KRIVET Issue Brief People are Our Hope
Korea’s Intergenerational Social Mobility and the Effect of the Labor Market Environment
- In Korea, an individual ’ s relative standing in a hierarchical education structure has an important influence on their economic status, and among parental factors, income is more significant than education level.
- The effect that a parent ’ s economic status has on their child becomes greater as inequality in the labor market widens.
- Further, the effect of the parents ’ income on their children ’ s income is more distinct in lower-income brackets, and there is evidence that labor market inequality has a stronger effect in lower-income brackets, confirming the trend of “ inheriting poverty. ”
01 Necessity for Data Analysis
| It is necessary to consider the labor market conditions, as well as parental and personal education factors, to understand what influences the economic status of an individual.
Recently, growing concerns regarding equality in Korean society have been triggered by the perception that personal achievement, especially economic achievement, depends more on parental factors than on individual efforts. This raises a need to examine what actually influences personal achievements.
- Previous empirical studies mostly focused on comparing how parental factors (parent’s educational attainment, family background) and personal education factors (an individual’s educational attainment) influence the economic status of individuals.
- However, the economic achievement of the youth is also influenced by the labor market environment during the transition period from school to the labor market, and the choice of first job—influenced by the labor market environment when entering the market—in turn influences jobs undertaken throughout one’s lifetime.
- The increase in attention paid to intergenerational social mobility among the recent generation may be related to the worsening opportunity structures of the labor market.
- Consequently, it is important to consider not only how parental and personal education factors influence personal achievement but also how this relationship is influenced by the labor market conditions.
Moreover, it is important to consider that the “inheritance” of an individual’s economic status can vary by income bracket.
- It is reasonable to predict that the way in which parental, personal education, and labor market factors determine personal economic achievement will differ for the high-, middle-, and low-income classes.
- As the often-mentioned phenomenon of the “inheritance of poverty” suggests, the “inheritance” effect is likely to be larger among low-income classes.
Publisher: Young Sun Ra | Date of issue: June 8, 2020 | Issued by: Korea Research Institute for Vocational Education and Training (KRIVET)
2020
No.186I Note I
This brief reorganized Chapter 3, “Intergenerational Social Mobility of Korea” of Vocational Education and Social Mobility, a KRIVET report by Nam, Jae- wook and others (2019)
KRIVET Issue Brief
| Data for analysis: Korean Labor and Income Panel Study (KLIPS), Korea Labor Institute, 1st–20th year data
Data for analysis: Korea Labor Institute has conducted an annual KLIPS survey since 1998 to identify household income, consumption, assets, housing and personal economic activities, employment, income, and consumption. The 20th survey was completed in 2017.
Subjects of analysis: Participants in the KLIPS survey (1998–2017) born between 1980 and 1990 were extracted as the “children group,” and 1,300 people with “parent-child” data, whose parental information was derived from the household data, were analyzed.
Method of analysis: Adjusted regression analysis using the labor market environment as a moderating variable to identify individual economic status. In addition, quantile regression analysis was used to identify differences by income group.
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.임 임02 Influencing Factors on Personal Income and the Effect of the Labor Market Environment
.| An individual’s relative standing in a hierarchical education structure had a bigger influence on economic status than parental factors, and income was more significant than education level among parental factors.
In an analysis not considering labor market factors, the effect on an individual’s economic status (log of monthly average income during the period of economic activity) was found to be affected more by the individual’s education factors, especially their relative position in the educational hierarchy, than by their parental factors.
- The correlation between the parents’ income and the child’s income was significant but weak, and that between parental education and the child’s income was even weaker.
- Depending on whether an individual graduated from a university or not (Model 2), vocational high school graduates earned less than general high school graduates, but there were no significant differences in income based on personal education, university ranking (Model 3), or between colleges and regional private universities. This indicates that an individual’s relative standing in a hierarchical education structure had the bigger influence on economic status as a personal educational factor.
- However, indirect factors—for example, parental factors affecting individual education, which in turn affects personal income—
could not be identified, which is a limitation.
[Table 1] Influence of Parental-Personal Educational Factors on Personal Monthly Average Income
Variable Model 1 Model 2 Model 3
Log parent income 0.0128(0.0046)** 0.0097(0.0046)* 0.0085(0.0046)+
Father’s education [Reference:
elementary school or lower]
⋮ ⋮ ⋮ ⋮
college 0.1767(0.0733)* 0.1335(0.0723)+ 0.128(0.0722)+
university or higher 0.1305(0.0633)* 0.0912(0.0626) 0.0597(0.0628) Mother’s education
[Reference:
elementary school or lower]
⋮ ⋮ ⋮ ⋮
high school 0.0944(0.0456)* 0.064(0.0450)+ 0.047(0.045)
⋮ ⋮ ⋮ ⋮
High school type
[Reference: general high school] -0.0678(0.0282)* -0.0456(0.0289)
University or higher [Reference: lower than
college graduates] 0.1613(0.0270)***
Educational hierarchy [Reference:
college]
Top universities and
universities in Seoul 0.1438(0.0439)***
Gyeonggi, Incheon, and
local national universities 0.1311(0.0404)***
Local private universities 0.0287(0.0351)
High school or lower -0.1194(0.0297)***
Constant term 5.1659(1.3800)*** 4.9684(1.3563)*** 5.1307(1.3594)***
Adjusted R2 0.1963 0.2270 0.2314
N 1,183 1,183 1,161
| It was partially confirmed that the more polarized the labor market is when an individual enters it, the stronger the effect of the parent’s income on the child’s economic status.
The labor market environment is measured by the annual income polarization index (DER index), which is extracted from the Household Income and Expenditure Survey by Statistics Korea. Analysis of the moderating effect of the parent’s income on the child’s income shows a limited but significant result.
I Note I
1) + p<.10, *p<.05, **p<.01,
***p<.001
2) Figures in parentheses are standard errors.
3) Control variable statistics are omitted due to space constraints.
June 8, 2020
- The degree of polarization in the labor market at the time an individual enters is found to amplify the effect of the parent’s income on the child’s income.
- However, this effect is significant when only the interaction term, not the moderating variable (the degree of polarization in the labor market), is included.
<Table 2> Moderating Effect of Labor Market Polarization on the Parent Income–Child Income Relationship
Variable Model 2-1 Model 3-1
Log parent income 0.0111(0.0046)* 0.0099(0.0046)*
Father’s education [Reference: elementary
school or lower]
⋮ ⋮ ⋮
college 0.1469(0.0723)* 0.1438(0.0721)
university or higher 0.1277(0.0633)* 0.0978(0.0634) Mother’s education
[Reference: elementary school or lower]
⋮ ⋮ ⋮
college 0.0101(0.0884) -0.0139(0.0899)*
⋮ ⋮ ⋮
High school type [Reference: general high school] -0.0708(0.0282)* -0.0475(0.029) University graduates or not [Reference: lower than
college graduates] 0.144(0.0284)***
Educational hierarchy [Reference: college]
Top universities and
universities in Seoul 0.1468(0.0434)***
Gyeonggi, Incheon, and
local, national universities 0.1356(0.0397)***
Local private universities 0.0279(0.0346)
High school or lower -0.1026(0.0306)***
Log parent income * DER polarization index 0.0068(0.0032)* 0.0081(0.0032)*
Constant term 6.1322(1.422)*** 6.4581(1.423)***
Adjusted R2 0.2298 0.2354
N 1,135 1,113
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.임 임03 Differences in the Influence of Parental Factors on the Economic Status of
.Children by the Income Quartile of Children
| The effect of the parent’s income on the child’s income is evident in the low-income class, and the influence of the parent’s income is amplified when the labor market is unfavorable.
This study checked whether the influence of parental factors on the child’s economic status (income) differs according to the child’s income decile. The parental factor was found to have a relatively large influence in the low-income decile, and the influence of one’s personal education factor also varied depending on the income decile.
- By income brackets, the influence of the parent’s income on the child’s income had limited significance in low-income brackets—
the 10th and 25th percentile—whereas parental education had significance in the high-income bracket—the 90th percentile.
- As for the influence of their relative position in the educational hierarchy, whether they are college graduates or not is important in low-income brackets, while the university’s relative standing in the educational hierarchical structure is significant in high- income brackets.
Analysis of the degree to which labor market polarization moderates the influence of the parent's income on the child’s income was found to be significant only in the 10th and 25th percentile, confirming that the disadvantage of the labor market environment is more pronounced in low-income brackets.
Combined with the result of the previous analysis, the influence of the parent’s income on the child’s income is evident in low-income brackets, as is the increasing influence of the parent’s income when the labor market is unfavorable. In short, the association between the parent’s income and the child’s income in Korea is characterized by the “inheritance of poverty.”
I Note I
1) + p<.10, *p<.05, **p<.01,
***p<.001
2) Figures in parentheses are standard errors.
3) Control variable statistics are omitted due to space constraints.
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<Table 3> Effect of Parent’s Income, Children’s Standing in Educational Structure, and Degree of Labor Market Polarization by Child Income Quantile
Variable OLS Quantile
τ=0.1 τ=0.25 τ=0.5 τ=0.75 τ=0.9
Log parent income 0.0099*
(0.0046) 0.0200*
(0.008) 0.0118*
(0.0055) 0.0039
(0.0051) 0.0003
(0.0059) 0.0006 (0.0067) Father’s education
[Reference:
elementary school or lower]
⋮ ⋮ ⋮ ⋮ ⋮ ⋮ ⋮
university or higher 0.0978
(0.0634) -0.0086
(0.132) 0.0541
(0.0799) 0.0609
(0.0738) 0.0896
(0.0875) 0.2218**
(0.1013)
Mother’s education [Reference:
elementary school or lower]
⋮ ⋮ ⋮ ⋮ ⋮ ⋮ ⋮
college -0.0139*
(0.0899) -0.467
(0.2985) -0.0719
(0.167) 0.1415
(0.1378) 0.1015
(0.0969) -0.1445 (0.1707)
⋮ ⋮ ⋮ ⋮ ⋮ ⋮ ⋮
High school type [Reference: general high
school] -0.0475
(0.029) -0.0376
(0.046) -0.0795**
(0.0302) -0.0479
(0.0315) -0.0684*
(0.0337) -0.0018 (0.0568)
Educational hierarchy [Reference: college]
Top universities and
universities in Seoul 0.1468***
(0.0434) -0.2308+
(0.1395) 0.1830*
(0.0827) 0.2591***
(0.0517) 0.2813***
(0.0488) 0.3028***
(0.0688) Gyeonggi, Incheon,
and local national universities
0.1356***
(0.0397) -0.0738
(0.1107) 0.1316
(0.0807) 0.2028***
(0.0504) 0.2346***
(0.0444) 0.1887***
(0.0563) Local private
universities 0.0279
(0.0346) -0.0618
(0.0657) -0.0217
(0.046) 0.0252
(0.0402) 0.1128*
(0.0451) 0.0943*
(0.0457) High school or lower -0.1026***(0.0306) -0.1358**
(0.0511) -0.0792*
(0.0345) -0.0956**
(0.0315) -0.0837*
(0.0388) -0.0611 (0.0537) Log parent income * DER polarization index 0.0081*
(0.0032) 0.0111+
(0.0063) 0.0114*
(0.005) 0.0062
(0.0041) 0.0035
(0.004) 0.0002 (0.0052)
Constant term 6.4581***
(1.423) 6.1236+
(3.1301) 6.2132***
(1.8296) 6.4801***
(1.6479) 5.0899**
(1.7355) 6.3186**
(2.4244)
04 Implications
In Korea, regarding the influence on the child’s economic status, parental income has a bigger effect than parental education, and the influence becomes greater as inequality in the labor market widens.
- This effect of inheritance is more pronounced in low-income brackets, confirming the “inheritance of poverty.” This result can be interpreted as follows: As the degree of labor market polarization intensifies, the competition for “good jobs” increases, and those with poor family backgrounds become more disadvantaged in the competition.
- In contrast, personal education has a larger effect than parental income on a person’s economic status; a person’s standing in a hierarchical educational structure explains personal economic achievement better than the educational content—vocational or general education—or the highest level of school one has completed.
- Although this study revealed that personal educational achievement influences a person’s economic status more than parental income, this does not consider the indirect effect of parental income that works through the personal educational achievement.
It is necessary to consider the results of previous studies that have examined the indirect effect, through education, of parental status on the status of the children.
Nam, Jae-wook (Ph.D., Associate Research Fellow, KRIVET)
I Note I
1) + p<.10, *p<.05, **p<.01,
***p<.001
2) Figures in parentheses are standard errors.
3) Control variable statistics are omitted due to space constraints.
