Whos Your Daddy?

By MILES CORAK
Gus Wenner runs Rollingstone.com; his father gave him the job. But Jann Wenner,
the magazines co-founder and publisher, was quick to assure critics of the
appointment process that his son is terribly talented and had to prove himself
before being given the reins. Apparently Gus worked his way up from more junior
positions with the company, and demonstrated, according to his father, the drive
and discipline and charm, and all the things that show leadership. Gus Wenner is
22 years old.
He is certainly not the only kid just out of college, or even out of high school,
working at daddys firm. Family contacts are a common way of finding both
temporary internships and longtime careers. But whether because of blatant
nepotism, or a privileged head start in life that nurtures talent and ambition,
opportunities for the children of the top 1 percent are not the same as they are for
the 99 percent.

Javier Jan
This is hardly a shock, but it is precisely the type of inequality that reveals the
elusive promise of the Just Do It version of the American dream and deepens our
cynicism about how people get ahead. As a consequence, it dilutes support for
public policies that could address the lack of upward mobility among children born
at the bottom, who ought to be given priority.
A strong tie between adult outcomes and family background rubs Americans the
wrong way. When the Pew Charitable Trusts conducted a nationally representative
poll asking about the meaning of the American dream, some typical answers
included: Being free to say or do what you want and Being free to accomplish
almost anything you want with hard work; but also Being able to succeed
regardless of the economic circumstances in which you were born.

This is exactly the reason that the American dream is not only a defining
metaphor for the country, but also why Americans have long been willing to tolerate
a good deal more economic inequality than citizens of many other rich countries. A
belief in the possibility of upward mobility not only morally justifies inequality as the
expression of talents and energies, but also extends a promise to those with lower
incomes. After all, why would you be a strong advocate for reducing inequality if you
believe that you, or eventually your children, were likely to climb the income
ladder?
Hard work and perseverance will always be ingredients for success, but higher
inequality has sharply tilted the landscape and made having successful parents, if
not essential, certainly a central part of the recipe.
A childs prospects are actually more fluid elsewhere, not just in the most equal
countries, like Denmark or Sweden, but even in countries like Canada that have
moderate levels of inequality, as I demonstrate in a forthcoming paper in the Journal
of Economic Perspectives.
American children raised at the top, and at the bottom, are more likely to land on
the same rung of the income ladder as their fathers than their Canadian
counterparts. More than one-quarter of sons raised by fathers in the top 10 percent
stay in the top 10 percent as adults, and another quarter fall no further than the top
third. Meanwhile, half of those raised by fathers in the bottom 10 percent remain at
the bottom or rise no further than the bottom third. In Canada there is less
stickiness at the top, and children raised in the bottom are more likely to rise to the
top half in earnings.
Maternal income was left out of this study and others like it because many women
were out of the workforce in past generations. This may have made sense once, but
no longer. The achievements of the next generations reaching adulthood will reflect
the steep rise in the number of working mothers as well as the increasing tendency
of high earners to marry each other. Both these trends have raised family incomes
in a way that will reinforce privilege and position.
BUT American parents with high aspirations for their children are not packing their
bags for Denmark, or even crossing the Canadian border, particularly if they find
any appeal in Jann Wenners belief in the virtues of talent and energy.
Children, after all, inherit a good deal from their parents: height, beauty,
personality, to saying nothing of drive, discipline and perhaps even charm. It should
be no surprise that a parents and a childs incomes are correlated if certain genetic
traits or aspects of family culture continue to be as important for success now as
they were a generation ago. The relatively small and homogeneous Danish
population can hardly be compared to a large and ethnically diverse country like
America: perhaps there are just fewer visionary and driven entrepreneurs on the
coasts of the North Sea who have equally talented children?

The belief that talent is bred in the bone, and that opportunities are open to anyone
with ambition and energy, also has a dangerous corollary. When the lens of public
policy is focused on the plight of the poor, this belief can help revive the laissezfaire conception of the poor as undeserving, the authors of their own
predicament. Yet we actually know a good deal about why children of the poor have
a higher chance of being stuck in poverty as adults.
The recipes for breaking this intergenerational trap are clear: a nurturing
environment in the early years combined with accessible and high-quality health
care and education promote the capacities of young children, heighten the
development of their skills as they grow older, and ultimately raise their chances of
upward mobility.
Talent is nurtured and developed, and even genes are expressed differently
depending upon environmental influences.
It is not just demography and inbred entrepreneurial spirit that make the tie
between parent and child incomes stronger in America than any other rich country
to which it is commonly compared. Differences in public policies also play a role.
Less inequality makes opportunity-enhancing policies that are of relatively larger
benefit to lower-income families easier to introduce and sustain. Ontario, the most
populous Canadian province, is introducing full-day kindergarten, accessible to all 4and 5-year-olds, without fanfare or a hint of the kind of rhetorical rancor and
calamitous opposition that the Obama administration has faced for its proposal to
do the same.
THE Danish and Canadian top 1 percent certainly have their share of privilege: the
Gus Wenners of the world, talented or not, are not rare. A recent study published by
the Russell Sage Foundation showed that about 30 percent of young Danes and 40
percent of Canadians had worked with a firm that at some point also employed their
fathers. This is more likely the higher the fathers place on the income ladder, rising
distinctly and sharply for top earners. In Denmark more than half of sons born to the
top 1 percent of fathers had worked for an employer for whom the father also
worked, and in Canada the proportion is even higher at nearly 7 of every 10.
This is on a par with the United States, where, according to a 2006 study, up to half
of jobs are found through families, friends or acquaintances, with higher wages
being paid to those who found jobs through prior generation male relatives who
actually knew the potential employer or served as a reference.
The difference is that Danes, Swedes and even Canadians are able to promote
mobility for the majority while continuing to live with a dynasty at the top. It is the
lack of a cleareyed focus on the top, free from rhetoric about talent and the pursuit
of dreams, that is keeping Americans from effectively promoting upward mobility.

This intergenerational transmission of employers has little to do with the

exceptional talent that produces the next Steve Jobs. There is more than a one-inthree chance that newly appointed C.E.O.s of American family firms will have a
family connection. Yet these firms are more likely to experience a subsequent
decline in performance than those promoting from outside.
Family members do not on average have a distinctly more valuable set of skills or
managerial talent, but the belief that they do remains an important thread running
through the American dream and sustains the aspirations of Americans in, roughly
speaking, the top fifth of the income distribution.
The 1 percent are an important touchstone for these upper-middle-class families,
who after all have also experienced significant growth in their relative standing. The
graduate and other higher degrees that they hold, and for which they exerted
considerable effort, have put them on the upside of the wave of globalization and
technical change that has transformed the American job market.
An era of higher inequality gives them both more resources to promote the
capacities of their children, and more incentive to make these investments since
their children now have all the more to gain. It is not unreasonable for these
aspiring families to believe that with a little more effort they may yet cross the
threshold into the top 1 percent, and they can certainly imagine that their children
stand just as good a chance, if not better.
For them, an American dream based on effort, talent and just deserts still lives, and
as a result they are likely to be less and less predisposed, with their considerable
cultural and political influence, to support the recasting of American public policy to
meet its most pressing need: the prospects of those at the bottom.

Miles Corak is a professor of economics at the University of Ottawa.