Wealthy parents tend to raise children who grow up to be wealthy, just as children whose parents have few assets are likely to possess little wealth in adulthood. However, little is known about the extent to which this relationship is determined genetically, by environmental factors, or by some combination of both.
Our research highlights that children with wealthy parents benefit not just from good genetics but, more importantly, from growing up with more advantages. This is true in a relatively egalitarian society with a strong social safety net, suggesting a likely larger role for the environment in less equal societies such as the United States. As wealth and consumption become more unequally distributed, children from poorer families have fewer opportunities relative to children from wealthier families, suggesting an important role for policy to equalize opportunities and to mitigate intergenerational disparities.
In this episode of EconoFact Chats, Michael Strain, Director of Economic Policy at the American Enterprise Institute discusses the financial constraints and challenges facing state and local governments in the wake of COVID-19.
Read more
COVID-19 has severely disrupted the nature and availability of childcare options. Even now, many daycares and summer camps have not reopened due to the challenges of complying with state-imposed restrictions and many schools are planning hybrid or fully online education programs for the fall. In addition, parents are left wondering if informal or unpaid caregiving arrangements with relatives, such as grandparents, are safe — particularly in states with high or resurging COVID-19 caseloads. Evidence is beginning to show the extent to which disruptions to childcare have already affected the hours and employment of parents.
Childcare is a critical piece of our economic infrastructure that enables parents to “get to work” just like roads and bridges do for commuters. The obstacles that childcare imposes on workers during the COVID-19 crisis are widespread and not limited to just a few key industries or certain geographic areas. Many families were able to find short-term solutions during the initial round of daycare and school closures by reducing hours, taking paid or unpaid leave to care for children, or alternating schedules with another adult in the household. Even if parents are able to juggle working from home, they are not likely to be as productive. However, these stopgap measures were based on the assumption that the fall would bring a return to school and organized childcare and are simply unsustainable for the long-term. The longer that the childcare crisis continues, it is likely that more parents, primarily women, will need to drop out of the labor force to care for children. A full economic recovery simply cannot happen without adequate childcare.
Racial and ethnic disparities in wealth – assets like home equity, savings, and retirement accounts, minus debts –are even larger than racial gaps in income. Gaps in wealth are particularly important for households with children because wealth plays a key role in children's life chances, which makes racial and ethnic gaps in wealth all the more alarming.
The stability in racial income gaps — which are large, but have not changed much — compared to the increase in Black-white wealth gaps underscores the distinctiveness of wealth inequality. It also suggests the need for policy solutions that specifically target wealth. Given low levels of intergenerational wealth mobility and the importance of wealth in educational attainment, the wealth fragility of today’s Black families with children will likely impede social mobility for generations to come.
Beyond the obvious effects on health and the economy, COVID-19 has also had an effect on politics; and, in turn, politics has affected the spread of the disease and its economic consequences. In this episode of EconoFact Chats, Michael Klein and Jeffry Frieden at Harvard discuss the links between politics and economics in the COVID-19 era.
Read more
