Income Inequality and Class Divides in Parental Investments

Abstract

Historic increases in income inequality have coincided with widening class divides in parental investments of money and time in children. These widening class gaps are significant because parental investment is one pathway by which advantage is transmitted across generations. Using over three decades of micro-data from the Consumer Expenditure Survey and the American Heritage Time Use Survey linked to state-year measures of income inequality, we test the relationship between income inequality and class gaps in parental investment. We find robust evidence of wider class gaps in parental financial investments in children—but not parental time investments in children—when state-level income inequality is higher. We explore mechanisms that may drive the relationship between rising income inequality and widening class gaps in parental financial investments in children. This relationship is partially explained by the increasing concentration of income at the top of the income distribution in state-years with higher inequality, which gives higher-earning households more money to spend on financial investments in children. In addition, we find evidence for contextual effects of higher income inequality that reshape parental preferences toward financial investment in children differentially by class.

Strengthening Social Programs to Promote Economic Stability During Childhood

“…Parents invest in children by allocating their time to child rearing, purchasing food and clothing, providing childcare and education, and establishing stable housing. There is a positive income gradient of absolute spending on children, which has steepened over time, but the percentage of family income spent on children is far higher for the lowest quintile families than for any other group (Kornrich & Furstenberg, ; Schneider et al, ).…”

“…Parental spending is viewed as a key pathway by which social class is reproduced across generations (Coley, Sims, & Votruba-Drzal, 2016;Pfeffer, 2018;Pfeffer & Killewald, 2018;Schneider, Hastings, & LaBriola, 2018). Parents invest in children by allocating their time to child rearing, purchasing food and clothing, providing childcare and education, and establishing stable housing.…”

Family Change in Global Perspective: How and Why Family Systems Change

“…It is worth noting that in parts of the developing world, the pattern of consensual marriages has long existed, particularly in Latin America and the West Indies (Esteve & Lesthaeghe, ). The stratification of family systems is both a cause and a consequence of rising levels of inequality in most nations with advanced economies and introduces profound differences in children's opportunities. Among the educated, children are more often the products of intense investment; less educated parents often lack both the resources and the skills to prepare their children for a more demanding educational system to acquire the knowledge and skills needed today (Dronkers, Kalmijn, & Wagner, ; Schneider, Hastings, & LaBriola, ). In all likelihood, this pattern is appearing in developing nations (Kalil, ; Pesando & the GFC team, ). Although preferences for intergenerational arrangements continue to prevail in some parts of the world, individuals forming families are increasingly less likely to reside in conjoint and complex households (Ruggles & Heggeness, ).…”

“…The stratification of family systems is both a cause and a consequence of rising levels of inequality in most nations with advanced economies and introduces profound differences in children's opportunities. Among the educated, children are more often the products of intense investment; less educated parents often lack both the resources and the skills to prepare their children for a more demanding educational system to acquire the knowledge and skills needed today (Dronkers, Kalmijn, & Wagner, 2006;Schneider, Hastings, & LaBriola, 2018). In all likelihood, this pattern is appearing in developing nations (Kalil, 2015;Pesando & the GFC team, 2019).…”

“…A host of advantages for children are strongly associated with adequate income and education. Just to mention a few, children in privileged families (those whose parents have a college education) live in more desirable neighborhoods with better schools, libraries, and recreation facilities, and in these preferred contexts, they are more likely to have supervised peer relationships with children of other privileged families in preschool and after-school programs or during the summer (Lareau, 2011;Minh, Muhajarine, Janus, Brownell, & Guhn, 2017;Schneider et al, 2018). Lower-income parents cannot afford these amenities unless the programs are publically funded or subsidized, which for the most part does not happen in most low-income communities in the United States (Esping-Andersen, 2016).…”