Intergenerational Income Mobility in South Africa

Source: Patterns of persistence: Intergenerational mobility and education in South Africa

People’s income or earnings matter enormously with respect to social mobility. One’s ability to move above the position of one’s parents reflects a society that is creating opportunities and social mobility. Social scientists refer to this as intergenerational income mobility.

A Study by the Southern African Labour and Development Research Unit (SALDRU) examined intergenerational income mobility paying special attention to the role of education in determining the association of labour market earnings between parents and offspring. The study titled, Patterns of persistence: Intergenerational mobility and education in South Africa, was conducted by Arden Finn, Vimal Ranchhod and Murray Leibbrandt.

Measures of intergenerational earnings mobility provide evidence of the actual relationship between parents’ earnings and their grown children’s earnings. In other words, it measures labour market income mobility from one generation to the next. Intergenerational income mobility is described as a good companion indicator to income inequality because it measures equality of opportunity. Income inequality measures equality of outcome.

Similar to the Gini coefficient, intergenerational income elasticity is measured from 0 – 1. A low value (0), translates to a low correlation between the earnings of parents and their children and therefore excellent prospects for income mobility. On the other hand, a high value (1), translates to a close relationship between the earnings of parents and their children and therefore, no mobility.

The graph above is taken from a SALDRU study on labour market income mobility, which found that the intergenerational income elasticity for low-income families in South Africa is 0.9 (almost 1), which translates to no income mobility. This means that there are virtually no prospects for children from low-income families to do better in the labour market than their parents. Our study found the highest correlation between parents and children in families where parents were working in elementary jobs, such as, domestic workers, day labourers, farm workers and those engaged in informal trade, such as, selling goods on the side of the road.

At the other end of the spectrum, amongst the well-off in South Africa, intergenerational income elasticity is 0.73. This is also a very high value, which demonstrates immobility at the top end of the spectrum, indicating that the children of the well-off are largely locked into their economic class.

In theory, we should see widespread social progress if everyone has an equal opportunity to improve his or her life chances. If there were equality of opportunity, one’s background would be irrelevant, as individual effort would determine one’s ability to move up the social ladder rather than the socio-economic status of one’s parents. But young adults from low-income families in post-apartheid South Africa are not breaking out of their socio-economic class despite better access to education and a higher probability of finishing school. A major concern is that these children end up in the same elementary jobs as their parents, thus thwarting any likelihood of income mobility.

Amongst the poor, 43% of respondents reported attaining a matric in contrast to only 12.4% of their fathers and 11.7% of their mothers. The study found that a parent’s level of education affects earning’s elasticity by 40%.

This SALDRU study on income mobility challenges the notion that one’s background does not hinder one’s prospects for progress. It is an empirical study that highlights the structural nature of immobility and inequality of opportunity in South Africa. The study demonstrates that in a low mobility society such as ours, getting ahead in life has less to do with individual characteristics and more to do with the inheritance of advantage and disadvantage.

SALDRU’s study on social mobility used data collected from 2008 to 2015 by the National Income Dynamics Study, a project implemented by SALDRU on behalf of the National Department of Planning Monitoring and Evaluation.

Learn more

Watch: Patrizio Piraino on intergenerational mobility in South Africa

Watch: Vimal Ranchhod on the multidimensionality of income inequality

Watch: Murray Leibbrandt on understanding the texture and multidimensionality of inequalities in South Africa