importantly, it brings up the main challenge for empirical economists and other social scientists studying inequality. Those on the right of the political spectrum believe the relation in the chart above is a causal one: some factors changed social norms and led to the breakdown in family structure. A strong family structure is crucial for instilling the education and habits necessary to succeed in the workplace, the argument goes. As a result of the breakdown in families, income inequality has risen. This view is expressed most forcefully in Coming Apart by Charles Murray.

Those left of center argue the causality is the opposite. Rising income inequality was the trigger that led to the disintegration of families. Less-educated Americans, especially men, cannot find a decent-paying job. As Paul Krugman put it: “Still, something is clearly happening to the traditional working-class family. The question is what. And it is, frankly, amazing how quickly and blithely conservatives dismiss the seemingly obvious answer: A drastic reduction in the work opportunities available to less-educated men.” He concludes: “the social changes taking place in America’s working class are overwhelmingly the consequence of sharply rising inequality, not its cause.”

So which is it? Did changing cultural values degrade the importance of the two-parent family, which then led to income inequality? Or did the rise in income inequality and the lack of opportunities for less-educated men cause the disintegration of families?

We are still looking for studies that answer this question definitively. If there are studies out there that help us interpret this correlation, let us know in the comments or on twitter. We will happily update the post.

But if progress is going to be made, we believe it will be led by researchers using advanced empirical techniques to come to objective conclusions about causality. There was a firestorm of coverage of this study when it was released in January. Some of it was balanced and sensible. But a lot of it was extreme and ideological. It’s going to be very hard for people to remain objective when looking into this issue. But objective study is exactly what we need.

The authors of this study should be commended for adding data to a controversial issue. Now let’s see if we can get more traction in figuring out the causal chain.

UPDATE: here are a few sources we’ve discovered while writing the post (we will add more as we come across them)

 

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23 Responses to Family Structure and Inequality

  1. Maximilian Hell on April 10, 2014 at 12:38 pmi

    The state of the field of mobility research is aptly summarized in “From Parents to Children: The Intergenerational Transmission of Advantage” (ed. by Ermish, Jäntti and Smeeding). Highly recommended.
    On family structure and inequality, Bruce Western has an interesting paper:
    “From 1975 to 2005, the variance in incomes of American families with children increased by two-thirds. In attempting to explain this trend, labor market studies emphasize the rising pay of college graduates, while demographers typically highlight the implications of family structural changes across time. In this article, we join these lines of research by conceiving of income inequality as the joint product of the distribution of earnings in the labor market and the pooling of incomes in families. We develop this framework with a decomposition of family income inequality using annual data from the March Current Population Survey. Our analysis shows that disparities in education and single parenthood contributed to income inequality, but rising educational attainment and women’s employment offset these effects. Most of the increase in family income inequality was due to increasing within-group inequality, which was widely shared across family types and levels of schooling.”
    http://asr.sagepub.com/content/73/6/903.short

  2. Carlos García on April 10, 2014 at 1:11 pmi

    To my believe, the best way to explain the direction in causality would be to compare data with another set of data. I don’t have the data, but I understand that the Scandinavian countries have the highest rates of single mothers, basically high income, professional, ealy thirties ones driven by cultural change. If this were to be true, we could conclude that is income inequality which generates single mothers, and not the other way around.

  3. Up the down escalator on April 10, 2014 at 1:52 pmi

    Your assumption that inequality does not necessarily lead to family degradation is too cautious, and is therefore misleading to your readers. Last year I was furloughed and had to take a 2nd job. My relationship went downhill very quickly. This year with the furlough gone, and back down to one job, my relationship has improved. The financial stress of not making bills is overwhelming. Family degradation has everything to do with losing jobs, inequality, low pay, and/or long hours. Last year Bill Moyers had an excellent report on the destruction of jobs, and families, in Milwaukee. Go watch it and educate yourself in case studies beyond your ivory tower.

    • Thomas Paine on April 11, 2014 at 12:41 pmi

      “Last year I was furloughed and had to take a 2nd job. My relationship went downhill very quickly.”

      There is a problem with your reasoning: It is illogical for a married couple to split up because of financial stress; splitting up usually invariably makes the financial stress worse.

      In your case, the problem wasn’t inequality, it was an insufficient devotion to the relationship.

      • jsn on April 11, 2014 at 5:14 pmi

        There is a problem with your reasoning. Once financial problems become dire, beyond the joint capacity of a couple to meet, the father, unencumbered by wife and child, often finds more autonomy and self direction, even if toward stoned wasting, by abandoning family obligations. You are quite right it is not logical, it is however quite obviously human. It only takes the most moderate depression to throw all your reason out the window.

      • Patricia Shannon on April 11, 2014 at 7:24 pmi

        What a dumb comment. Financial stress causes psychological stress, which can cause conflict between family members. And if you value your relationship, why would you want to see less of your spouse because they are working multiple jobs? What would be the point of the marriage, except for money?

      • Anonymous on April 11, 2014 at 9:11 pmi

        Mr. Paine, your opinion is judgmental and, in fact, insulting. Financial stress and loss of time together, anxiety about bills and fear of bankruptcy, long hours and no financial stability — are those really your prescription for divining true love? You should be ashamed.

      • Up the down escalator on April 14, 2014 at 12:48 ami

        “It is illogical for a married couple…” Spock, you green-blooded… Vulcan.

        Good point! I’m somewhat glad we aren’t Vulcans. Captain Kirk always seemed to have more fun at the end of the day.

        I stand by my opinion. Thanks for the supportive comments, folks.

  4. Dylan on April 10, 2014 at 11:05 pmi

    I think it’s interesting that most of these arguments are articulated in conversations in these neighborhoods. I think data categorization is difficult in establishing causality in many instances. Many of my former students became pregnant from a confluence of factors, one from an unrelated man living in the home for example. That is why I struggled with social science research. Classification always seems a very difficult challenge, at least when you see the situations first hand. On the other hand, I like the attempt of books like Poor Economics to measure interventions and their efficacy. It seems isolation is more easily obtained and just leads to more constructive conversations in general.

    As far as the previous comment, we should always talk about these things, and I am happy that two economists who have made great contribution to raising the understanding of their field are still willing to tackle the issue of inequality when few seem to and when many are simply quick to respond with snarky comments. Please keep up the good work.

  5. Toady on April 11, 2014 at 8:42 ami

    If too many men cannot find good paying jobs then unwed childbearing should have skyrocketed during the Great Depression when deep poverty was widespread and unemployment was around 25-30%. It didn’t.

    In fact, illegitimacy has been rising since the 1960s, through good times and bad. What’s changed is peoples’s VALUES and the fact that generous government assistance has made the fatherless family financially viable.

    Carlos Garcia;
    It is specious to use the Scandinavian countries for comparable data. Scandinavian couples tend to cohabit for decades, raising their children together, providing what is, functionally, a common law “marriage”. This will cause the statistics to report high numbers of single mothers but the children are not, in fact, being raised by a lone parent.

    Coabitation in the US tends to be a lot more unstable, involving a carousel of partners, creating a very poor environment to raise children.

  6. Don on April 11, 2014 at 9:14 ami

    It is reasonable to distinguish between cause and effect when studying this problem. But it is illogical to suggest that the path toward improving outcomes NECESSARILY lies in reversing that path. That is to say that if one believes that decreased upward mobility CAUSES increased single mother households, the best path toward reducing single mother households is to increase upward mobility. While it sounds good, it may not be as viable as being INTENTIONAL about reducing the incidence of single mother households. Whether or not decreased upward mobility is the CAUSE of single mother households, there can be little doubt that, at this stage, that reducing single mother households and increased emphasis on parental responsibility will increase upward mobility.

  7. Joe on April 11, 2014 at 10:34 ami

    It is well known that the majority of poor women with children are unmarried, while the majority of upper class women with children are married. 70% of poor children would not be poor if their mothers married their fathers.

    If poor women have more children, they get more money from the government. If they get married, they get less money from the government due to the extra household income. We could say the breakdown of society’s norms is the root cause for these women to be poor, but the government monetarily encourages it. If we want to solve the poverty problem, we have to stop giving money to those in poverty.

  8. Mike Constitution on April 11, 2014 at 11:14 ami

    Either way, what seems to matter is why the jobs went away in the first place and are not recovering as quickly now as they have historically.

    Job loss, family disintegration, single-motherhood, income inequality, poverty, crime, and all the other pathologies we see are the fault of one thing; government meddling.

    Government and its union allies taxed, regulated, waged, and benefitted themselves out of jobs by making the US uncompetitive and forced companies to move away in order to survive.

    Government and its regulatory burdens and barriers destroy economic opportunity.

    Government’s tax, borrow, and steal from the future zeal to buy more votes to increase its power destroys lives.

    The article does not list the cities at the lower end of the spectrum but we all know they include Democrat-run disasters like Detroit and Chicago.

    As long as people are too stupid or afraid or dependent to take their political power back from the government bureaucrats that have lied us into this mess, the status quo of failure will continue and get steadily worse.

    Vote for wealth creation; not redistribution.

  9. Doug on April 11, 2014 at 11:49 ami

    There is a third explanation, which is the group of people who are single parents are in a sense self-selecting, and those traits which cause that selection similarly tend to cause an inability pass on the traits to allow their children to change social class. It should be noted in this study that it is not poverty per se that is correlated to single parenthood, it is the inability of children to escape poverty. So some of the places with a low incidence of single parenting may still be quite poor (as are some places in downstate Illinois), the difference in those places, according to the study, is that children of impoversihed parents in those communities would have a reasonable expectation of escaping poverty themselves.

    I think using mobility as a stand-in for poverty in the explanation (but not in the math) is misleading. I am not a big fan of the zero-sum-game mobility studies (for everyone rise in social class, there must be a corresponding drop somewhere else, unless you live in Lake Woebegon where everyone is above average), real wealth is not measured by what other people make, but by how many hours you need to work to buy the things you need (shelter, food, heat, et.al.).

    Perfect mobility would imply that no matter what resources you had, you could not affect your children’s life in a meaningful, postive way. That would be a said commentary on a society indeed.

  10. Chris on April 11, 2014 at 12:42 pmi

    Krugman’s hypothesis that growing income inequality drove the increase in the rate of illegitimacy doesn’t hold up to the data. The percentage of children born out of wedlock began its deviation from trend in the 1950s and really took off in the 1960s — which were supposedly the halcyon decades of income equality in this country according to Krugman, Piketty, and others — whereas the growth in income inequality began some decades later in the mid-1970s or 1980, depending on who you ask (Krugman has repeatedly said 1980).

    What did occur during the 1950s and 1960s to help explain this was the growth of the welfare state and the loosening of social norms, as Murray and others have repeatedly pointed out.

    That issue aside, the paper tells us nothing about the cross sectional relation between illegitimacy and income mobility in previous periods, such as 1950. For all we know, the correlation could have been the same or even greater. (Though the fraction of single mothers has surely increased over time, this needn’t have affected the correlation measure, which is dimensionless).

    So, apart from the question of what has driven the increase in inequality over time, what is behind the cross sectional variation in income inequality at any point in time, even in 1950? Clearly, single motherhood appears to be related to income mobility, but is there anything that drives single motherhood? Surely socioeconomic status (SES) does, but what about other factors? I believe one cannot claim to be reality-based on this matter without taking into consideration IQ, as well.

    In fact, Hernstein & Murray show, in their 1994 book ‘The Bell Curve’, that IQ has a larger independent effect on (white) illegitimate births than the mother’s socioeconomic background. Single motherhood is just a proxy for IQ and SES, and IQ is the stronger predictor of the two.

    As you point out, cities with greater inequality have significantly higher rates of single parenthood. But we know that educational attainment has driven income inequality over the last few decades. And we know that IQ is highly explanatory for educational attainment. I believe it’s IQ and to a lesser extent SES that drive single parenthood, educational attainment, and income inequality. (I understand the last is somewhat circular, but the fact is that parental SES has explanatory value for the SES of their offspring in adulthood.)

    Of course I understand that this doesn’t fit in with the standard “progressive” dogma, but I prefer the truth.

    I strongly suspect that the inclusion of IQ in the cross sectional regression would knock out single motherhood in explaining income mobility.

    • Ajit on April 12, 2014 at 9:59 pmi

      My more provocative question is, even if it did show that inequality was the cause, what exactly would the right proscription be? Certainly no one would advocate a pol pot style redistribution, let alone mau or stalinistic. Yet even we avoid these obvious strawmen, I have yet to find some regime that instituted widespread redistribution and it leading to some kind of prosperity for all(yes even the 1950s and 1960s are highly misleading as far as effective tax rates).

    • Up the down escalator on April 14, 2014 at 12:37 ami

      Um, no, the trend in single mothers started significantly rising in the 1970s. I note that the 70s had (1) many men going to Vietnam in the 1st half decade, and (2) oil shocks leading to high inflation throughout the decade. Not your usual decade.

      It may be true that *never married mothers* seems to have started rising earlier than the 70s, but this is not the same thing as all single mothers. A good article is here:

      http://www.theatlantic.com/business/archive/2013/10/how-americas-marriage-crisis-makes-income-inequality-so-much-worse/280056/

      Another question is when our ultra-high incarceration rates, which have taken away many fathers, started to rise? This problem has disproportionally affected non-whites.

      Of course people with higher IQs will land better jobs with more responsibility (and thus more money). That has been true throughout human history. The question is whether our society should be one in which all citizens, regardless of ability to perform white collar management jobs, should have a baseline of decency and quality of life.

      • Up the down escalator on April 14, 2014 at 12:50 ami

        I should say “ability or opportunity”. There is loads of ability out there, not so much opportunity.

  11. mrrunangun on April 11, 2014 at 2:41 pmi

    Daniel Moynihan recognized family disintegration as a social problem developing among black Americans in the late 1960s during a period characterized by many changes in American society. Many of those changes were the results of New Deal and Great Society programs’ expansive views of the role of the state in society. Many commentators on social problems over the past 40+ years have regarded New Deal and Great Society initiatives as causative, if inadvertently, of social problems that have developed or redeveloped over that 40+ year span. But the US did not exist in isolation from the world during those years. The US foreign geopolitical goals were manifold as were the efforts to achieve them. As a method of strengthening cold war allies, the US began to organize and develop what we know as the Global Trading System. At around the time Mr. Moynihan made known the plight of the black family, the rest of the world was completing its 20-year recovery from WWII and thus becoming more effective competition for US firms in international markets and, thanks to generous trade policy, in the US domestic market as well. It may be that domestic policy is not responsible for the plight of working class families (of all racial groups) today, but rather trade policy which has operated to the strong disadvantage of the less-educated American working class. As larger numbers of less-educated people have entered the workforce competing in he global trading system, very little effort has been made by the US government to protect the working class from the effects of that competition. Neither trade barriers to reduce competition, nor incentives toward the domestic formation and deployment of productivity-enhancing capital investment have been considered. Less-educated workers require greater capital investment to become sufficiently productive in the Global trading system. US tax and regulatory policies discourage domestic capital deployment. So capital is deployed offshore. Offshore earnings can best be laundered tax-free by share buy backs on foreign exchanges. Leaving ever more less-educated Americans with limited economic prospects. You cannot foster your kids’ upward mobility unless you can afford to educate them. Relying on the public school system as it exists in the impoverished sections of urban and rural America has proven to be unrealistic.

  12. Ronald Calitri on April 11, 2014 at 3:06 pmi

    The Gini coefficient often gets knocked out of regressions. Try the Thiel. See UTIP (U. Tex. Ineq. Proj.) for their explanations.

    Single motherhood, “that one variable is far more statistically powerful than any other variable,” is utterly powerless above 25%, in your figure. A bad fit, thus a rather slender reed for “causal” thinking.

    • Chris on April 12, 2014 at 5:11 ami

      The relationship here looks like an exponential or polynomial one that could be linearized with a simple log-transformation or polynomial fit of the upward mobility variable. So, to be perfectly accurate perhaps they should have used the word “relation” in place of “correlation”. But the fact that the relation is not a simple linear one doesn’t negate the obvious powerful nonlinear relation between the two variables. As for causality between them, they specifically stated that the relation “is not necessarily evidence of causation.”

  13. Kaleberg on April 11, 2014 at 11:46 pmi

    Shouldn’t the title on that chart be “Cities with less upward mobility have more single mothers”?

    The causality seems pretty obvious to me. Men have never married unless they had “prospects” where “prospects” meant a chance of making enough money to support a wife and children. This is why poorer men or women often never married. Of course, it had nothing to do with getting laid or bringing a child into the world, just meeting a middle class norm.

  14. Ajit on April 12, 2014 at 5:44 pmi

    I agree with the comments above, we need to survey lots of other countries and attempt to control for as many factors as we can to isolate causation here. Obviously, I don’t think it’s as simple as single mothers. After all, a single mother with an education or educated parents or belonging to a tight knit community as is often found in Europe will have a very different experience than a single mother living in the housing projects.

    Even still and I have posed this question to everyone, what should be done IF it appears inequality does this. Is the the solution to thus enforce a redistribution policy of taxing the rich and just handing money to poor people?

    In my opinion(which I am happy to change) is, we need to overhaul our primary education system in this country and put particular emphasis on ensuring that people do not end up as single parents. Education seems to be the predictor of avoiding bad habits and I think(again just an opinion) that our institutions are doing an awful job of it.