The Best Advantage in Life
Warren Buffet talked about the ‘ovarian lottery’ i.e, the biggest influence on the average human’s life will be the conditions of our birth – where you were born and who you were born to. In this piece, Nick Maggiulli drives home the point, as usual with research and data to back it. His post was triggered by an online poll showing highest votes cast for rich parents as the factor that best improves your career prospects in investment management, more than a CFA, or an MBA or a great first job. He then goes onto show why those voters are not wrong:
“…a study out of Georgetown found that those students who scored in the top 25% on a standardized math tests but were in the bottom 25% of socioeconomic status had a 31% chance of graduating college and earning $45,000 by the time they were 35. However, for those students who scored in the bottom 25% of their standardized tests but were in the top 25% of socioeconomic status, the chance of reaching the same milestones was 71%!
This suggests that you will probably do better economically if you are dumb and from a rich family than if you are smart and from a poor family.”
He cites another study that shows “less intelligent students (from high income families) have the same odds of graduating college as more intelligent students (from low income families)”.
“…But it’s not just better education that the rich can give their children. They can also provide jobs too. According to U.S. Census data, about 22% of men work at the same company as their father before they turn 30. More importantly, research suggests that “children’s earnings at shared employers tend to be higher than at unshared jobs, especially for children of high-earning fathers.” So not only can the rich provide their children with jobs, but the data suggests that those jobs they do provide tend to have better pay as well.”
Furthermore, he shares an interesting chart from the Equality of opportunity project which shows that “the rich stay rich and the poor stay poor, but the middle class move around a lot”.
The data clearly has implications for policy makers working on addressing the growing inequality challenge.