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On My
Mind My Brother the Bum You're not going to end up in the same economic class as your brother or sister. Get over it.Most American parents assume that their homes are a haven from the harsh world of capitalism. They like to think that they send each of their children out into the world on an identical economic footing. Oh, how parents delude themselves! The truth is, inequality starts at home. Growing up in the same family with the same parents is no guarantee that siblings are going to end up in the same economic class.Start with college. Most middle-class parents expect that all of their children will get a bachelor's degree. They see a B.A. as a minimal foundation for middle- or upper-middle-class status. But the reality is that if one of your children gets a four-year degree, there's a 50% chance that another of your children will not. The differences continue with sibling income. The disparity is enormous among kids from the same family. In fact, three-quarters of income inequality in the U.S. occurs within families. To put this in statistical terms, 25% of the variance in incomes is variance between families, and 75% is variance within families. Here's another way to look at it: If we lined up everyone in America in order of income, from the poorest person to Bill Gates, and tried to predict where any particular individual might fall on that long line, knowing about that person's sibling would help us very little. (My data come from three national surveys, by the U.S. Census Bureau and by researchers at the universities of Michigan and Chicago, and from an ongoing study conducted by my staff at New York University.) What explains a person's income? Many factors are at work: natural abilities, inclinations (some people would rather be artists than orthodontists), parental behavior, how much money and time parents invest in each child and even the passage of time. Fifty years ago musical talent might have led to a decent living. Today, in an economy that rewards the most popular musicians handsomely at the expense of everyone else, giving in to one's innate musical ability is more often than not a route to financial struggle. But as much as we'd like to think there is a single factor--like genes or birth order--there simply isn't. For example, lots of people like to point out that half of American Presidents are firstborn males. Well, that is a bit misleading. Many had elder sisters. Only about one-quarter were the firstborn of all their siblings--about what we would expect from chance. And despite rumors that most chief executives are firstborns, there is no solid research to back up the claim. Bill Gates and Warren Buffett are later-borns. That said, there are a couple of statistically significant patterns within families. While birth order doesn't matter for two-child families, if a third child is added to the mix the middle-born suffers disproportionately when it comes to education. That middle child is several times more likely to be held back a grade. If a mother never works outside the home, her sons are 10% more likely than her daughters to graduate from college and will earn on average $8,000 more per year. But among families where the mother works outside the home, providing a model of a working mother for her daughters, there are no economic differences between male and female offspring. The answer to who succeeds within families turns out to be not all that different from explanations of who succeeds across families: the timing of economic shocks to the household, gender norms, even cultural changes taking place in society. All of these factors result in different outcomes for children based on their age, birth position and gender--to name the most obvious categories. Take the case of Warren Buffett: He was selling Cokes for a profit at age 6; by 11 he had bought his first stock; and the rest is history. Or is it? He relied on his sister Doris (as well as an aunt) to help raise the initial $105,000 for his hedge fund, Buffett Associates, in 1956. (He put up a mere $100.) Clearly, gender expectations within the family played a role in helping to launch Warren's stellar rise in the business world. What's a worried parent to do? Never get divorced, never move, enjoy a stable income, have only two children and make them the same sex. That doesn't sound so easy? Well, you can have just one kid and punt on the whole issue.
People To Watch: The Week Ahead - 5/22/04 6:00:00 AM ET Paulson, others may face fire; Krispy Kreme's Livengood eyes earnings; Indevus' Cooper anticipates FDA decision. Hires, Fires And Retires: May 17-21 - 5/22/04 6:00:00 AM ET Dollens to retire as Guidant CEO; King Pharmaceuticals CEO Gregory resigns; SBC's Daley moves to J.P. Morgan Chase. The Business Week In Pictures - 5/21/04 3:30:00 PM ET A collection of the most compelling images from the week's top business stories. Steve Forbes On Wobbly Stocks - 6/7/04 12:00:00 AM ET Steve Forbes says stocks are wobbly because Washington is, too. Eye On Stocks For Monday, May 24 - 5/21/04 5:54:45 PM ET A look at shares likely to dominate trade at Monday's opening. Subscriptions >
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