Intergenerational Mobility in Israel: Do Gaps Get Smaller from Generation to Generation?

This study examines patterns of intergenerational mobility and found considerable differences between different population groups

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Executive Summary

The issue of intergenerational mobility relates to the extent to which children of a family with a specific set of socioeconomic characteristics are likely in adulthood to have similar or different socioeconomic characteristics as compared to their parents. A stronger association between the socioeconomic ranking of parents and their adult children indicates a low level of mobility, while a weaker association indicates higher mobility. The link between parents' socioeconomic status and that of their children, stems from various factors, some of them interrelated, including residential environment, social environment, investment in education (whether parents’ direct investment in educating their children or their investment in educational services), social connections, and inborn abilities.

A particularly interesting social issue relates to the likelihood of children born to families with low socioeconomic status rising to a higher socioeconomic status as adults, with the associated policy question referring to the extent to which the state should take an active role in enhancing opportunities for populations from disadvantaged socioeconomic backgrounds.

In this study, we examine patterns of intergenerational mobility in employment and in income from work, comparing data in adulthood (at the age of 31–36) for children who were born in the late 1970s and early 1980s (1977–1983), with that of their parents when the children were aged 18–22 (fathers aged 49 on average and mothers aged 46 on average).

Intergenerational mobility in income from employment is examined in this study using several measures:

1. The Rank-Rank Measure. This is a widely accepted measure in the literature, which indicates the association between the income percentile of parents and that of their children—that is, the lack of intergenerational mobility. It is important to note that this measure does not differentiate between upward and downward mobility.

2. The "the sticky floors and ceilings” measure. This measure refers to the probability that a child of parents in the lowest income quartile will make his way up to the highest income quartile as an adult; or alternatively, the probability that an individual born to parents in the lowest quartile will also remain in the lowest quartile.

3. The representation of the parents’ generation and the children’s generation in each income decile. This measure focuses on different population groups rather than on individual families, assessing the over-representation of different population groups in the higher and lower income deciles, and the extent to which the level of over-representation changes between the parents’ generation and the children’s generation.

In addition to examining intergenerational mobility in terms of income from employment, we also looked at employment mobility or continuity. To this end, we examined the correlation between the proportion of the period examined in which the parents were employed t and the equivalent proportion among the children’s generation, as well as the equivalent proportions in the general population and in different population groups.

Our study produced several main findings:

Similar to other studies conducted in recent years, and in contrast with the findings of earlier research, we found that the level of intergenerational mobility in Israel is not particularly high, based on two widely accepted measures: A comparison of the association between parents’ and children’s income levels with that found in other countries reveals that the coefficient in Israel is 0.28, the same as that in the United States, but higher than those in Canada, Denmark, and Sweden (countries in which studies using similar methodologies have been carried out), which indicates a relatively low level of intergenerational mobility. In addition, a comparison of the probability that children of parents in the lowest income quartile will reach the highest income quartile reveals that this probability stands at just 14% in Israel, compared with an average of 17% across the OECD countries; and similarly, the probability that those in the lowest income quartile will remain in the same quartile as their parents stands at 36% in Israel, compared with an OECD average of 31%.

In terms of the link between parents’ income and children’s income in Israel, we found considerable differences between different population groups:

First, the correlation between parents’ and children’s incomes stands at around 0.30 among Arab families (that is, relatively low mobility), at 0.21 for non-Haredi Jews, and just 0.13 for Haredim. The very low correlation found for Haredim largely reflects downward mobility, that is, the tendency of children in families with relatively high incomes to slide down the income scale. It would seem that the preference for engaging mainly in Torah study rather than acquiring skills relevant to the labor market, leads to a steep drop in economic status relative to the parental generation, even among Haredim who are employed.

We also found that the contribution of human capital (as measured according to the classification of ten education groups) in linking parents' and children's income is relatively high, but varies among different population groups. Among non-Haredi Jews and among Christian and Muslim Arabs, the human capital component is the main channel for maintaining the intergenerational income ranking (accounting for about 67%, 60%, and 56% respectively, of the correlation between parents' and children's income), but plays a lesser role among Haredim (39%).

Second, we find a “regression to the mean” in the economic situation of most of the population groups between the parents’ generation and that of their adult children. That is, if (for example) the mean decile in the parents’ generation in a specific population was lower than the average, then the mean decile of the children’s generation is higher than that of the parents, and approaches the average. Thus, the decile ranking of income from employment among Muslim Arabs, which for the parents’ generation was 3.1 on average, rose to an average of 4.2 for the children’s generation—an increase of 1.1 decile points. Non-Haredi Jews also approached the average, and their ranking declined by 0.2 decile points. The decile ranking of income from work among Haredim, on the other hand, declined by half a decile to an average of 3.9, even though this ranking was below the average for the parents’ generation as well (4.4).

Third, a detailed analysis of mobility in Israel as measured by the representation of various population groups in the different income deciles, reveals that despite a considerable improvement in the income of Arabs between the parents’ and children’s generations, Muslim women are caught in a severe poverty trap: Around two-thirds of women born to parents in the lowest income quartile remain in that quartile (compared with just over one-third of Muslim men).

Among Haredim, by contrast, no improvement was found between the parents’ and children’s generations, and there was even a decline in ranking by income from employment, among both women and men. It appears that despite the much higher integration of Haredi women in the labor market, the quality of employment in the children’s generation is lower than that of their parents. This would seem to stem from the fact that many of the women in the children’s generation who joined the ranks of the working public have entered jobs that pay less or that offer fewer working hours than the jobs held by men and women in their parents’ generation. In addition, as noted, among Haredim, children's educational level explains a smaller portion of the correlation between parental income and that of their adult children, indicating that Haredi parents with relatively high incomes do not tend to encourage their children to acquire an education relevant to the demands of the labor market.

Among Christian Arabs, we found that the children’s generation is much better off than that of the parents, and though there is still considerable poverty among the adult children in this population group, the gaps between this group and the rest of the population have narrowed significantly.

In terms of representation in income deciles, breaking down non-Haredi Jews by ethnicity (using a new methodology that takes into account the ethnicity of both fathers and mothers), reveals that for the children’s generation, the average income decile among Ashkenazim (of European-American origin) is approximately one decile higher than that among Mizrahim (of Asian and African origin) This represents a significant reduction of the gap relative to the parents’ generation, when the difference between these two groups stood on average at 2.2 income deciles. Immigrants from the former Soviet Union completely erased the gap from the mean that existed in their parents’ generation. In other words, among non-Haredi Jews, the differences among different groups were greatly reduced relative to the differences that existed in their parents’ generation, though they did not entirely disappear.

In a similar vein, we examined the association between parents' employment and the probability of their adult children's employment. This analysis revealed that men whose fathers worked, are far more likely to work themselves, as are women whose mothers worked. To some extent, a positive association also exists between daughters' and fathers' employment and between sons and mothers, though it is weaker than the relation between parents and children of the same gender. Among Haredim and Muslim Arabs, we found that the association between mothers and daughters is much stronger than that found among non-Haredi Jews (the population group with the highest employment rates for both the parents’ and children’s generations), and among Haredim, we found that the association between fathers and sons is also relatively strong. These findings are consistent with the existence of significant cultural barriers to the integration in the workforce of both Haredi men and Muslim women.