NCPA - National Center for Policy Analysis

Sources of Inequality

March 31, 2004

Most Americans assume that the source of economic inequality is the difference between families -- that children t raised in affluent households will remain wealthy, whereas those raised in lower income households will be stuck in poverty. In reality, Dalton Conley says, the greatest inequality occurs within families rather than between them.

The majority of income inequality in the United States occurs within families -- 25 percent of the variance in income is variance between families, while 75 percent is variance within families.

Despite the effort by parents to send each of their children out into the world on an identical economic footing, there is no guarantee that siblings will end up with the same income level. For example, Conley's research found:

  • Middle-born children are hurt disproportionately in academic achievement, as they are three times more likely to be held back a grade.
  • If one sibling gets a four-year degree, there is a 50 percent chance that another one will not.

In other words, lining up everyone in America in order of income and trying to predict where someone might fall along that line, knowing about that person's sibling would offer very little assistance.

Conley says that there are many factors that explain a person's income, such as natural abilities, inclinations, parental behavior, and how many resources parents invest in their children.

Source: Dalton Conley, "My Brother the Bum," Forbes, March 2004.


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