This study characterizes income inequality and mobility of Canadian children between the ages of 4/5 and 14/15. There is considerable inequality of family income. Moreover, income position is especially persistent for children at the bottom and top of the distribution; this is unfair and may be perpetuated into adulthood. Finally, family structure is very important for children’s material well-being; for example, they experience a considerable drop in income position upon parental separation/ divorce. It is recommended that such children be protected, perhaps through advance maintenance payments

Burton, Peter

Phipps, Shelley

Zhang, Lihui

English

Scholarship@Western

Population Change and Lifecourse Strategic Knowledge Cluster Centre for Population, Aging and Health, Western University, London, ON N6A 5C2 Website: http://www.pclc-cppv.ca Email: pclc-cppv@uwo.ca Policy Brief No. 18 November 2014 This brief is based on Burton, P., Phipps, S. and Zhang, L. (2014). The prince and the pauper: Move-ment of children up and down the Canadian income distribution. Cana-dian Public Policy, 40(2), 111-125. For more information, please contact Shelley Phipps, Dalhousie University and Canadian Institute for Advanced Research.  The brief was prepared by Angela Daley, Dalhousie University.  Target Audience About the Brief The Dynamics of Inequality among Canadian Children   Researchers  Policy Makers  Graduate Students  T his study characterizes income inequality and mobility of Canadian children between the ages of 4/5 and 14/15. There is considerable inequality of family income. Moreover, income position is especially per-sistent for children at the bottom and top of the distribution; this is un-fair and may be perpetuated into adulthood. Finally, family structure is very important for children’s material well-being; for example, they ex-perience a considerable drop in income position upon parental separa-tion/ divorce. It is recommended that such children be protected, per-haps through advance maintenance payments.   There is considerable inequality of family income among Canadian children, with no clear trend as they grow up (i.e. the 90/10 ratio is approximately five as children age from 4/5 to 14/15).  Some children experience mobility; while income position is persis-tent for others. For example, 50 percent of children in the bottom quintile at age 4/5 remain there at age 14/15. And, 54 percent of children in the top quintile at age 4/5 remain there at age 14/15.   It is relatively common for children to temporarily experience the bottom or top of the income distribution. Fewer children are stuck compared to those who have ‘ever’ been at the bottom; however they represent an important minority of chronically disadvantaged children. Policy should seek to improve their material situation, with implications for present and future well-being.   Children in lone-parent families are more likely to be stuck at the bottom of the income distribution; having young parents and those with low levels of education are also risk factors. Moreover, children move down the distribution when a younger sibling is born or when a parent leaves paid work. Most notably, income position drops by 23 percentage points upon separation/ divorce. The authors recommend advance maintenance payments to shelter children from economic loss associated with such events. Summary Key Findings 1Burton et al.: The Dynamics of Inequality among Canadian ChildrenPublished by Scholarship@Western, 2014Population Change and Lifecourse Strategic Knowledge Cluster Centre for Population, Aging and Health, Western University, London, ON N6A 5C2 Website: http://www.pclc-cppv.ca Email: pclc-cppv@uwo.ca  2 Inequality among Canadian Children Data and Method Background T here is a relatively large literature on the dynamics of child poverty (e.g. Bradbury et al, 2001; Picot et al, 1999), with little attention to those at the top of the income distribution. Likewise there is a need to better understand factors associated with movement up and down the distribution during childhood.  This is important for reasons of equity; it is unfair if some children are affluent while others are poor, espe-cially if income position is persistent. Moreover, ine-quality may be perpetuated in later-life to the extent that material resources during childhood affect biologi-cal and brain development (e.g. Hertzman and Boyce, 2010). Finally, it is important to understand whether social transfers shelter children from economic hardship (e.g. whether shocks to the family affect income posi-tion, or are alleviated by social transfers).  This study characterizes income inequality and mobility of Canadian children between the ages of 4/5 and 14/15. In addition to describing movement up and down the distribution, the authors identify early-life predictors of low income and affluence, as well as cor-relates of relative income position. The latter are im-portant for understanding whether social transfers ef-fectively protect children from economic hardship.  Definitions Advance Maintenance Payments: The state guarantees financial support for children in lone-parent families upon de-fault by the non-custodial parent. Advance maintenance payments are common in some European countries (e.g. France, Germany, Norway, Sweden). The amount and duration of payments vary across countries. Quintiles and Deciles: Children are sorted by family income, from lowest to highest. Quintiles divide the distribution into five equally sized groups; each contains 20 percent of the population. Likewise deciles divide the distribution into ten equally sized groups. For example, the bottom decile contains the poorest ten percent of families with children; while the ninth decile represents the richest ten percent.  90/10 Ratio: This is a comparison of income at the ninetieth percentile to that at the tenth percentile. For example, a 90/10 ratio of five implies that families at the bottom of the richest ten percent earn five times more than those at the top of the poorest ten percent.  T his study uses microdata from the National Longi-tudinal Survey of Children and Youth. Children are followed from birth to early adulthood; however the sample is limited to those between the ages of 4/5 and 14/15. This avoids the early years (e.g. income volatili-ty due to maternity/paternity leaves), as well as later years when children may leave home. Information is provid-ed by the ‘person most knowledgeable’, which is usually the child’s mother. Data are collected every two years. There are three cohorts of children, each observed over a ten year period (i.e. 1994 to 2004, 1996 to 2006 and 1998 to 2008). The authors use a pooled sample of overlapping cohorts to balance the effect of macroeconomic conditions on family income. The pooled sample comprises more than 5,000 observations; however a child’s income position is relative to others in his/her own cohort.  The material situation of children is given by annual family income from all sources, before taxes and deductions; it is expressed in real 2004 dollars. The authors adjust for econ-omies of scale in household consumption using the ‘Luxembourg Income Study’ equivalence scale (i.e. they di-vide by the square root of family size to account for differ-ences in relative income needs). For example, a family of two does not need twice the income as a single person to have the same material standard of living (e.g. shared hous-ing, utilities).  Dynamics of Family Income  T here is considerable inequality among Canadian chil-dren, with no clear trend as they grow up. For exam-ple, Table 1 indicates the 90/10 ratio is approximately five as children age from 4/5 to 14/15. The authors argue that changes in family characteristics had offsetting effects on inequality. For instance, the proportion of lone-parent fami-lies increased from 14.6 percent at age 4/5 to 20.7 percent at age 14/15; however there was a corresponding increase in the prevalence of paid work.  Results 2Population Change and Lifecourse Strategic Knowledge Cluster Research/Policy Brief, Vol. 1, No. 5 [2014], Art. 6https://ir.lib.uwo.ca/pclc_rpb/vol1/iss5/6Population Change and Lifecourse Strategic Knowledge Cluster Centre for Population, Aging and Health, Western University, London, ON N6A 5C2 Website: http://www.pclc-cppv.ca Email: pclc-cppv@uwo.ca  3 Inequality among Canadian Children To characterize movement up and down the income distribution, Table 2 shows the long-run position of children who start in the bottom, top or intermedi-ate quintiles, respectively. There is some mobility; however income position is especially persistent at the bottom and top of the distribution. Specifically, 50 percent of children in the bottom quintile at age 4/5 remain there at age 14/15; 25 percent move to the second quintile and only five percent move to the top. Likewise 54 percent of children in the top quintile at age 4/5 remain there at age 14/15; 22 percent move to the fourth quintile and only four percent move to the bottom.  The preceding table indicates relative income posi-tion at ages 4/5 and 14/15, with no information about intermediary periods. Thus, Table 3 shows the percentage of children who were ‘ever’ or ‘always’ in a particular income decile. It is relatively common for children to temporarily experience the top or bottom of the income distribution. For example, 39.6 percent of children spent at least one year in the top 20 percent; while only 7.3 percent were ‘always’ above the threshold. Likewise fewer chil-dren were stuck compared to those who have ‘ever’ been at the bottom; however these chronically dis-advantaged children represent an important minori-ty. Policy should seek to improve their material situ-ation, with implications for present and future well-being.  Time Period 1994-19981996-20001998-20022000-20042002-20062004-2008Age 4/5 6/7 8/9 10/11 12/13 14/1590:10 Ratio 5.37 5.08 4.69 4.72 4.64 4.86Lone Parent (%) 14.6 14.4 15.3 16.9 17.9 20.7Lone Parent with Paid Work (%) 54.8 74.5 82.4 81.5 84.9 84.8Table 1: Income Inequality and Family Characteristics of ChildrenBottom Quintileat Age 14/152nd Quintileat Age 14/153rd Quintileat Age 14/154th Quintileat Age 14/15Top Quintileat Age 14/15Bottom Quintile at Age 4/5 0.50 0.25 0.12 0.08 0.052nd Quintile at Age 4/5 0.27 0.29 0.23 0.15 0.073rd Quintile at Age 4/5 0.11 0.24 0.28 0.23 0.144th Quintile at Age 4/5 0.08 0.13 0.25 0.33 0.22Top Quintile at Age 4/5 0.04 0.08 0.12 0.22 0.54Table 2: Relative Income Position at Ages 4/5 and 14/15Decile  'Ever' Below'Always' Below 'Ever' Above'Always' Above1 26.4 1.3 98.7 73.62 41.3 5.0 95.0 58.73 53.2 10.9 89.1 46.84 64.3 17.6 82.4 35.75 73.3 24.5 75.5 26.76 81.5 35.2 64.8 18.57 87.7 46.7 53.3 12.38 92.7 60.4 39.6 7.39 97.2 77.6 22.4 2.810 100.0 100.0 0.0 0.0Table 3: Percentage of Children 'Ever' or 'Always' in a Particular Income Decile Early-Life Predictors of Low Income and Affluence T o inform policy, the authors identify early-life predictors of low income and affluence (i.e. characteristics at age 4/5 that affect the risk of ‘ever’ or ‘always’ being at the bottom or top of the income distri-bution). Refer to the paper for methods and regression output.  Family structure is very important. For example, the probability of ‘always’ being in the bottom quintile is 11.3 percentage points higher for children of lone parents. Likewise siblings reduce the probability of ‘always’ being rich. Moreover, children of older parents are less likely to ‘ever’ be in the bottom quintile. This probability is also higher for those with parents who did not finish high school; in contrast, having a uni-versity-educated parent increases the probability of ‘ever’ being at the top by 27 percentage points.  3Burton et al.: The Dynamics of Inequality among Canadian ChildrenPublished by Scholarship@Western, 2014Population Change and Lifecourse Strategic Knowledge Cluster Centre for Population, Aging and Health, Western University, London, ON N6A 5C2 Website: http://www.pclc-cppv.ca Email: pclc-cppv@uwo.ca  4 Inequality among Canadian Children Conclusion References Correlates of Relative Income Position T he authors identify changes in family characteristics that affect relative income position (i.e. correlates of movement up and down the distribution). Refer to the pa-per for methods and regression output.  On average, children move down the income distribution by nine percentage points when a younger sibling is born, or five percentage points when a parent leaves paid work. However, parental marital status is the most important cor-relate of mobility. Specifically, income position drops by 23 percentage points upon separation/divorce; it increas-es by 20.6 percentage points if a lone parent re-partners. This implies that existing social transfers do not shelter children from economic loss associated with parental sep-aration/divorce. The authors recommend advance mainte-nance payments, which are common in some European countries (i.e. state-funded, guaranteed payments for children in lone-parent families upon default by the non-custodial parent).  T his study uses microdata from the National Longitudinal Survey of Children and Youth to characterize income inequali-ty and mobility of Canadian children between the ages of 4/5 and 14/15.  There is considerable inequality among Canadian children. And, income position is especially persistent for those at the bottom and top of the distribution. It is a concern that some children are ‘always’ poor while others are ‘always’ rich. Ine-quality is unfair, especially when it is persistent. It is relatively common for children to temporarily experience the bottom or top of the income distribution. Fewer children are stuck compared to those who have ‘ever’ been at the bottom; however they represent an important minority of chroni-cally disadvantaged children. Policy should seek to improve their material situation, with implications for present and fu-ture well-being. For example, inequality may be perpetuated in later-life to the extent that material resources affect child development. To inform policy, the authors identify early-life predictors of low income and affluence, as well as correlates of mobility. They find that children of young parents and those with low levels of education are more likely to be stuck at the bottom of the distribution. Not surprisingly, children in lone-parent families are most at risk. Likewise children experience a consider-able drop in income position upon parental separation/divorce. This implies that existing social transfers do not effectively shelter children from economic hardship. The authors recommend advance maintenance payments, which guarantee finan-cial support for children in lone-parent families upon default by the non-custodial parent.   Bradbury, B., Jenkins, S.P. and Micklewright, J. (Eds). 2001. The dynamics of child poverty in industrialized countries. Cambridge, England: Cambridge University Press.   Hertzman, C. and Boyce, T. 2010. How experience gets under the skin to create gradients in developmental health. Annual Review of Public Health, 31(1), 329-347.  Picot, G., Zyblock, M. and Pyper, W. 1999. Why do children move into and out of low income? Changing labour market conditions or marriage and divorce? Analytical Studies Branch Research Paper Series, 132. Catalogue number 11F0019MPE. Ottawa, Ontario: Statistics Canada. 4Population Change and Lifecourse Strategic Knowledge Cluster Research/Policy Brief, Vol. 1, No. 5 [2014], Art. 6https://ir.lib.uwo.ca/pclc_rpb/vol1/iss5/6

Policy Brief No. 18 - The Dynamics of Inequality among Canadian Children

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Policy Brief No. 18 - The Dynamics of Inequality among Canadian Children

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