© Institute for Fiscal Studies Children’s outcomes and family background Claire Crawford

Introduction UK has relatively low intergenerational mobility –Correlation between parents and children’s income is relatively high –Intergenerational elasticity of 0.29 for those born in Britain in 1970 (Blanden et al, 2005) –Circumstances into which you are born heavily influence future income Government would like to improve life chances of children in poverty –Child Poverty Act (2010) –Review on Poverty and Life Chances © Institute for Fiscal Studies

How can we improve life chances? If the link between income across generations is causal, then increasing parents’ incomes today should lead to higher income for their children in future Of course parental income may not be the only factor that is causally related to children’s future income (or well-being) –Other family background characteristics (e.g. Parents’ education, marital status) –Other factors (e.g. Health) – not dealt with today © Institute for Fiscal Studies

An aside on causality... What do we mean by causal? –Certainty that changing a particular factor of interest causes (rather than is simply correlated with) a change in the outcome of interest Important distinction, because we really only want to base policy decisions on causal (rather than correlational) relationships © Institute for Fiscal Studies

How can we improve life chances? If the link between income across generations is causal, then increasing parents’ incomes today should lead to higher income for their children in future Of course parental income may not be the only family background characteristic that is causally related to children’s future income –Others include parents’ education and marital status © Institute for Fiscal Studies

Evidence on causal relationships Can be difficult to find evidence of direct causal relationships between (e.g.) parent and child income, not least because of need for long time lags between observations Can instead piece together evidence in two stages: –Establish causal links between outcomes in childhood and later in life –Establish causal links between parental income (and other family background characteristics) and child outcomes © Institute for Fiscal Studies

Link between outcomes in childhood and later life Evidence of causal relationship between children’s educational attainment and their future income –e.g. Blundell et al (1999) suggest that the gross rate of return to an additional year’s education in the UK is 5-10% Also some evidence of causal link between childhood cognitive and non-cognitive skills and a range of adult outcomes –e.g. Heckman et al (2006) for the US; Carneiro et al (2008) for the UK Suggests improving educational attainment and skills amongst poor children is key to improving future labour market outcomes –Other outcomes also relevant for wider well-being, e.g. health © Institute for Fiscal Studies

Link between family background and child outcomes: focus on parental income Some evidence of causal relationship between parental income and children’s educational attainment –e.g. Blanden & Gregg (2004) suggest that a one third fall in household income (around £7,000) reduces the probability of getting a degree by around 5 percentage points (ppts) –e.g. Chevalier et al (2005) suggest that a doubling of father’s income increases the likelihood of post-compulsory education by 14 ppts –Suggests that policies which focus on increasing parents’ income are likely to improve children’s life chances - although such sizeable income changes may be beyond the scope of policymakers to provide © Institute for Fiscal Studies

Link between family background and child outcomes: focus on parental education Also of causal link between parents’ and children’s education –e.g. Chevalier (2004) suggests that each additional year of parental education increases the probability of staying on in post-compulsory education by up to 8 ppts (although estimates are insignificant) –Chowdry et al (2008) also suggest that parental education increases GCSE attainment (although again estimates are insignificant) –Suggests that improving educational attainment amongst today’s children will also have benefits for the next generation © Institute for Fiscal Studies

Link between family background and child outcomes: focus on marital status What about other family background characteristics? Evidence from UK and elsewhere that children born to married parents have better cognitive and behavioural outcomes than children born to cohabiting parents –Conservatives’ proposal to support marriage through the tax system presumably based on such evidence But do these gaps reflect a causal effect of marriage on child outcomes? Or do they simply reflect the fact that different sorts of people choose to get married (selection effect)? –Recent IFS research tries to shed light on this issue... © Institute for Fiscal Studies

Difference in outcomes between children of married and cohabiting parents at birth © Institute for Fiscal Studies

Aside: how does this gap compare to others?

© Institute for Fiscal Studies Aside: how does this gap compare to others?

Link between family background and child outcomes: focus on marital status What about other family background characteristics? Evidence from UK and elsewhere that children born to married parents have better cognitive and behavioural outcomes than children born to cohabiting parents Conservatives’ proposal to support marriage through the tax system presumably based on such evidence But do these gaps reflect a causal effect of marriage on child outcomes? Or do they simply reflect the fact that different sorts of people choose to get married (selection effect)? –Recent IFS research tries to shed light on this issue... © Institute for Fiscal Studies

Aim of research To provide a best estimate of the causal impact of marriage on child outcomes by eliminating that part of the gap due to selection –i.e. take account of the fact that people who choose to get married are different from those who do not Interpret the remaining gap as the causal effect of marriage Need to strike a careful balance in terms of controls: –“Over-control” and you risk under-estimating the effect of marriage –“Under-control” and you risk over-estimating the effect of marriage © Institute for Fiscal Studies

Data Millennium Cohort Study We use a sample of around 10,000 children, born to married or cohabiting couples (i.e. we exclude lone parents) Marital status measured at birth –70% married; 30% cohabiting Outcomes: –Cognitive development measured using vocabulary component of British Ability Scales (BAS) at ages 3 and 5 –Social and behavioural development measured using mother- reported Strengths and Difficulties Questionnaire (SDQ) at ages 3 and 5 © Institute for Fiscal Studies

Controls Three key groups of variables: © Institute for Fiscal Studies Group 1Group 2Group 3 Reflect sort of person that chooses to get married Very likelyLikelyPossible Affected by marriageUnlikelyPossibleLikely Examples...Ethnicity; religion Education; occupation; housing tenure; income Relationship stability; parenting practices We believe that controlling for groups 1 and 2 is the right balance to strike to identify the causal effect of marriage. But debatable...

Who cohabits rather than marries? Cohabiting parents are more likely than married parents to: –Be White or Black Caribbean –Be of no religion –Be low qualified –Be home renters rather than homeowners Groups 1 and 2 –Be teenagers at birth of first child –Have lived together for short time –Report that the pregnancy was unplanned –Exhibit lower relationship quality (at 9 months) They are also more likely to: –Have poorer maternal mental health (at 9 months) –Have lower paternal involvement with baby (at 9 months) Group 3 –Be less likely to set regular bedtimes (at age 3) © Institute for Fiscal Studies

Explaining difference in outcomes between children born to married vs. cohabiting parents © Institute for Fiscal Studies OutcomeABCDEF BAS (age 3) ** ** SDQ (age 3) ** ** ** ** BAS (age 5) ** ** SDQ (age 5) ** ** ** ** * A controls for the child’s month and year of birth B also controls for mother’s ethnicity, immigration status and religion C also controls for education and socio-economic classification of the parents D also controls for household income, tenure and work at 9 months E also controls for family structure at 9 months F also controls for relationship quality at 9 months

Summary: impact of marital status on child outcomes Small gap in cognitive ability at ages 3 and 5, largely explained by the fact that, compared to married parents, cohabiting parents: –Have lower education –Have lower occupational status –Have lower income –Are more likely to live in social housing Larger gap in social and emotional development at ages 3 and 5, largely explained by the fact that cohabiting parents: –Have lower education –Have lower socio-economic status –Are more likely to have unplanned pregnancies –Report lower relationship quality when their child is 9 months old © Institute for Fiscal Studies

Conclusions on marital status Differences in outcomes between children born to married and cohabiting couples largely reflect differential selection into marriage, rather than a causal effect of marriage itself –Otherwise marriage needs to lead to very significant improvements in parents’ socio-economic status and relationship quality Suggests that providing a tax incentive to encourage more parents to get married is unlikely to significantly improve child outcomes © Institute for Fiscal Studies

Broader conclusions Policies that improve educational attainment amongst poor children are likely to have long-term pay-offs in terms of increasing life chances amongst this generation and the next Amongst the family background characteristics I have considered: –Increasing parental income or education may help achieve these aims –Encouraging more parents to marry probably will not Of course, there are other ways to raise educational attainment amongst poor children as well –e.g. raising school quality; improving attitudes and behaviours But causal evidence on the latter much less clear –Clear need for well-designed policy experiments © Institute for Fiscal Studies