Economic Inequality: The life course perspective over economic shocks

Esa Karonen & Mikko Niemelä

Tackling Inequalitiesin Time of Austerity

Aims of the PhD study

Research topic Data 1

Income inequality between generations Income distribution statistics 1987-2014Income and expenditure surveys 1966-1985

2 Wealth inequality between generations Households’ Wealth 1988-2013

 3 Consumption inequality between generations Income and expenditure surveys 1966-2012

 4  

Benefit reforms and their effects on the income inequality between generations

SISU-microsimulation data

Life course perspective offers a great platform for researching intergenerational changes (Karl Ulrich Mayer)

Birth-cohorts as research units and objects of research

The effects of economic shocks as comparison point

Offers the periodic perspective and the association between incomes and birth-cohorts

Literature review

Adequate range of data (mainly income)

Adequate range of statistical years in data (short time series)

Age-period-cohorts –design

A prior research lacks

Research questions How birth-cohort’s income trajectories differ from

each other? What are the effects of economic shocks over

different birth-cohorts?

Economic shocks 1940 2nd World War 1973 oil crisis 1993 ”the great depression” 2007/8 financial crisis

Research questions

Two cross-sectional datasets Income Distribution Statistics, 1987-2014 Income and expenditure survey, Consumption,

1966-1985

Data

Dependent variables: Disposable household income (equivalent & inflation adjusted)

Independent variables: GDP, employment level, education, SES

Cohort design: Birth-cohorts with 5 year intervals ”Crisis cohorts” – two different generations

25-30 year olds at the time of economic shock 40-45 year olds at the time of economic shock

Used statistical models: APC-model, D-variant (age-period-cohort “detrend” -variant) Foster-Greer-Thorbecke poverty indexes

Variables & models

APC –model in a nutshell

Some technical Greek moonrunes

Results19

66

1971

1976

1981

1985

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

FGT a=0, headcount index

1966

1971

1976

1981

1985

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

0

0.02

0.04

0.06

0.08

0.1

0.12

FGT a=1, normalized poverty index19

66

1971

1976

1981

1985

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

00.005

0.010.015

0.020.025

0.030.035

0.040.045

0.05

FGT a=2, squared poverty index

WW2 - 25-30yrs - 1915-1920Oil crisis - 25-30yrs - 1948-195390´s depression - 25-30yrs - 1965-1970Financial crisis - 25-30yrs - 1985-1990Oil crisis - 40-45yrs - 1933-193790's depression - 40-45yrs - 1950-1955Financial crisis - 40-45yrs - 1967-1972

Dependent variable: centered (period level) logarithmic disposable income Control variables: Education, SES, size of household, unenployment Used weight: (weight*n members in household)

Results19

10

1915

1920

1925

1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

-0.2

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

APC-D Cohort estimates, linear regression (hysteresis adjusted)

International comparing points Scale is same as

in Norway In the cases of

Norway and France the APC-D estimates have similar shape as Finland

Results

1910

1915

1920

1925

1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

APC-D Cohort estimates, logistic model (hysteresis adjusted)

Dependent variable: middle income ”membership” Disposable income in quitiles (1-2 = 0; 3-5 = 1) No control variables included (saved processing time)

Results

Again, international comparing points Scale is more

aggressive than in Norway

Reason: upper-middle class

Norway has the same trajectory, although, younger cohorts have recovered

Results

Youngest cohort at the risk of income stagnation…or not?

Income developement peak at the cohorts born in 1930-40 and the middle income attainment at 1945-1950?

Financial crisis affects risk of poverty more heavily for those who are entering to the job market than older cohorts in more stable life cycle

Conclusion

THANK YOU!

Consortium partners of TITA project