None of us has any control over the family we are born into. Yet the accident of birth determines a large share of each of our future earnings. Alarmingly, the more somebody’s own earnings depend upon what their parents earned, the more inequality persists. If this dependence – known as intergenerational earnings persistence – is high, a society is characterised by a dynastic structure where the poor stay poor and the rich stay rich.
The US was originally associated with the “American Dream”, the ideal that everybody can make it in life through effort. However, the US is not only among the most unequal countries in the world, but is also among the most rigid societies where a person’s earnings are closely linked to what their parents earned.
Recent research suggests that higher public spending on education for very young children and more progressive taxation can help foster social mobility, thereby making parental earnings less important for a person’s future.
Taking this one step further, my recent working paper found that differences in voter turnout between countries can explain differences in public education expenditures. Because of this, the way people vote – and if they vote for more public spending on education – can affect inequality and intergenerational mobility, the difference between what parents and their children earn.
Education spending and inequality
If the state provides no public education then the education a child receives depends solely on the investments that their parents make. In contrast, public education can equalise the playing field by giving both rich and poor families’ access to quality education. It is considered redistributive expenditure.
So we would expect voters to demand more public education when inequality is high. However, my analysis of data from OECD countries suggests the opposite, as the graph below shows. Surprisingly, the share of GDP dedicated to public education is lower in countries where inequality is high. At the same time, in more unequal countries private education expenditures are higher.
The x-axis shows inequality in terms of the Gini index, which takes the value zero when everybody earns the same and one if one single person earns everything. The y-axis shows the percentage of GDP spent on public education, so the countries on the top left such as Iceland are the most equal and also spend the most on public education in relative terms.
In my model, public education expenditures on early and college education are determined through voting. I took into consideration that some people are more likely to vote than others by using data on voter turnout by age and education in each country. Politicians are only accountable to those people that actually vote – and cater to these voters when deciding on policies.
Relatively high turnout among the educated, as in the US, might bias policies in their favour. So if richer households prefer private education this could limit the provision of public education even in countries with high inequality. In contrast, relatively high voter turnout among less educated individuals, such as in Scandinavian countries, could increase public spending on early education due to its redistributive nature.
By varying the weight a politician attaches to different social groups according to voter turnout by age and education in each country, I found this same link between inequality and low public education expenditures. This also helps to explain nearly one-quarter of the gap in inequality between the US and other OECD countries and the high importance of parents' earnings on what their children earn. This suggests that if the poor do not vote, their children are more likely to stay poor (and the rich are more likely to stay rich).
More voters, better education
By projecting what would happen if 100% of the voting age population in the US turned out to vote, I found that a person’s earnings would be 10% less dependent on what their parents earned – mainly because of the predicted increase in public expenditures on early education. The logic is as follows: if everybody voted, politicians are now more interested in what poorer households think about public education, and so state spending on early education should increase.
Improved early education prepares more children from poor households to enter college. The smarter a kid is coming out of high school, the more he or she gets out of going to college, and the likelier they are to graduate. When more children from poor households enter college, public support (and therefore funding) for college subsidies broadens, thereby further alleviating barriers to college enrollment. In turn, this increase in college enrollment raises overall returns to public investment in early education. This feedback effect is what makes a child’s outcome less dependent on parental earnings.
The findings suggest that politicians concerned about equality of opportunity would do well to remove barriers to vote that disproportionately affect the poor – such as the requirement to present a birth certificate – and to emphasise to people that their vote really does count.
Christopher Rauh has received financial support from the Barcelona GSE through the Severo Ochoa Program for Centers of Excellence (SEV-2011-0075) and from the INET Institute Cambridge.
Authors: The Conversation