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Intergenerational mobility between and within Canada and the United States

April 15, 2019

Intergenerational mobility is lower in the United States than in Canada, but the border only partially distinguishes the two countries with mobility varying significantly within each. The within-country differences and similarities hint at some of the reasons why the United States has lower social mobility than many other rich countries.

This is the main theme of a study released by the National Bureau of Economic Research, based upon Canadian data my co-authors and I constructed with the cooperation of Statistics Canada. Our research offers a more accurate comparison between these two countries than any cross-country comparisons made in the literature to date: tax-based administrative data, used to define similar measures of income, and coming close to covering the total population of similarly aged young people and their parents.

We cluster more than 1,000 communities in these two countries—709 American Commuting Zones and 288 Canadian Census Divisions—into four broad regions according to their similarity across a comprehensive set of five different measures of intergenerational income mobility, all referring to the strength of the tie between parent incomes and child adult incomes.

Source: Connolly, Corak, Haeck (2019, Figure 7). Click on image to enlarge.

The data and methods are meant to conform to the design of research published in 2014 by Harvard University’s Raj Chetty, Nathan Hendren and their co-authors, who focus on the adult attainments of Americans born between 1980 and 1982 using income tax data from the Internal Revenue Service.

A growing consensus in the academic literature suggests that social mobility is twice as great in Canada than in the United States, a finding our study confirms by showing that the middle class is within easier reach of Canadian children raised in low income families than for Americans.

At the same time our within and between country analysis does not naturally support the conclusion that a simple between country comparison is the most accurate way to view social mobility. The regions of highest and lowest mobility span the border, one running through the mid west of the United States into adjacent Canadian regions, and another grouping the southern United States with northern parts of Canada.

But another relatively low mobility cluster of communities is almost exclusively American, and includes large parts of the northeastern seaboard. This group of commuting zones represents almost 60 percent of the children we study, covering some of the most populous regions on both the east and west coasts.

Consequently this American region is one of the drivers of the overall cross-country differences, with a distinct cross-border effect along the Great Lakes that extends through the northeastern United States and the Atlantic provinces. This US area is both more affluent and more unequal than the adjacent Canadian areas, with higher inequality being associated with lower mobility.

The negative relationship between inequality and mobility is now well established  across countries, as summarized by The Great Gatsby Curve, and our analysis shows that this is also the case within the United States and Canada.

Source: Connolly, Corak, Haeck (2019, Figure 9). Click on image to enlarge.

Another important reason explaining lower intergenerational mobility in the United States has to do with the very low levels of mobility in the American south. While some parts of northern Canada share these challenges, they represent a much smaller fraction of the Canadian population.

This is the elephant in the room to which simple cross-country comparisons do not draw enough attention: the US mobility challenge may have to do with the longstanding issue of fully integrating the black population in the economic mainstream of cities and regions that have a long history of exclusion.

The Canadian challenges may be just as important but different in nature, more likely being associated with the indigenous populations in some geographically more isolated areas of the country. There is no parallel in Canada for the magnitude of the experience in the American south.

Americans and Canadians have similar views on the factors determining upward mobility, whether these deal with causes beyond an individual’s choice or responsibility—like race, gender, and luck—or to others like hard work, and having ambition. In both countries, factors associated with individual choice and responsibility are viewed as the prime drivers of economic mobility, and ironically only very small minorities in both countries cite race or luck as being important.

 

[ This post is based upon my co-authored research paper with Marie Connolly and Catherine Haeck released by the National Bureau of Economic Research on April 15th, 2019 called “Intergenerational Mobility Between and Within Canada and the United States.” The paper is forthcoming in the Journal of Labor Economics, and the working paper version can be downloaded the from the NBER website, or downloaded as the ungated version here. ]

Read the other posts in this series:

If there is such a thing as the “Canadian Dream,” it would look very much like what Americans say is the “American Dream”

The “middle class” is within easier reach for low income Canadian children, than it is for low income Americans

Equality of opportunity is a choice

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