The persistence of poverty across generations

The recent focus on reducing the extent of child poverty in the UK stems mainly from worries about the future consequences of poverty on children’s later achievement. With this background in mind, it is clearly crucial to improve our understanding of the costs of growing up poor.

This report explores the strength of the link between childhood poverty and poverty later in life, and asks whether this link has grown stronger or weaker in recent decades.

Using information on the incomes of two British cohorts who were teenagers either in the 1970s or in the 1980s, it asks:

• How large is the transmission of poverty between a teenager’s parents’ circumstances and their own circumstances when they are in their early 30s?
• By how much has the strength of this transmission of poverty changed between the two cohorts studied?
• How far do the effects of early disadvantage continue to be felt as individuals reach middle age?

Poverty in middle age

For teenagers growing up in the 1970s, teenage poverty doubled the odds of being poor adults. Being poor as a teenager in the 1970s also doubled the odds of being poor in early middle age (age 42) by 2000. For this group, teenage poverty is therefore as strongly related to middle-age poverty as it was to poverty in earlier adulthood.

This is perhaps surprising: we might expect the influence of teenage poverty to fade as the years go by. One explanation could be that teenage poverty influences poverty in early adulthood, and this then links through to poverty in later life. However, accounting for poverty at age 33 has very little impact on the odds ratios for poverty at age 16. The link between poverty in teenhood and adulthood continues through to middle age, regardless of whether or not a person is recorded as poor in their thirties. It is also clear that the association between poverty at different points in adulthood is much stronger than that between childhood poverty and adult poverty.

Understanding why poverty persists

It is extremely difficult to pin down the factors that cause the persistence of poverty. Income poverty goes hand in hand with numerous other forms of deprivation, some of which are consequences of the lack of resources in the household and others of which lead to poverty in themselves. Many of these aspects of deprivation may be a result of other underlying factors that are very hard to measure and which persist through individuals’ lives. For all these reasons, it is extremely difficult to really understand the causal processes that lie at the route of the persistence of poverty through the lifecycle.

In order to gain some understanding of how poverty is transmitted across generations the researchers examined the link between teenage poverty and adult poverty when the other characteristics of the child’s family are held constant. This enables us to find out whether it is disadvantage in general rather than income poverty that is harming children’s life-chances. It also enables the analysis of which aspects of disadvantage are particularly harmful.

The results of this exercise make it clear that:

• Poor teenagers in the 1970s grew up to be poor because of more general family background disadvantages, in particular, parental non-employment and low education. Poverty itself had little or no direct effect over and above these teenage family factors.
• For teenagers in the 1980s, poverty had a direct effect on the chances of ending up in poverty, even allowing for differences in these same aspects of family background. Certainly, family background differences account for much of the persistence from child poverty to adulthood, but the odds of a poor teenager being a poor adult were much larger than for a non-poor teenager.

This provides some grounds for suggesting that redistribution could have had a beneficial impact for those growing up in the later cohort.

A similar analysis tells us which adult characteristics help to explain the persistence of poverty between teenhood and adulthood. Unsurprisingly, being out of work, having a partner out of work or having little accumulated work history are the factors most closely associated with poverty – both for adults in middle age and in their thirties – though low education plays an important role too. Our understanding of the persistence of poverty can be improved by analysing which of these characteristics are most closely linked with disadvantage and poverty in the teenage years.

The study finds that earlier disadvantage is associated with all of these later outcomes. One of the reasons for the stronger persistence among those who were teenagers in the 1980s is that teenage poverty became more closely linked to the likelihood of a person being out of work in their early thirties. The main factors linked to being out of work in adulthood are low education, lone parenthood and ill health. However, educational attainment does not explain the rise in persistence: the risk of poor teenagers in the 1980s ending up without qualifications was not much greater than for poor teenagers in the 1970s. Compared with a girl in the 1970s, a poor teenage girl in the 1980s was at higher risk for lone parenthood, and at higher risk for incapacity through illness in her thirties. These facts can explain part, though not all, of the rise in the intergenerational persistence over this period – but only for women.

Conclusion

This study presents two main new findings on the extent of the persistence of poverty.

• First, the persistence of poverty from the teens into the early thirties has risen over time, with teenage poverty having a greater impact on later outcomes for teenagers in the 1980s compared with teenagers in the 1970s. This finding adds to the wider evidence that family background has had a growing impact on later outcomes between these cohorts.
• Second, the link between poverty in teenhood and adulthood continues to have a bearing through to middle age for those who were teenagers in the 1970s (born in 1958). This is the case regardless of whether or not the person was poor in their thirties. In other words, an adult who was a poor teenager continues to be at higher risk of poverty by middle age even if they were out of poverty in their thirties.

The findings on why poverty persists are less clear-cut, and reveal multi-dimensional causes. The results suggest that initiatives to improve skills and employment opportunities are probably the only sensible way to tackle the problem of persistent poverty and that there is no quick fix available through other more specific interventions. Despite the lack of specific policy prescriptions that can be drawn, it is clear that children in poverty are more likely to grow up to be poor, a result that highlights the importance of the policy agenda to reduce child poverty and disadvantage but not through income transfers alone.

About the project

The data used are from the National Child Development Study (all children born in a week in 1958) and the British Cohort Study (all children born in a week in 1970).

The core data used are on income and other characteristics at age 16 for both cohorts, as well as information on later income and characteristics at age 33 for the first cohort and age 30 for the second cohort. The study also uses this information on income at age 42 for the older group.

Jo Blanden is a lecturer in economics at the University of Surrey, UK and Steve Gibbons is a lecturer in economic geography in the Department of Geography and the Environment at the London School of Economics, UK. Both authors are research associates in the LSE’s Centre for Economic Performance.