Income Inequality and Class Divides in Parental Investments

June 5, 2018

A new report in the American Sociological Review by RSF grantee Daniel Schneider (University of California, Berkeley) and colleagues finds that as income inequality has risen over the past several decades, so have socioeconomic disparities in how much parents invest in their children.

In their study, Schneider and colleagues merged thirty years of microdata from the Consumer Expenditure Survey and American Heritage Time Use Survey on parental expenditures—schooling, childcare, and lessons—with state-level measures of income inequality from the IRS and Census to study the effects rising income inequality on these expenditures. They show that between 1980 and 2014, as inequality increased, so did gaps in parents’ investments in children by household income. “In high inequality contexts,” Schneider writes, “families in the top 10 percent spend 3.5 times as much as those in the bottom 75 percent.” As he further notes, this appears not to be a result of lower income families spending less, but rather, of affluent families spending much more.

Schneider and colleagues note that the increase in rich parents’ expenditures is partially the result of income concentrating at the top of the distribution—that is, rich parents spend more on their children simply because they have more to spend. But they also show that the rich spend a larger proportion of their income on financial investments in children, particularly when income inequality is higher. “In summary,” the authors write, “we provide new evidence that rising income inequality is reshaping parenting practices in the United States along class lines.”

These findings complement a recent study by RSF grantees Fabian Pfeffer (University of Michigan) and Alexandra Killewald (Harvard University) that tracks wealth transmission across three generations of families and shows that wealth is most commonly passed on to children by their parents and grandparents through indirect means, such as education. Given that education has long been considered one of the primary avenues for upward mobility, the growing divide between the educational investments affluent parents are able to make and those of less advantaged parents afford holds troubling implications for opportunity and intergenerational mobility in the U.S. today.

Read the full report

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